The Wall Street Journal Online December 28, 2020 5:30AM EST “Instacart Looked Like a Savior. Now Stores Aren’t So Sure.” “Some supermarket plan to stick with delivery service despite fees; Instacart says it lets grocers expand e-commerce without building their own infrastructure.” By Jaewon Kang
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Summary of Article
A few years into working together “grocers are starting to question the relationship” with Instacart but most admit that especially in the pandemic these services provided “armies of on-demand shoppers to fulfill orders in-store and deliver groceries to people’s homes.” When looking at “Share of U.S. weekly [grocery] sales” prior to the pandemic Walmart led the grocery delivery services with nearly 60% followed by Instacart at 25% and others including Fresh Direct, Peapod and Shipt accounting for the rest. At the peak in March/April Instacart jumped to more than 50% with Walmart holding about 30% and the others making up the rest. That amounts to a 600% increase YOY for Instacart, about 200% for Shipt and 100% for Walmart. But with a commission >10% supermarkets “say they aren’t making money through Instacart” and they worry that Instacart has “too much control over customer interactions and expect it to take an increasing share of money that food makers spend on marketing.”
Instacart, now working with 500 companies including Kroger, Walmart, Aldi and 7-Eleven and 500,000 mostly gig-workers, for its part notes that they don’t compete with grocers, they don’t operate out of warehouses and haven’t created their own stores. The pandemic boost “helped give Instacart its first profitable month, in April…and raised nearly $500 million since March, for a valuation of $17.7 billion” with an IPO on a TBD horizon. Instacart is now delivering beyond groceries including prescriptions and alcohol” and is cutting into brand marketing funds of grocers by working to “promote and discount products on its platform.”
To accommodate fees etc. H-E-B LP, a Texas-based chain, starting in 2015 “raised prices on products it sold through Instacart…”. Others like Kroger have supplemented Instacart and other third-party services, including DoorDash/Uber/Shipt-Target, by developing their own order services encouraging their “customers to order delivery [or pick-up] through its website-rather than Instacart.” Kroger sweetens the deal “by offering digital coupons and fuel savings…for members of its loyalty program.” “Other supermarkets are [just] holding out.”