It is a business that should not have existed. Last-mile delivery of groceries hasn't been figured out by Amazon or Walmart. The founders of Instacart are not supply-chain veterans either. Instacart was supposed to be the WebVan of our generation. Thankfully, it isn't.
The only pitch Instacart had in its early days was that it would not be infrastructure-heavy like WebVan and instead use the gig-workers to power the last-mile picking, packing, and delivery.
If it's not labor unrest, the sheer unprofitability compounded by the insurmountable slowness of Grocery chains should have killed it.
Instead, Instacart is on track to process $35B in grocery delivery this year.
Vanillin and unpacking loyalty
The vanilla extract that we bought recently had no vanilla in it. I re-read the label. Like Money Heist, 'Vanilla Extract' now feels like a subtle con on me. It's the extraction of money from my pocket in the name of Vanilla. Turns out, Vanilla is hard to get. War, people digging a pit behind their backyards to save the money they earned from harvesting Vanilla are some of the unbelievable things you never expect to read about, erm, plain vanilla.
The experience of buying non-vanilla plain vanilla won't deter me from the grocery store that I buy from. It's not that I am loyal to them. I am a creature of habit. I researched about Vanilla. Every grocery store sells the same con. It doesn't matter.
Loyalty, if there was ever one, doesn't matter. We went to the same grocery store not because we loved them. They were in our neighborhood. That is it. And yes, some were cheap, some had the assortment and some had less waiting time.
The reasons you love (?!) a grocery store are less about the products they sell but the value constructed around the products and the buying experiences.
If you are a Wholefoods loyalist and grumble, Sire, hold that fire!
If incredibly good assortments at snobbish prices are your thing, will you care if it comes from Wholefoods or Partialfoods as long as you get them?
Instacart grew 750% in the first two weeks of April.
Consumers love Instacart. They are indifferent about grocers.
The web around the grocers
Instacart now connects 300,000 stores to you via their app, in the US. Walmart has 11,500 stores in 27 countries. Walmart is on Instacart. Instacart also partners with Aldi, Target, Costco, Albertsons, Kroger, Sam's Club, and most recently, Walmart.
Instacart is several things rolled into one. It is Amazon (Marketplace) + Shopify (Storefront) + USPS (Lastmile Courier) + Uber (Contract workers) + Picking & Packing operations that you'd expect a 3PL to do + of course, an ad network and maybe, a checkout platform of its own that will be thrown in at some point.
It is arming the rebels against the war with Amazon/Whole Foods. 350 retailers and 250,000 stores. Walmart has 11,500 stores in 27 countries.
Well, arming the rebels is a bit of a stretch. Grocery chains are the cannon fodder. The $35B in GMV that Instacart will process comes from 85% of American households that are in the serving radius of Instacart. Instacart will know about each of those households and not the chains.
Preparation meets luck
There are a few things going for Instacart:
Grocery shopping is a chore (& a bio-hazard now)
Grocery chains, even if they understand tech, cannot hire PWA developers to come and work in the Midwest. Data science? Fuggedaboutit!
They hated Wholefoods and now they hate Amazon+Wholefoods
Grocery delivery is an 'NP-Hard' problem. For mortals like you and me, it simply means it is hard af.
The below diagram won't make sense. It is simply there to make you feel bad for skipping it. If you spend time on it, it will make you question your career progress.
Rounding up the constituents
Instacart has 3 stakeholders:
The grocery shopper (who buys grocery on behalf of the end consumer)
The grocery store
The consumer side of the business is thriving for obvious reasons but they have done a fantastic job of offering choice, convenience, and flexibility of delivery - the things that ensure loyalty. That sounds like Amazon, right?
On the store side, they have nailed the delivery technology to such perfection that an individual grocery chain cannot aspire to achieve. eCommerce is still new for many grocery chains. Delivery is a hard problem compounded by the perishability of the items. Instacart has gone ahead and white-labeled its technology powering the retailers' eCommerce business. It sounds a lot like Shopify but it could also be doing what AWS does for Amazon. Instacart could essentially become a 'managed services cloud provider with a storefront' - a Shopify+AWS if you would.
For the grocery shoppers though, Instacart has had rough times on and off. From tipping to health policy, there have been kinks everywhere. But Amazon is no different.
Had Amazon not acquired Wholefoods and almost killed Instacart, it would not have been this big. Instacart is big because it was chopped by Amazon.
Grocery chains are late adopters of technology. That wouldn't let them succeed in eCommerce unless someone drags them to the cleaners for not doing it. Coronavirus did. Commerce has become a 'must-do' thing for survival. So the grocery chains' weakness and the ensuing frustrating delays in the adoption of Instacart has now become a favorable thing for Instacart. Not only can it onboard grocery chains fast, but it can also make its technology available in a box to Grocery chains that don't want to go the whole nine yards.
If there is a chink in its armor, it is the worker benefits and their working conditions. The very complaint of long working hours is now seen more as a blessing than a curse. It is a sad commentary of the world today but starvation and homelessness are worse than long hours for many.
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PipeCandy is a market intelligence platform that tracks the global eCommerce & 'direct to consumer' landscape.
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