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.
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.