Yahoo Autos How the pandemic made Instacart “essential”
If you’ve been inside a grocery store recently, perhaps you noticed a number of people pushing around jam-packed carts while scrolling furiously through their phones. The pandemic is powering growth for grocery-delivery startup Instacart, and many of those shoppers are handpicking groceries for the app rather than their own households.
After reportedly losing $300 million last year, San Francisco-based Instacart turned a profit for the first time in April. In October, a report from investment bank Cowen found that Instacart is the third most popular online US grocery destination, after Walmart and Amazon. The company is expected to go public as early as 2021, at a possible valuation of $30 billion.
The grocery-delivery app—currently valued at $17.8 billion, according to PitchBook—partners with over 500 retailers including Walmart, 7-Eleven, and Sephora, and delivers from 8,000 store locations across the US and Canada. It exists in a saturated space: Gig companies like DoorDash and Uber are also getting into groceries, as are big retailers like Amazon, Walmart, and Target. But there’s also huge opportunity, as Covid-19 drives record levels of demand.
In March, online shopping accounted for almost 7% of all US grocery sales, up from 5% at the end of 2019, according to a Bain report. In the UK, online sales hit 12%, compared with 8% pre-Covid. In France, online sales jumped to 10% from 6%, and in Italy they doubled to 4%. Analysts are expecting at least some portion of that surge to stick around: By 2025, online grocery is expected to hit 22%—or $250 billion—of total US grocery sales.
To contend with demand, Instacart has hired hundreds of thousands of contractors to help it fill orders. It’s also vying for a diverse customer base, making delivery service available to shoppers on food stamps and launching a phone service to add 60,000 seniors to its platform.
But that expansion is also exacerbating tensions around worker compensation, workplace protections, and lack of hazard pay. Now Instacart must keep up with short-term demand while laying the groundwork for the online-grocery long game.
By the digits
41 minutes: Length of the average trip to the grocery store.
2%: The average grocery store’s profit margin.
$225 million: Instacart’s latest funding round.
750,000: Active Instacart shoppers.
$35 billion: Grocery sales Instacart says it’s on track to process this year.
85%: US households that can get grocery orders filled through Instacart.
$155: How much the average customer spent on Instacart the week of Sept. 21, according to research firm Second Measures, up 20% year-over-year.
39%: Share of millennial respondents to a 2019 Instacart/Harris poll who said they would rather give up their phones for a month than be responsible for cooking a Thanksgiving dinner.
Remember when
If Instacart ever needs a cautionary tale about growing too quickly, it can refer to Webvan, considered one of the most notorious dot-com flops. The online grocery startup filed for bankruptcy in 2001 after burning through $800 million in just three years, and became a poster child for the perils of too-quick expansion, too-little management expertise, and too much money spent building out a proprietary infrastructure.
