Apps tap into $70 billion-a-year food delivery industry

Postmates, Instacart deliver what stores and ... 05:52

Food delivery is estimated to be a $70 billion-a-year business in the U.S., and startup companies like Postmates and Instacart have created apps to try and tap into that mobile marketplace.

At the click of a button, they're aiming to deliver anything from seafood to shoes in a matter of hours -- or minutes -- reports CBS News contributor Jamie Wax.

"So we just saw a guy come in, and said, 'I'm pickin' up for Postmates,' and we didn't think anything of it," Meatball Shop owner Daniel Holzman said. "And then, you know, the next day it was two guys, and three guys, and before you knew it, we -- I mean, we've done thousands of deliveries with Postmates."

Holzman owns six meatball-themed restaurants in New York City. None of them offer delivery, but on-demand delivery services like Postmates have changed that.

"I think Postmates feels like a remote control for your life. It feels almost magical," the company's founder and CEO Bastian Lehman said. "You press a button and seconds later you see a person on the map moving to a store, purchasing an item, and another few minutes later you have that item delivered."

From their offices in downtown San Francisco, Postmates employees review orders submitted by customers online and turn around and place orders over the phone to local businesses across the country. Then a local courier, or "postman" as they call them, is dispatched to pick it up and deliver it for a flat delivery fee that starts at $5. The company promises to have any delivery to your door within an hour.

And it's working.

With almost 10,000 couriers across 22 different cities in the country, Postmates has become the Uber of local delivery. They claim to deliver a slice of pizza every 45 seconds in New York City and a cup of coffee every three minutes across the country.

They're not the first to attempt the idea of instant delivery; in the 1990s, tried the same game. But in spite of millions of dollars in funding, it went belly-up in 2001.

The New York Times tech reporter Farhad Manjoo says things have changed.

"The main difference is they're based on smartphones," he told CBS News. "These companies wouldn't have worked five or six years ago because not everyone used smartphones... So the fact their customers are ordering from smartphones, and their workers are being deployed by smartphones, that makes the whole system work."

What also helps is that all of these new services, like Instacart, which focuses on grocery delivery, have no warehouse costs. Instead, an Instacart shopper will go to your local grocery store and personally pick out everything on your shopping list and bring it right to you. Local stores benefit and Instacart wins by collecting delivery fees.

Lehman calls the idea "anti-Amazon."

"If you look for a specific suit jacket or you look for a specific boot, on Amazon you can just search for the product. You click a button and you have it delivered one or two days later. Now wouldn't it be beautiful if you could do the same thing in your city?" Lehman said. "If you could literally search through your city, if you could see the local store that has your shoes available in your size, you could press a button and for $5 you have them delivered in an hour. A local product sold by a local store delivered by a local person -- I think there is something very appealing to that."

The local merchants CBS News spoke to are all for it.

"Delivery requires a lot of management. There's a lot of liability involved. You know, to think that an employee of mine is out there in the streets of New York, whether it be on a bicycle, or a car, or a motorcycle, you know, they could be hit by a car. It's really scary," Holzman said. "So having a third party that's there, they don't charge us -- I mean, they don't charge us anything... It's a no brainer."

Ivan Orkin owns two ramen noodle shops in New York. His product isn't easy to deliver, which is why he never offered it, but he's welcomed the challenge.

"It's a double edge sword. Sometimes it'll be Saturday and you're super busy and your store is making all of this food for people who are waiting right in front of you, and you get a bunch of delivery orders as well... You know, that is a problem I can get used to," Orkin said.

If this new batch of delivery systems survive -- and they look poised to -- it seems everyone from business owners to hungry video gamers will reap the benefits.