A New Contender Emerges in the Online Grocery Sector

The competitive landscape of the online grocery market is set to expand in the coming months. A new startup, spearheaded by a seasoned founder with prior experience facing competition from Amazon, is preparing to launch, leveraging a sophisticated network of robots to enhance its operations.

Funding Announcement and Demonstration Center

Home Delivery Services, a grocery delivery startup established by Louis Borders, intends to offer both groceries and general merchandise online. The company plans to utilize a large-scale, automated system for fulfillment and logistics. Today, HDS Global announced $3 million in funding to finalize development of an AI-driven robotic demonstration center located near Indianapolis.

RoboFS: The Automated Fulfillment System

This center will serve as a showcase for the technology HDS Global has been developing over the past several years – initially conceived as early as 2014 – under the name RoboFS. This system encompasses robots and other automation technologies designed to streamline the entire fulfillment process.

This includes stocking, sorting, and picking items, ultimately delivering them, primarily through human couriers, directly to consumers. Borders envisions capturing a significant share of the $1 trillion U.S. grocery market.

Opportunity and Scale

“The U.S. grocery market remains largely untapped online,” Borders stated, drawing a parallel to the opportunity Walmart capitalized on two decades ago with physical retail locations. “Our aim is to provide a comprehensive selection of groceries and general merchandise within a single order.”

The company intends to establish warehouses spanning approximately 150,000 square feet, capable of generating $200 million in revenue from millions of SKUs, with a focus on one-hour delivery times.

Funding and Future Plans

The current $3 million funding round, provided by Bob DiRumualdo, chairman of Ulta and CEO of Naples Ventures, may appear relatively modest. This is particularly when contrasted with the substantial investments made by other online grocery businesses in recent months, all striving to expand their operations in response to increased consumer demand following the COVID-19 pandemic.

Borders explained in an interview that this initial funding is primarily intended to launch the demonstration center. This will allow HDS Global to showcase RoboFS to potential investors and partners, demonstrating the viability of the concept.

The company already has partnerships with Ingram Micro and Toyota, and plans to attract additional investors. HDS – which will adopt a new brand name upon its commercial launch – is also preparing for a larger funding round, anticipated to close within the next 15 months, to support its broader commercial rollout. To date, the company has secured $38 million in funding.

A Founder's Second Act

Louis Borders is a well-known figure in the retail and technology sectors. He founded the Borders book superstores and later launched Webvan, an early pioneer in online grocery ordering and delivery.

Both ventures ultimately failed, serving as cautionary tales regarding the challenges of building businesses in the digital age. These experiences highlighted the importance of anticipating market shifts, maintaining agility, and avoiding inefficiencies, as well as the potential impact of competitors like Amazon.

Focus on Technology and Automation

This time, Borders is prioritizing technology to address the issues that plagued his previous endeavors. HDS Global has dedicated several years to developing its technology, specifically focusing on automation in areas like grocery picking, a challenge that has proven difficult for many companies, including Amazon. Ocado, a leader in the field, is also working towards implementing robotic picking solutions.

Borders estimates that automation can reduce labor costs by as much as two-thirds, allowing personnel to concentrate on delivery and customer service.

Building a Unique System

“We found that the available technology didn’t meet our requirements,” Borders said. “We decided to build our own system five years ago, recognizing a gap in the market. This became our core opportunity.”

A Potential Alternative to Amazon

The opportunity extends beyond creating new services; it involves establishing an infrastructure that can serve as a viable alternative supply chain to Amazon. This shared objective has attracted companies like Toyota and Ingram Micro to collaborate with the startup.

Challenges and Future Outlook

Given the extensive development timeline and the need to demonstrate the proof of concept, numerous challenges remain. However, HDS Global, Borders, and their partners are committed to pursuing this venture.

“Ecommerce has become integral to daily life, but its potential for improvement is often overlooked,” stated DiRumualdo. “I am pleased to collaborate with Louis once again and support the company’s innovative approach – a purpose-built robotic fulfillment system for ecommerce – which promises a significantly enhanced experience at a lower cost. I am excited to contribute to bringing this vision to fruition.”