Feel like Instacart isn’t insta enough? The company is looking to change that, with a new rapid delivery option in the works that it hopes will also rapidly deliver profits, in a time that Instacart is trying to prove itself as still relevant in a (sort of) post–COVID-19 shopping landscape.
The grocery delivery startup thrived during the pandemic, reaching revenues of $1.5 billion when so many Americans were avoiding shopping in public. But by late spring of 2021, its momentum had faded away, and its sales dropped sharply. Whereas it had announced hopeful intentions to go public, those plans grew a little dimmer and less certain. The founder and then-CEO of the company even attempted to sell Instacart to Uber and DoorDash, though no avail.
When a board member came in to take on the position of CEO, she faced the same significant challenges as her predecessor, along with some added upheaval among top executives and competition from new grocery delivery startups like Gopuff, which promises delivery in half an hour. But Instacart was determined to persist. It reduced its own valuation by 40 percent in March, from $39 billion to $24 billion. Then in May, it filed documents with the Securities and Exchange Commission to start the process of going public.
To support these strategic growth ideas, Instacart needed a hook. For example, lightning-quick delivery is one of a series of new strategies designed to help make Instacart seem still-relevant and appealing to investors; others include advertising, fulfillment services, and other tech.
The company’s move into ultra-rapid delivery is initially being launched in two cities, Miami and Atlanta. The goal is 15-minute delivery from warehouses owned by Instacart. This logistical plan differs from Instacart’s conventional model, which has shoppers pick out goods at the actual store and delivering them, whenever they can. Instacart does not want to take ownership of all the goods at its warehouses, but it plans to “work to be flexible with retailers,” to accommodate their preferences, grant them access to its warehouse spaces, and potentially co-locate warehouse efforts, such as in existing bricks-and-mortar locations.
This strategy might not be ideal though. Even as Instacart pins its hopes on being fast, a recent study cautions that customers want to have a say over when their groceries are delivered, not for the food to be delivered as quickly as possible. In this sense, rather than only prioritize speed, retail delivery provides need to combine and balance the demand for speed with the benefits of precision and flexibility. One promising application of analytics, for example, might allow retailers to gauge customers’ revealed preferences, such that they can establish delivery times that resonate with those preferences but also ensure the most efficient operations for themselves.
Discussion Questions:
- Why is Instacart launching a new quick-delivery service?
- Will customers and investors continue to be interested in grocery delivery, once COVID-19 no longer seems like a threat?
- How else can Instacart appeal to customers and investors?
Source: Tom Ryan, “Is Timing More Important than Speed for Grocery Delivery?” RetailWire, April 28, 2022; Laura Forman, “Rapid Delivery Gets Some Insta-Validation,” The Wall Street Journal, March 24, 2022; Kellen Browning and Erin Griffith, “Instacart Searches for a Direction as its Pandemic Boom Fades,” The New York Times, April 29, 2022; “Instacart Appoints Board Member Fidji Simo to Chief Executive Officer and Announces Founder and Current CEO Apoorva Mehta Will Serve as Executive Chairman of the Board,” PR Newswire, July 8, 2021; Erin Woo, “Gopuff Does Deliveries in 30 Minutes or Less. It’s Also Buying Time for Itself,” The New York Times, April 14, 2022; Jackie Davalos, “Instacart CEO Courts Investors, Skeptical Grocers Ahead of IPO,” Yahoo, May 12, 2022; Laura Forman, “Instacart Wants to Be an Influencer in Food Delivery,” The Wall Street Journal, July 14, 2021