Instacart is a revolutionary approach to today’s shopping experience. Founded in 2012, Instacart offers home delivery service of groceries. Using their website or App, customers make a digital shopping list and enter payment and delivery information. A few hours later, an Instacart delivery contractor will be at their door. Depending on the store, the customer pays the exact cost of the product (no adjusted price markup), a small, variable delivery fee and optional tip. Convenient, affordable, and fully customizable food shopping, accomplished from your couch, desk, or commute.
In 2014, Instacart announced a partnership with Whole Foods Market (WFM). For Instacart, this added a new customer base with different willingness to pay, but allowed them to maintain much of their operational model. For WFM, this was seen by many as a crucial investment in technology.
- Techy Bostonians: In a 2014 statement, Instacart’s CEO/co-founder noted that the company chose Boston for expansion due to its “high concentration of tech-savvy urban dwellers and its weather.”
- Working Families: According to the Bureau of Labor Statistics, the share of all families that had a husband and wife in the labor force increased from 34 percent in 1975 to 47.7 percent by 2014. Further, both parents are employed in 60.2 percent of all married-couple families with children. The overload of responsibilities (both at work and at home) has increased tremendously. There is too much to accomplish, and not enough time to do it.
Instacart paired a digital solution with the existing supermarket model. They rely on speed and accuracy to deliver (no pun intended) on their customer promise. By rethinking the way we shop, Instacart has been able to disrupt the traditional shopping model. By decoupling the process of shopping and receiving groceries, Instacart (and WFM) has added opportunity to create value, while still capturing value.
As their business model adapts and they streamline their in-store operations and delivery methods, Instacart will continue to create value for customers. They have been able to apply the desirable features of the “On demand” economy to a very traditional marketplace. While Instacart offers alternatives to shoppers with not enough time, this is a strategic play by Whole Foods. With this partnership, WFM ensures that Instacart doesn’t completely disrupt their model (since WFM sources Instacart directly). It also allows WFM to access attractive customers who don’t want to shop, or don’t care about in-store amenities. But industry experts wonder whether WFM can fend off other disruptors who are attempting to disintermediate supermarkets. Services like AmazonFresh and Peapod use their own warehouses to source orders, cutting out the supermarket altogether.
Instacart’s business model has evolved. Originally, they had the same employee shop and deliver. Now, they have two individuals who play a key role in the value chain for each customer- the personal shopper, and the deliveryman(woman). The personal shopper has a unique skill set, and the reputation of Instacart rests on their ability to get you exactly what you want.
Instacart has built into their structure continued engagement between the customer and the personal shopper. A customer builds their shopping list, adds comments, and selects acceptable substitutes- all without going to the store or talking to another individual. The ability to make this work entirely depends on a robust customer facing digital platform. By building a user-friendly website, Instacart has given customers confidence in trusting someone else with buying their daily groceries. This “picking power” is normally a very personal thing. Traditional shoppers lean over the butcher’s counter to inspect their meat, and buy bananas at peak ripeness. We maintain our own quality standards for the goods that we buy with our hard earned money, during our hard-to-come-by free time. Is relaying a detailed shopping list to a stranger using the internet a good substitute?
The other value creation is the actual delivery of groceries. By eliminating the round trip to the supermarket, time spent parking, time spent searching for items, and waiting in line to pay (not to mention the frustrations of shopping with small children in tow), Instacart is a real winner. Storage and tracking of goods is imperative, but the real operational challenge (and where the company will have opportunities to innovate in the future) is in delivery execution. Efficient route choices and optimal delivery patterns will be crucial. In the future of grocery delivery, there will be opportunity to leverage digitally driven, shared economy methods (i.e., Uber, Rideshare platforms, and backloading).