Should Grocery Retailers Offer On-Demand Delivery?

Should Grocery Retailers Offer On-Demand Delivery?

Prior to the pandemic, online grocery shopping accounted for just 5% of all grocery sales in 2019, according to data from Mercator Advisory Group. As of February 2021, online grocery shopping had increased 230% from pre-pandemic levels, according to Adobe research.

In 2021, consumers continue to shop online, but I’ve found that retailers are under pressure to deliver orders faster. This is no easy task for most retailers, as they don’t have a business model suited to making deliveries in several hours — let alone in minutes.

The desire for speed on the part of consumers has resulted in the creation of a new business model known as “instant on-demand delivery” whereby customers can place an order and receive their delivery in as little as 10 minutes.

New entrants like Gorillas, Fridge No More, Gopuff, Getir, Dija and Jokr have exploded on the scene and are attracting significant investor capital. An advantage of on-demand delivery companies is that they can often launch operations very easily due to lower-cost and lower-tech operating models.

Many retail analysts are claiming that on-demand delivery is the next big thing in retail. Is it? Should retailers embrace on-demand delivery? If so, how? I’ll answer these questions in the next section.

Grocery Retailers Versus On-Demand Delivery Retailers

Although all retailers can technically utilize on-demand delivery, I am using the grocery industry as an example of how retailers operate and the changes they will need to make for the purpose of this article.

With the growth of e-commerce, grocery retailers have invested capital into creating the ability to fulfill online orders themselves or by using third parties that perform most functions for them: Think Instacart or Shipt.

The biggest drivers of costs related to e-commerce for grocery retailers are generally the processes required to pick products from a store shelf or from a location in a fulfillment center, pack the items into grocery bags and totes, and deliver the orders to customers. A detailed example of the costs associated with fulfilling an online grocery order can be found on the MWPVL International website here.

Most grocery retailers operate stores that have their own costs related to store labor, utilities and additional costs associated with running and operating stores. Some grocery retailers fulfill all online orders from their stores, but many grocery retailers fulfill orders from large distribution centers. Distribution centers may employ associates or leverage automation to fulfill orders.

Based on my experience consulting for leading grocery retailers in the U.S. and globally, most grocery retailers are able to offer same-day delivery. Many grocery retailers aim to offer two-hour grocery delivery, but they may not be able to do this consistently without using third-party delivery companies like Instacart or Shipt.

Companies that offer on-demand grocery delivery operate with a completely different business model. For example, the average number of items carried in a supermarket is 28,112, according to 2019 FMI data. This means there can be tremendous variance in the number of products that customers order. The higher the number of products ordered is, the longer it takes to pick the items and fulfill the order. In my experience, on-demand grocery retailers tend to offer far fewer products.

Offering a smaller number of products makes it easier to fulfill orders, especially if customers are ordering fewer items from the on-demand retailer.

Unlike grocery retailers with lots of stores and large fulfillment centers and warehouses, on-demand retailers typically operate manual micro-fulfillment centers in the neighborhoods and regions they serve.

The biggest difference in the model is the way the companies utilize labor. On-demand retailers typically hire workers who can pick and fulfill orders quickly, place the items picked into a backpack, and walk to the customer or ride a bicycle to them. Some companies claim they can deliver groceries in as little as 10 to 15 minutes.

One of the leading grocery delivery companies, Instacart, recently announced that it would be offering an option called “Priority Delivery,” which offers delivery in as little as 30 minutes.

Should Grocery Retailers Embrace On-Demand Delivery?

Many grocery retailers are likely grappling with the question of whether or not they should offer their customers a separate grocery service for essential items. Yes, I think they should. Here’s why.

I believe consumers will continue to push retailers for faster deliveries with a goal of near-instant gratification. I often state in the articles I write that the future of delivery is delivering to people, not places. Gone are the days when retailers only need to deliver to a customer’s home. Instead, I believe retailers will have to deliver to wherever the customer is — and do so quickly.

Retailers should understand that the need for speed will likely only increase, and they should work to become experts at offering this service. As I’ve written about before, I strongly encourage grocery retailers to open micro-fulfillment centers to fulfill online grocery orders and supplement their network with nano-fulfillment centers to reduce the cost of fulfilling online essentials orders. (Full disclosure: My company helps retailers do this, as do others.)

I strongly encourage grocery retailers to leverage data to better understand the daily consumption habits of their customers, too. This requires collecting data to identify what products customers purchase to use and what products customers purchase and eat or drink by the time of day, day of the week, and week of the month. The more granular the data is, the better you can plan your offerings.

In turn, retailers need to build a dynamic pool of easily replenished inventory to meet the needs of their customers 24/7.

I also encourage grocery retailers to explore the use of mobile retail vans for essential items. The business model has been adopted in Japan, as Warehouse Automation explains, and some mobile markets have been developed in the U.S.

What I recommend won’t be easy for retailers to accomplish. However, without the ability to meet the demand for speedy deliveries, retailers may lose customers.

 

PULSE Team Makes The Difference – Interns

PULSE Team Makes The Difference – Interns

Every industry and company possesses crucial skills and features setting it apart from the competition in an ever-changing world. At PULSE Integration, we are industry leaders because every employee embodies our culture. Our values provide us with the compass that directs our teamwork, sensitivity to client’s needs, and fuels our commitment to excellence. Our value is in the strength of our ever-growing talent.

We take this time to recognize a few of our valued associates, Luke Tromp, John Seasock, and Maggie Dow. Both Luke and John are mechanical engineers who began their journey with PULSE Integration as college interns. Maggie also started her journey at PULSE as a project management intern. Upon graduation from college, they all were hired as full-time employees at PULSE.

Luke and John are highly proficient in full system design and complex technology applications and have immediately integrated into the solutions team to play a key role in new projects. While Maggie has quickly become a super user of our financial system and of our project management tools.

How does this translate to our clients?

 PULSE Integration harbors a culture of learning and growing, taking an innovative approach while welcoming new ideas and endeavors. A diversified team willing to pioneer new concepts is the methodology that keeps PULSE competitive to changing market conditions. Clients continue to utilize PULSE in part because of our agility.  It is built into the foundation of our culture to be nimble as the industry adjusts to frequently changing technology.

Our culture supports the development of the younger generation who are adept at cultivating new ideas and shaping the new world of technology solutions. Technology is changing and so should our way of thinking.  Cultivating a new generation embodies just that. So why should more companies leverage interns to hiring opportunities?

Fresh Perspective

Interns open an opportunity for fresh perspectives on business, strategies, and plans. Including interns in brainstorming sessions and encouraging them to speak up in meetings will maximize the potential for innovative ideas.

Boosts Social Strategy

It’s no secret that every generation has developed into greater tech savvy individuals with unique social styles. Utilizing these features provides an opportunity for both young and old employees to share an exchange of talent that can be a direct benefit to a company’s social presence.

Mentorship

While interns often provide and extra set of hands to accomplish goals and finish projects, these opportunities can be fostered into teaching sessions to learn a specific skill or give them a great learning experience from seasoned employees. Bringing together old and new employees to engage offers an exchange of knowledge, social styles, and technology of which can create a more cohesive culture of mentorship and trust.

Interns Become Employees

New people bring novel perspectives and specialized strengths and skill sets. They are the foundation of a workforce. With just a little time, patience, and guidance, they can quickly develop into strong and proficient leaders and lay the foundation of a new generation of well-trained employees.  At PULSE, students are provided with the supervision they need to be successful. We equip our team with adequate resources to ensure we set them up for success. That is why PULSE has earned a great place to work designation.

Building Strong Leaders

When an organization takes the time to carefully train the next generation of employees how to execute on important projects it often creates a personal professional motivation of accountability. It encourages morale and will increase effective leadership in businesses.

At PULSE Integration we are committed to educating, training, and fostering the next generation of leaders who will pioneer innovative ideas and adhere to the commitment, integrity, and transparency of the PULSE culture.

How Retailers Can Get Started With Micro-Fulfillment As A Solution

How Retailers Can Get Started With Micro-Fulfillment As A Solution

Surging e-commerce sales appear to be accelerating demand for logistics automation as retailers adjust their business models to adapt to changing economic conditions and consumer behavior. One of the industries that has been most impacted by recent changes is the grocery industry, which has witnessed a 43% increase in e-commerce grocery sales between March 2020 and 2021, according to Brick Meets Click data (via Grocery Dive). However, as the chief marketing officer of a company that offers micro-fulfillment technologies and services, I believe specialty retailers, department stores, warehouse clubs and big-box retailers can all benefit from the use of micro-fulfillment.

Prior to 2020, retailers would often adjust to increased demand for online groceries by hiring more people to fulfill and deliver online orders, or contracting with a third-party fulfillment company like Shipt or Instacart.

Recently, however, a small number of grocery retailers began to experiment with a new technology designed to automate grocery fulfillment.

Micro-fulfillment centers, or MFCs, contain robotic systems from companies like AutoStore, Attabotics or Alert Innovation. Retailers can install MFCs inside a grocery store, beside a grocery store in a separate building or inside a “dark store” where inventory and products are staged but customers are not allowed to enter.

I believe MFCs are quickly becoming the next big thing in retail, and Research and Markets projects that they will amount to a $10 billion opportunity by 2026.

2021 has seen an explosion in popularity for MFCs: H.E.B., Ahold Delhaize, Kroger, Walmart, Albertsons and many other grocery retailers are installing or assessing the use of MFCs within their grocery ecosystems. Third-party online fulfillment company Instacart is exploring the use of MFCs to fulfill orders for their grocery customers.

I believe the growth of MFCs will have a significant impact on the grocery industry. However, not all grocery retailers have the desire or capabilities to purchase and install their own micro-fulfillment centers. This has created the opportunity for a new business within the grocery industry to meet the needs of retailers seeking an outsourced solution for micro-fulfillment.

Service Or Solution: What’s Best? 

As micro-fulfillment grows in popularity, so too could the desire on the part of grocery retailers to find a way to outsource micro-fulfillment. Several companies offer outsourced micro-fulfillment services, but I’m not convinced that outsourcing micro-fulfillment makes sense strategically or financially based on my research.

For example, robotics companies are great at manufacturing robots but may lack experience running operations for companies across different industries. I can’t stress this point enough — just because a company manufactures micro-fulfillment technology doesn’t mean that it’s an expert at outsourcing, logistics, inventory optimization, transportation, operations or last-mile delivery. Based on my experience, third-party logistics companies that leverage MFCs as part of their logistics and supply chain solutions are often the most qualified for managing outsourced micro-fulfillment requirements.

Typically, outsourced micro-fulfillment providers utilize MFCs to fulfill online orders for multiple customers at the lowest costs. I disagree with the business model for one simple reason: Micro-fulfillment centers aren’t always enough.

My experience in micro-fulfillment led me to design what I refer to as Micro-fulfillment as a Solution, or MaaS. I originally referred to MaaS as Micro-fulfillment as a Service, but upon reflection, I concluded that grocery retailers and the retail industry need a solution for their fulfillment requirements more than they need a company that only provides a service to fulfill online orders.

I do not market MaaS. I created the concept of MaaS to improve the micro-fulfillment industry. Everyone is free to leverage the information contained in this article to their benefit.

MaaS is a solution whereby multiple technologies are combined to provide an end-to-end solution for shifting from manual, in-store fulfillment of online grocery orders to utilizing automation to efficiently meet customer demand at lower costs and faster speeds. Among the technologies and strategies a company can consider utilizing are:

  • Supply chain network optimization and consulting to identify the optimal number of MFCs required to cost-effectively meet customer demand while achieving the necessary service level for each customer.
  • Autonomous mobile robots (AMRs) to streamline material handling and minimize the need for human intervention.
  • Automated guided vehicles (AGV) to improve efficiency in manufacturing and warehousing.
  • Teleoperated delivery vehicles that can deliver groceries to customers within three miles of an MFC.
  • Last-mile delivery software to orchestrate, optimize, route and schedule deliveries.
  • Logistics software to optimize and replenish inventory to the MFC.
  • Lean Manufacturing and Six Sigma to help eliminate waste in the processes required to fulfill and stage online and curbside pickup orders.

I believe a solution-based approach to fulfilling online grocery can reduce cost and complexity; increase speed of deliveries; and accelerate the process for opening more MFCs to support regional or nationwide fulfillment requirements for grocery retailers.

Retailers can evaluate their operations by contracting a logistics consulting firm or a third-party logistics company. Make sure any company you’re considering has experience in MaaS, micro-fulfillment technology, operations and optimizing logistics. Ask about each one’s process for conducting a thorough review of your retail business and operations to determine if MaaS is right for your needs.

Introducing MaaS requires making changes across many aspects of a retailer’s business, including inventory replenishment, transportation and last-mile delivery, so you should anticipate and address those changes before adopting MaaS.

Interestingly, as an example, an analysis may determine that a retailer should leverage MaaS in specific regions of the U.S. and introduce company-owned micro-fulfillment centers or larger customer fulfillment centers capable of fulfilling thousands of orders weekly in other regions. Situations like these are why it’s important to analyze the needs of the business and identify the optimal strategy versus making decisions based on gut feelings.

I believe e-commerce will continue to grow further, which could strain retail business models and supply chains. Based on my experience, MaaS is an option worth considering.

Read this as well as additional article from PULSE CMO, Brittain Ladd on Forbes

The Benefits When Considering Automation

The Benefits When Considering Automation

AutoStoreIn today’s ever-changing market, automation is the leading edge most companies are using to gain a competitive advantage. Companies delaying automation will fall behind, primarily due to the brisk speed at which innovation is already being adopted in the market. The pandemic showed the world that the current supply chain model was modeled after a world that does not exist anymore. Customers demand easy access to products, speed of delivery, and high-touch customer service. However, many executives are unsure of where to begin with automation, what products are right for them, or even what company they should be using, causing them to delay the process altogether. By automating your business, you can execute operational activities more efficiently. Robotics take care of monotonous tasks while employees can focus on main business processes and more complex tasks. The below highlights some key benefits to automation:

Autonomous Mobile Robots Reduce Human Movement & Injury

OTTO AMRPULSE Integration partnered with OTTO Motors to complete the largest at scale deployments of AMR technology in North America. During the study, PULSE compared AMR performance to existing technologies and human load factors. The result, AMRs represented 10% of the equivalent manual handling labor costs and 20% of the cost of a forklift.  It is important to note the situational aspects associated with this study. At higher speeds and with advanced safety features, AMRs outperformed manual carrying, and driver operated pallet loaders over long distances. However, humans have more agility moving goods for short distances or around stations.  It was determined that a blend of both would create the optimum result with output and efficiency. AMRs would conduct the heavy lifting and repetitive labor while humans would operate at stations carrying out tasks of picking, sorting, or quality control. Reducing the number of people moving around a facility compounded with the risks of human driver error, and injury related to repetitive “heavy lifting” tasks helped alleviate some of the many key hazards companies continue to face leading to costly accidents in their facilities. Due to materials handling automation, the repetitive task of pushing product is assumed by the vehicle, while more value-added tasks are left for the workers. Injuries decrease and overall company injury related costs decrease as well.

Integration Into Existing Equipment

WMSWhile researching supply chain automation, it is important to consider solutions that complement the equipment you already have or plan to buy. Some autonomous vehicles, including those from OTTO Motors, integrate with a warehouse management system (WMS) to reduce unnecessary steps. Compatibility between equipment makes the installation of new products more efficient.

Scalability

Scaling a business can be a complicated process. There are many variables that add to a business’s operational costs when it’s being scaled. The more manual process your business has, the harder it is to scale that business. When you automate your processes though, scalability becomes easier. All a company needs to do is make sure that systems can accommodate that growth. If not, minor upgrades are all that is needed.  System’s like AutoStore are easily scalable solutions for retail and e-commerce applications.

Increased Collaboration

An added benefit to automation solutions is that it allows increased collaboration among teams. Many believe automation results in job loss and less teamwork. However, it’s the exact opposite. When repeated tasks are automated, staff will have more time to focus on more integral aspects of the business. Instead of doing mindless repetitive tasks, they’ll work together to make the business better. When business processes are done manually, teams will have to dedicate all of their efforts just to keep things moving. This results in wasted human potential and allocating the valuable brainpower and creativity where it is not utilized effectively.

Accountability

AccountabilityWhen a business is automated and streamlined properly, it’s easier to assess responsibility. This comes as a result of having clear, well-defined tasks, with all the minor tasks automated. If your business has many small tasks that are not automated, they tend to become “nobody’s responsibility”, as none of the staff is directly responsible for them. When these tasks are automated, you end up with the few important tasks where staff members are directly responsible. Having this clear responsibility distribution increases the staff’s accountability for work done and makes quality control easier.

Trackability

Automated and digitalized processes are much easier to track. Your system knows exactly the time, effort and resources required to carry out a specific task. Using the right tools, you can get valuable business insights that’ll help you make it better.

The Future of Robotics Solutions & Automation

The Future of Robotics Solutions & Automation

As the world begins to adopt more forms of automated systems, it raises concern for the impact on job loss.  While robotics can automate and improve efficiency it is not a substitute for all operations and human labor in the industry. A study conducted by Deloitte shows that 60% of companies are utilizing robotics as an assist to with current workforce rather than to replace it altogether.

This will lead to a fundamental change in the duties assigned to human roles.  Repetitive, labor-intensive, and oftentimes potentially dangerous tasks will be replaced by robotics while more crucial and analytical roles will still need a personalized touch of human involvement. Robotics and AMRs help boost productivity, efficiency, resilience, and even safety within a facility, however, humans are still needed to play critical roles in the overall system. The ideal solution is a blend of human involvement and robotic automation.

The pandemic showed the world that the current supply chain model was modeled after a world that does not exist anymore. Customers demand easy access to products, speed of delivery, and high-touch customer service.

AutoStore automated fulfillment solutionsBusinesses must evolve quickly to navigate the ecommerce demand and to stay ahead of their competitors. Convenience and social distancing take precedence over the in-store shopping experience. Businesses that can serve eCommerce customers efficiently and effectively will win market share.

Today’s competitive businesses are seeing that the use of Robotics is becoming cost effective for order fulfillment. More retailers are relying on automated fulfillment and robotics to lower costs, ensure accuracy, and decrease processing times. eCommerce continues to account for a larger percentage of market share each year. Grocers must meet demand with grocery fulfillment that works for both the business and the customer. Customer expectations have evolved, and efficient grocery fulfillment solutions are quickly becoming necessary for a competitive market. Online shoppers expect to locate the same variety of products, with little to no change in price points. Consumer needs and tastes are rapidly changing, and the dominance of eCommerce has changed customer expectations. New technology enables your business to futurize processes and increase the utilization of existing assets.

PULSE Integration partnered with OTTO Motors to complete the largest at scale deployments of AMR technology in North America. The Business Case for AMR's in ManufacturingDuring the study, PULSE compared AMR performance to existing technologies and human load factors. The result, AMR’s represented 10% of the equivalent manual handling labor costs and 20% of the cost of a forklift.  It is important to note the situational aspects associated with this study. At higher speeds and with advanced safety features, AMR’s outperformed manual carrying, and driver operated pallet loaders over long distances. However, humans have more agility moving goods for short distances or around stations.  It was determined that a blend of both would create the optimum result with output and efficiency. AMR’s would conduct the heavy lifting and repetitive labor while humans would operate at stations carrying out tasks of picking, sorting, or quality control.

Reducing the number of people moving around a facility compounded with the risks of human driver error, and injury related to repetitive “heavy lifting” tasks helped alleviate some of the many key hazards companies continue to face leading to costly accidents in their facilities.

Read More About PULSE Integration and OTTO’s deployment of AMR Solutions in the attached white paper.

Read More Here

The Instacart Deception

The Instacart Deception

One of the most read and quoted books on military strategy and tactics is called The Art of War written by Sun Tzu, a Chinese general, philosopher, and military strategist. One of Sun Tzu’s most famous observations is that “All warfare is based on deception.” I like the quote and I agree with the majority of the strategies proposed by Tzu.

The quote could also have been written to state the following, “All business is based on deception.” In fact, deception is a common practice in business. For example, Apple founder Steve Jobs hid the bugs that could have destroyed the reputation of the iPhone. To prepare for a demo of the iPhone in 2007, Jobs painstakingly identified how to demo the phone in a certain way that camouflage all of the bugs. It worked. The demo was a massive success.

I believe we are witnessing another executive and company practice the art of deception in plain sight, Apoorva Mehta and the company he founded, Instacart. Here’s why.

 

Instacart’s 20-Year Game 

A challenge faced by some executives, especially executives that run startups, is appearing more capable and intelligent than they really are. This isn’t a slam or criticism, it is a fact. I’ve interviewed dozens of executives that lead or work for startups and I’ve been able to get them to open up to me about their fears. The biggest fear I identified is the number of executives who had to accept that luck played a large role in their success and that sooner rather than later, the success or failure of the company would depend on their leadership abilities and business acumen. The executives were afraid because they weren’t leaders or skilled in business. Over 50% of the executives I interviewed went on to fail.

Apoorva Mehta legitimately deserves credit for recognizing the need for a company to fulfill online grocery orders and deliver them. Mehta worked very hard to get Instacart off the ground. However, many retail analysts recognize that Instacart not only benefitted from luck, but their growth can directly be traced to actions taken by others and events that haven’t occurred for over 100 years.

If Amazon hadn’t acquired Whole Foods, and if COVID hadn’t appeared, I wouldn’t be writing this article. The acquisition of Whole Foods by Amazon scared the majority of grocery executives into thinking Amazon would soon take their customers. Instacart benefitted from the panicked executives who contracted Instacart to provide online grocery fulfillment and delivery.

Prior to COVID, only 3% of grocery sales were online. When COVID arrived, the need for online grocery fulfillment and delivery exploded. To the credit of Instacart’s executive team, they took full advantage of the opportunity to grow their business.

 

(Note: I continue to read articles or hear talking heads on news programs claim that COVID is a ‘Black Swan‘ event. This is false. The shift to agrarian life 10,000 years ago created communities that made epidemics and pandemics possible. The Black Swan event wasn’t COVID. The Black Swan event was that many countries voluntarily shut down their economies creating a global economic disaster).

Will Instacart continue to grow in a post-COVID world or will the luck run out? I believe Instacart will grow because Mehta and his executive team are already planning well into the future.

According to Mehta in a recent Forbes interview, he’s “playing a 20-year game.” Mehta also states that Instacart isn’t trying to take away customers from the grocery retailers they serve, and that Instacart has no plans to “ever sell groceries directly.” Is that true? Let’s turn to Sun Tzu for guidance on how to answer the question:

“All warfare is based on deception. Hence, when we are able to attack, we must seem unable; when using our forces, we must appear inactive; when we are near, we must make the enemy believe we are far away; when far away, we must make him believe we are near.”

If Mehta is playing a 20-year game, what then does the future hold for Instacart and it’s customers? Are we honestly to believe that the Instacart of today will look very similar to the Instacart in 2040 except for better analytics? Even though online grocery fulfillment will increase to become 50% or more of a retailers business, we are to believe that grocery retailers will be happy to turn over their customers and business to Instacart? Gosh, is Instacart going to run the grocery stores too in a mutually beneficial relationship with their retail partners where love and respect drives all?

Based on discussions I’ve had with numerous industry experts, retail analysts and individuals who work for Instacart, this is what customers of Instacart can expect in the coming years in my humble opinion.

Instacart will go public in 2021, 2022 at the latest.

I’ve been told by multiple sources with first-hand knowledge of the matter that Instacart is actively engaged in discussions about opening micro-fulfillment centers (MFC). Fabric is one of the companies Instacart has spoken with about Micro-fulfillment as a Service. (Note to Instacart: Drop your insistence on technology exclusivity and acquire Fabric). Instacart has engaged in discussions with other MFC vendors according to executives I spoke with this.

Instacart will need a minimum of 50 MFC locations to begin with but the number of MFC facilities could eventually exceed several hundred. The challenge for Instacart will be convincing their retail customers to sign up for the service. Make no mistake – Instacart will convince a few customers to contract Instacart for fulfillment. When this happens, a flood of customers will follow. (I believe a partnership with AutoStore for Micro-fulfillment as a Service is the best strategy for Instacart to pursue. I don’t believe micro-fulfillment is enough. AutoStore is an ideal company to enable Instacart to become a fulfillment powerhouse).

Micro-fulfillment centers will allow Instacart to remove grocery fulfillment from the stores of their retail customers and reduce costs. This is actually a wise move and it is something I’ve recommended several times to Instacart. Grocery retailers can ship inventory to each Instacart MFC and leveraging technology from Fabric or other MFC vendors like Geek +, Attabotics, AutoStore, etc., online and curbside pickup orders can be automatically fulfilled using the MFC. Some products will continue to be picked by hand. Instacart will be able to reduce the costs associated with fulfilling orders significantly increasing their value to their grocery customers.

Micro-fulfillment centers will allow Instacart to expand their business model. According to Mehta, he wants to expand Instacart beyond supermarkets and has signed deals with Sephora, Best Buy, and 7-Eleven. Opening micro-fulfillment centers will allow Instacart to offer ‘Micro-fulfillment as a Service’ to fulfill online orders and replenish inventory rapidly in small format stores; like Sephora and 7-Eleven, for example.

Micro-fulfillment centers will also make it easier for Instacart to become an online grocery retailer and open their own physical stores. This is something I estimate will happen by 2025 at the latest. Grocery retailers pay Instacart an average 10% per order. In 2019, Instacart was losing $2.00 on every order they fulfilled. (Mehta claimed Instacart was profitable in 2019). In 2020, Instacart is grossing $3.00 per order. When COVID is tamed, which it will be, Instacart is going to again lose money or barely break even. Maintaining the status quo won’t work.

From a strategy perspective, the smartest move for Instacart is to continue to be deceptive about their future plans. Deception isn’t illegal. From the quote above, “When we are near, we must make the enemy believe we are far away.” Instacart must continue to sign new grocery retailers and do everything they can to maintain their current retail customers. Why? Data. Instacart understands the value of data. Instacart also understands the value of convincing grocery retailers that allowing Instacart to maintain a list of their customer names, email addresses, physical addresses and other data is nothing to be concerned with.

“If your enemy is secure at all points, be prepared for him. If he is in superior strength, evade him. If your opponent is temperamental, seek to irritate him. Pretend to be weak, that he may grow arrogant. If he is taking his ease, give him no rest. If his forces are united, separate them. Attack him where he is unprepared, appear where you are not expected.”

If Instacart chooses to become an online retailer, they will easily convert customers from shopping at their favorite online retailer to shopping at Instacart. Why? Because Instacart owns the customer relationship. When Instacart launches their online grocery business, they will have the best pricing, assortment, promotions and the best advertising campaigns for brands. I warned grocery retailers in this 2018 article that if they contracted Instacart, they would be teaching an eventual Trojan Horse their strengths and weaknesses. I was right.

Instacart not only knows how to serve their current grocery retail customers, Instacart knows how to take their customers and put them out of business. Mehta recently stated that Instacart is “actively hiring dedicated Instacart analysts who will be embedded in retail partners’ headquarters to support them.” Am I the only person screaming and laughing at the absurdity of grocery executives who will allow Instacart to embed analysts?

Note to Dunnhumby: You need to target every Instacart customer and market your services. I’m amazed you aren’t more aggressive in an industry actively looking for an alternative to Instacart. Retailers have a growing desire to analyze and monetize their own data vs. allowing Instacart and other third parties own and control the data.

Grocery retail isn’t only about online shopping. The grocery industry in the U.S. is estimated to be a $1T industry with most sales taking place in retail stores. Regardless of the denials, Instacart will leverage the mountain of data they’ve collected, and continues to collect, from their grocery customers. The data will identify exactly where Instacart must open stores to serve the needs of customers. Instacart branded grocery stores will become a reality.

Instacart is going to face an extreme amount of pressure in the coming years. For two years, I’ve had discussions with Postmates, DoorDash and the other restaurant delivery companies, about the need to fulfill and deliver online groceries and also teach their grocery retail customers how to install dark kitchens and sell restaurant quality food direct to their customers. Micro-fulfillment is a major topic of discussion. Uber Postmates, DoorDash, Grubhub, etc., must invest in opening their own micro-fulfillment centers. It’s happening. (Full disclosure: I continue to advise several restaurant delivery companies on the topic of micro-fulfillment).

What about Shipt? My advice to Target is divest Shipt. The company has failed at every level to become a competitor to Instacart even though the opportunity to do so exists. Shipt never lived up to its potential, Instacart exceeded theirs.

Instacart has no choice but to be deceptive. As with all deception, however, at some point the truth becomes known. Odds are high that by 2025, the deception will end and the truth will be told – Instacart is going to become the largest online grocery retailer in the U.S., and will open hundreds if not thousands of stores.

Conclusion

Instacart has every right to do what I outlined above. In fact, I hope it happens. But will it? The unknown is whether or not Instacart will be acquired. I have stated in writing and publicly that Shopify, Berkshire-Hathaway, Facebook, FedEx, Target or Google should assess acquiring Instacart. Amazon could acquire Instacart as doing so would eliminate a major competitor. Walmart could acquire Instacart.

The challenge for Instacart is that they’re vulnerable. The sun has shone brightly on Instacart for several years but storm clouds are gathering. DoorDash and Uber Postmates have exceptional potential to go after Instacart’s customers.

Most of Instacart’s customers can enter into agreements with micro-fulfillment companies to purchase and install MFCs within their retail ecosystems thus eliminating the need for Instacart.

Instacart going public may turn out to be its last hurrah if it’s not careful. Investing in micro-fulfillment, becoming an online grocery retailer, and opening their own stores remains the best strategy for Instacart.