Who will win the grocery delivery wars?

With tech giants Google and Amazon going head to head, and an army of startups vying for space, who will win the grocery delivery wars?

When Google Express pilots its fresh food same-day delivery service – announced this week – in the San Francisco Bay Area and a mysterious, yet to-be-named U.S. city (our money is on Seattle given it’s a stronghold for rival Amazon) in the coming months, it’ll be the equivalency of the big kid doing a cannonball in the already rammed pool.

The move isn’t surprising. The shut-in economy driven grocery delivery industry generates $13 billion in revenue in the U.S., and is expected to grow 16.6 per cent over the next 10 to 15 years according to a September report by IbisWorld. It’s also been one of the hottest VC sectors, with over $1 billion invested in 2014 and half a billion dollars pumped into it in the first quarter of 2015 alone.

But as our lovely pool analogy hints at, it’s uncomfortably crowded, with 3,121 businesses already operating in the sphere, and not all of those are startups scraping funds from burnt-out investors who stopped reading at “change the world.”

Too many cooks

In their effort to carve out a considerable chunk of the online-abetted grocery delivery market, it looks like Google’s biggest competitor will be delivery wizard Amazon.

Amazon got into the grocery delivery game in 2007, starting with delivering things like fresh produce and milk, to customers in the Seattle area. In 2013, AmazonFresh expanded into Los Angeles, New York, Philadelphia and New Jersey. Orders placed in the morning arrive that day and later orders will be there the following morning. The groceries are delivered from partner shops in the neighborhood. Deliveries over $35 are free but AmazonFresh costs $299 per year.

The e-commerce giant, long synonymous with finding new and novel ways to get things to consumers on time – think drones – may have an advantage against Google (for background on how drones work, check out this article). Amazon has cultivated and fine-tuned a well-oiled network of distribution centers to get products from A to B.

Google on the other hand, is having a tough time in this department. It tested out the Amazon distribution center approach when it first launched Express but announced it’d be shuttering the centers – both in California – to focus on a service that picks up the goods from the stories themselves and delivers directly to consumers.

But fresh groceries will be a different sphere for both, with distribution centres off the table given the perishable nature of the products. It levels the playing field some, but Google still has to contend with Amazon’s beefy supply network and partnership with the United States Postal Service for delivering groceries.

Meanwhile Wal-Mart has run tests on its Wal-Mart To Go free delivery service in markets like Denver and Phoenix and other grocery store chains like Safeway also offer delivery.

The dark horses in the grocery delivery sphere are San Francisco-based Instacart and in New York, FreshDirect .

Launched in 2012, Instacart delivers groceries in 17 cities across the US and has partnered with dozens of popular national chains including Whole Foods Market and Costco as well as regional grocers. Orders over $35 cost $4 to deliver in about two hours or $6 for one-hour delivery.

FreshDirect, on the other, hand has a decade on Instacart, but less reach. Founded in New York City in 2002, the custom grocery delivery service has expanded to other metropolitan hubs like New Jersey and Philadelphia.

Both are viable services but growing beyond will be a little more challenging with the big guys competing for their territory and potential new customer-base.

Who will win the online grocery wars?

Traditionally, e-commerce startups have been able to leverage their size and flexibility to pivot their services and respond to rapidly changing demands and markets. For someone like Instacart or FreshDirect, that ability to pivot means they’re a lot more plugged into trends and able to turn their customers into advocates as they respond to their demands. But winning over new customers as well-established brands like Google, Amazon, and Wal-Mart amp up their services will be a challenge.

Which puts the big players at an advantage, one that is further amplified when you consider the economies of scale they have to play with. Google has social networks, consumer algorithms and, well, big data. They’ve got the means necessary to anticipate demand and rapidly improve efficiency.

Of course that doesn’t rule out Instacart or FreshDirect going the way of Peapod , the Illinois-based online grocery store (one of the first) that was eventually bought up by grocery giant Royal Ahold – owner of Stop & Shop. Don’t be surprised if major grocers, cash-flush and looking to bypass all that research and development business it takes to come up with a well-oiled online service, start snapping up some of the later stage delivery startups.

As for who’s going to come out on top, Google can’t be ruled out, they’re a beast and we’ve no doubt they can pull off anything they’re serious about – case in point, smartphones. But can they compete with AmazonFresh? Likely not in terms of delivery time or supply chain management.

The key to wearing the online grocery delivery crown will come down to knowing what the consumers want, anticipating their demands and getting it to the consumers as quick as conveniently possible.

Luckily for Google, they already know everything about you.

Andrew Seale

Andrew Seale is a Toronto-based business writer who contributes frequently to Yahoo Canada Finance, The Globe and Mail's Report on Business and The Toronto Star.