Grocery delivery service Instacart Inc. once looked like the perfect partner for supermarkets hoping to enter e-commerce. However, after being together for a few years, some grocers began to question this relationship.
But many supermarkets said that they are not making money through Instacart, mainly because delivery companies usually charge them a commission of more than 10% per order. Some of Instacart’s retail partners say the service has too much control over customer interactions and hope it will increase the share of funds used by food manufacturers for marketing. As deliveries continue to prosper and become a necessity, all this puts the grocery store in trouble.
Skogen’s Foodliner Inc. CEO Mark Skogen said: “We don’t think we will profit from Instacart’s orders.” The company operates more than 30 stores under the Festival Foods brand and started offering Instacart about a year ago.
Mr. Skogen said deliveries are still expensive because his company has to pay Instacart a portion of online sales. The grocery store can still be used with Instacart because it can increase revenue even if there is no profit.
Instacart president Nilam Ganenthiran said in an email that the company̵
Mr. Ganenthiran said: “We do not compete with retailers.” “We will not operate outside the warehouse, nor will we directly open our own stores or small supermarkets like other services. These services will directly compete with grocers.”
Chris Hooks, chief merchandising officer at Midwestern grocery stores, said that this summer, the “savings” chain joined Instacart because the service is easy to implement. He said that Save A Lot believes that Instacart is a way to attract current and potential customers.
Instacart said it has increased or expanded cooperation arrangements with more than 150 retailers in the United States and Canada this year, and has cooperated with more than 500 companies including Kroger. the company
, Walmart the company
Aldi Inc. and 7-11 Inc.
Like many peers, delivery services were unable to meet the surge in demand at the beginning of the pandemic, but said it has since caught up. Instacart said that its orders have grown at a rate of 500% per year at certain times this year, and its workforce, which is mainly composed of odd jobs, has more than doubled to 500,000.
Since its establishment in 2012, the booming business has brought Instacart its first profitable month, namely April. Since March, the company has raised nearly US$500 million and is valued at US$17.7 billion. Instacart has stated that it hopes to conduct an initial public offering, but declined to comment on the timing.
Over the years, Instacart has added some services, such as recommending replacement of out-of-stock items based on customer preferences and allowing consumers to communicate directly with Instacart shoppers, Mr. Ganenthiran said.
Instacart has begun to provide non-food items, such as prescription drugs and alcoholic beverages. The company is expanding its business to build a website and provide technical support to retailers.
Instacart also works with manufacturers to promote and discount products on its platform. Nebraska B&R Stores Inc. President Mark Griffin (Mark Griffin) said that this means that retailers and Instacart are pursuing funds for brand marketing.
He said: “We are competing with what we consider to be partners.” He said that when working with Instacart, B&R became part of the retailer’s “whole laundry list” rather than the customer’s local store.
Mr. Ganenthiran of Instacart said that the advertising business allows consumers to enjoy discounts, which will eventually encourage them to buy more goods from supermarkets. He added that Instacart aims to protect retailers and help them gain share in the online market.
People familiar with the matter said that when HEB LP partnered with Instacart in 2015, the Texas-based chain increased the prices of products sold through Instacart to help pay for delivery-related expenses.
In order to maintain certain control rights, others choose not to outsource their entire e-commerce business. Kroger, the largest grocer in the United States, processes the pick-up order with his staff. The company also encourages customers to provide digital coupons and save fuel at Kroger gas stations through members of its loyalty program instead of ordering goods through Instacart’s website. Kroger executives described Instacart as an important partner in a recent earnings call, but he said that grocers have been looking for delivery partners.
Retailers have more options on hand.Men Chong the company
And Uber Technologies the company
This year began to provide groceries, and Target corps
Shipt Inc. continues to expand.
An Associated Food Stores in Salt Lake City with more than 400 stores said it will use Instacart to explore early next year. The company’s senior e-commerce manager Thomas Horne said that it has been using DoorDash so far, partly because of the service’s low commission rate (about 9% of the commission charged to the store per order). He said Instacart’s rates are higher, although the rates vary from retailer to retailer.
Instacart said it hopes to give all supermarkets an advantage.
Mr. Ganenthiran said: “Picking the perfect bunch of bananas or substituting your favorite biscuit for the best banana is more complicated than giving someone a burrito.”
Some supermarkets persist.Northeast Chain West Market the company
CEO Jonathan Weis said it prefers to encourage customers to order online and pick up in stores. Grocery stores do not use Instacart, but rely on Shipt for delivery.
He said of Instacart: “We think they are a bit expensive.”
Instacart may still be just one of many ways to shop online. Farhan Siddiqi, Chief Digital Officer of Koninklijke Ahold Delhaize NV, said customers like specific delivery services. In addition to using their internal delivery services Peapod and FreshDirect LLC, owners of Giant and Stop & Shop chains also use Instacart and partnered with a private equity firm to purchase.
He added: “This is a very complicated world.”
Write to Jaewon Kang at firstname.lastname@example.org
Copyright © 2020 Dow Jones Corporation. all rights reserved. 87990cbe856818d5eddac44c7b1cdeb8