What Retailers and Food Brands Need to Know About Instacart

Tap Into the Grocery Delivery Service Trend Serving Millennials and Seniors

Man picking oranges at the supermarket
Grocery stores are filled with personal shoppers picking foods alongside customers. Susie Wyshak

Online food and beverage shopping may be in its infancy at 3.5 percent of grocery spending. But that infant is growing like a baby elephant. As of early 2015, Instacart was valued at about $2 billion. The trend will only continue as some key forces converge:

  • people making livings in the "gig" economy as crowdsourced service providers.

While well-established grocery delivery services like Fresh Direct in New York continue to serve customers who want or need home delivery, some new services that dispatch personal shoppers open up a world of products to consumers in search of the next great convenience. 

Stores who don't benefit from the proverbial location, location or who want to serve customers better stand to benefit from this trend.

New Car On the Block: How Instacart Works

Instacart acts as the e-commerce and delivery partner for its retailer partners, focusing on large U.S. metro areas. 

Shoppers can tap into Instacart's same-day grocery delivery service for food and drinks from popular national chains (Whole Foods Market, Costco) as well as local, artisan grocers (Fairway Market, Bi-Rite).

Instacart's Personal Shoppers zip around the requested store selecting the foods, dry goods and even alcohol (in most locations) to a customer's location, often within an hour.

The Financials

Customers pay a several dollar fee for this service.  Prices are sometimes the same as in-store, sometimes a bit higher.

Such like other sharing economy services, from Airbnb to Uber, success (and earnings) for the shoppers, who are independent contractors, depends on customer satisfaction.

Quality performance is a delicate balance tied to shopper ratings, accounting for delivery speed, communication during the shopping process if items are unavailable, accuracy of the order, the grocery hand-off experience and perhaps most importantly the quality of fresh food selection.

How Grocery Delivery Services Help Food Retailers Deliver Happiness

Partnering with a delivery service eliminates high overhead costs of running your own delivery service and offers several benefits to grocery and specialty shops:

  1. Adds a valuable convenience for existing customers, including saving them from dangerous alcohol runs mid-party. Turns out Millennials are really into convenience.
  2. Attracts new customers who may be shopping-adverse or strapped for time. One Instacart customer noted that the service gives her access to Costco products, without needing a membership.
  3. Offers an opportunistic chance that app users will choose your store from a list of nearby stores that show up after entering a home zip code (like Uber for grocery stores).
  4. Increases chance of re-orders as the consumer can easily re-order from their past shopping lists.
  5. Creates a social benefit of serving consumers who are home-bound, elderly or who have mobility issues such as arthritis and joint problems. Baby Boomers make up 44% of shopping consumers earning more than $75,000. Many senior citizens may not qualify for Meals on Wheels or other food services. Your home delivery may be their lifeline to a healthy life.

    Success Tips for Retailers Offering Home Delivery Services

    1. Monitor quality standards for produce pickers and ask customers for feedback. An informal survey of several home chefs using these services produced complained about wilted and unusable fruits and vegetables.

      For shoppers who chose delivery to save time, the hassle of requesting refunds or replacements does not make for a good experience.
    2. Understand how the service compensates its shoppers and delivery people. This article on Instacart offers a glimpse into its car sharing service-like operations of its shoppers, who walk a line between speed and performance to achieve high ratings and high pay.
    1. Promote your service to diverse customer segments. Walk-in customers may opt for delivery as an occasional convenience for themselves. Consider that these guests may also be shopping for their parents or grandparents: Your delivery service offers a peace-of-mind, time-saving convenience to their loved ones' pantries stocked.

    Why Food Brands Must Build Loyalty and Differentiate Now More Than Ever

    1. Customers will be more easily exposed to new brands.
    2. They may be more prone to switching to a new brand, if yours is on par with other brands that are easier to buy.
    3. The more positive reviews the more your brand will likely attract new customers.

    For food crafters, the good news is Instacart shoppers are buying small batch goodies.

    No, It's Not All About Instacart

    I tested Amazon Prime Fresh for a home-bound senior who needed to stock up on basics. The food—including a pound of cheese from a local deli—arrived in incredibly insulated Amazon-branded shopping bags, ready to survive the nuclear winter. 

    As you can see in the Amazon Prime Fresh screenshot, customers get served a limited number of brands. What passes for "artisan" on Amazon is not quite the selection we find in our local cheese shop or specialty grocer.

    Therein lies the challenge. For any home-delivery service, retailers need to offer a great selection. Food manufacturers need to be a must-have brand, building loyalty to pop up higher in search. If you're targeting customers who opt for home delivery, that is.