We use instacart, and it's great for the small weekday shopping trip. Maybe in our home we're just more selective grocery shoppers than most, but I would never use them for meat and even much produce. Meat, for example.. I've asked for boneless chicken breasts from the butcher and instead i've gotten prepackaged shrink-wrapped, and recently I requested a single double-cut beef tenderloin and instead got 2 single-cuts. In both cases, InstaCart made amends (50% refund) but I have a meal to cook: I don't want a refund, I want what I ordered.
Another reason we couldn't move totally to IC is how they handle credit cards. We get 6% cashback at grocery stores using the Amex Blue Cash card. (And have a 5% cashback Visa for the stores that don't take Amex). Unfortunately, IC charges come thru as internet services, not grocery. So that's a 6% price increase right off the top, in addition to mark-ups on products and delivery fees.
We purchased their "prime" and will continue to use the service, but i still have the dream of being able to replace all my in-store grocery shopping.
I agree with everything you've said here, and use Instacart weekly.
One thing: in the case of Whole Foods, the chicken breasts in the butcher window are exactly the same as the ones in the shrink-wrap. They just take them out and put them in the window.
The ones in the shrink-wrap are actually more hygienic. :)
To counteract that, you should buy $500 gift cards at grocery stores. I got a year of free Amazon Prime by purchasing two $500 gift cards at Giant using my AMEX card. Check out /r/churning on reddit :)
I'm from abroad. What's this "cashback" thing that I keep reading about? They give you money back onto your credit card, after you paid? Why don't they just give you the discount right away? And what do credit card companies have to do with grocery stores?
The credit card company charges the shop a transaction fee for using the card. The retailers allow this as it increases the chance of someone making a purchase, especially bigger purchases.
The credit card company sets out in it's terms of business that the shop must not have a surcharge, and must charge the list price for good paid for by credit card. This is so that using a card is attractive to the customer.
The card fees can be quite high. High enough for there to be more money than the transaction really costs, and the credit card company can then offer some of this money back to customer to entice them to use this card rather than some other card that doesn't offer cash back.
The end result is that customers who pay cash are subsidising the prices of those who pay by card.
It's hard to break the cycle because if a shop doesn't offer payment by card, not many people will shop there as people don't carry much cash.
Amex have the highest fees. I don't know why shops even allow amex.
Shops allow Amex because wealthy people use Amex. Not exclusively of course, and I certainly don't consider myself wealthy. But Amex cardholders charge far more than the industry average.
Also it's not just the ppl paying with cash subsidizing card usage. Cards that offer >1% cashback are usually more difficult to get, and targeted toward higher-spenders. These benefits are subsidized by the people using cards with no benefits.
I work at Stripe (we handle credit card payments for Instacart). Have you checked the cashback situation recently? AFAIK, IC charges have been coming through as groceries for at least a few months now. Happy to dig further if you'd like to email me at anurag@stripe.com.
Oh, awesome. Thank you for mentioning this. Looking on Amex, I can see recent charges coming thru as Grocery, starting in October it looks like?
AFAIK, I won't be able to see if Amex gives 6% on these until my statement cuts in Dec (it's done in arrears), so I'll watch for that later this month.
Thanks, and thanks for fixing this! Is this just a special accommodation for InstaCart? These industry-specific rewards are common across many verticals.
Good to know! The fix isn't specific to Instacart though; industry-specific settings now apply to all Stripe merchants, and have for a while. Hope Amex comes through on the cashback!
I used to use them weekly, but being consistently late, and also consistently only bringing ~75% of what I ordered, I went back to shopping myself. It didn't help getting mouldy produce, or defrosted frozen stuff, or incorrect items on a regular basis.
Instacart prices are consistently more expensive than having it delivered from the stores directly (including a shipping fee). Here in NYC, where grocery prices are already expensive, it aches me to pay even more.
Seems like NYtimes (1) had done an article on Instacart being expensive (and Instacart's FAQ says that they add a markup)
Google Express is not a competition yet. They do not carry many popular products / perishables.
Hey! This is apoorva from Instacart. Our prices for most stores are the same as the store and we are working on getting other stores to have the same prices as well. Stay tuned :)
That has not been my experience with Instacart in NY. In fact, the website helps find popular, affordable items which helps me avoid the pricey alternatives that are typically promoted heavily by the stores.
Absolutely proud of what Apoorva, Brandon, Max, and the entire team have built. I remember working on their first Android app back in Max's apartment. They're truly deserving of their success so far.
Can't wait to see what they do next with this war chest.
To provide some figures for your point, Webvan was founded in 1999 when there were ~100M internet users in the US. Instacart was founded in 2012, when there were over 250M internet users. The success of these services is definitely a question of achieving sufficient scale to break even, which is much easier with a nearly 3x larger market.
Edit: Clearly it's not the only reason they've succeeded, they've smartly avoided all the capital infrastructure that Webvan relied on and mobile devices have improved tremendously but when you're talking about tenths of a percentage points in penetration, tripling your TAM is huge.
The major difference is not the size of the market. The major difference is that Instacart piggybacks on the existing grocery store network, meaning that they don't have to pay for the overhead of a big warehouse. That lets them scale up with their user base instead of having to invest a lot of money up front in warehouses.
So does Safeway. The trouble with doing this out of grocery stores is that the order system doesn't know what's in inventory, and some fraction of your items won't show up.
Amazon Fresh is doing this with their own warehouses and robots. They know their own inventory, and will probably crush these manual-picking operations.
Amazon has never had to deal with their own delivery fleets before, or perishable goods in their warehouses. While it's true Amazon has other revenue streams, Fresh is still just an experiment at this point.
It's a race to see who can take the market, and Amazon is taking a slower, infrastructure based approach. It will be interesting to see if they will see it through to the end.
I worked at a company that had many dot-com boom and bust companies as customers. 1-800-flowers changed their name to 1-800-flowers.com to increase the value of their brand. Barron's published some research in March (I think) of 2001 from Pegasus Research showing a list of publicly traded companies who, by their own optimistic estimates, would run out of cash and how many quarters of cash they had remaining. I remember because I identified the balance owed by each of those companies to us and gave the Controller and CFO the bad news,
As a comparison, Uber raised money at a $18B valuation in June, and then closed a round at $40B a few days ago. While a smaller percentage increase, Instacart's $1.6B increase in value looks pretty trivial compared to Uber's $22B increase over the same time period.
Instacart is one of the first businesses I've interacted with as a customer that I can hardly help telling everyone I know about. It's just that amazing.
And where do they find such pleasantly disposed people to deliver the groceries???
seems like their executing incredibly well and big congrats to the team.
I do wonder a bit how defensible this model is - it seems to me that safeway already has most of the infrastructure available to do deliveries and then could significantly outperform instacart deliveries from safeway in terms of customer experience for example.
- they always know what's in stock in which facility when you order, no more replaced or missing items
- they don't charge the high 20-30% markup that instacart charges to their customers
in terms of marketing, they could probably have lower cost of acquisition on scale as well.
- they could market their app in-store very aggressively at every single checkout counter.
what Safeway is most obviously lacking is a frontend that's as good as instacarts, but now that instacart has shown how to build it, it should be easy for safeway to build this out.
maybe they don't have their distribution setup such that they could actually deliver within 1-2 hours?
what else am I missing? how can this be a defensible business long term?
We used them recently in nyc and user experience was great. However once you do the math, a 10 - 15% markup on most products in addition to delivery fees, tips, (or prime) is simply too much if you use them on a regular basis. The annualized cost for a small family is easily north of $2000.
Now I know that "price is what you pay and value is what you get". So there are definitely occasions when I will use them.
But I honestly doubt that most of their users realize the true cost of their service.
Just ordered some groceries for tomorrow, hope it goes well. I find myself constantly too worn out after work to buy groceries, and buying amazon fresh is only good for some stuff.
I hope Instacart is coming to Canada soon. Toronto is an obvious choice.
The other city that would very likely be receptive is Vancouver. They're keen on the sharing 'economy' - including a home-grown car-share company called Modo. There are also a few Whole Foods stores in-town. I also read recently that cities with fewer cars per residents are more receptive to home delivery services.
Based on numerous reports, such as this one[1], Instacart Shoppers are currently being classified by the company as independent contractors.
Apparently, Instacart Shoppers are trained, set a work schedule with the company, have their work activities controlled through an app, and even wear Instacart clothing. While classification involves numerous factors, I personally don't see how any of this passes even one of the most fundamental, the "nature and degree of control by the employer" test.
Other on-demand companies that use independent contractor classification are facing class action lawsuits [2][3] over classification and given the general trends in the courts[4], there's little doubt we will continue to see the number of class actions alleging misclassification grow.
Putting aside the costs of defending and settling a class action, or paying damages in an adverse ruling, the real question for investors in any on-demand company that currently relies on independent contractor classification is what employee classification would do to the economics of the business. Think of this as an "employee stress test."
In some cases, on-demand companies are using independent contract classification to shift costs that have traditionally been borne by competitors in their markets, giving them an "unfair" pricing advantage. If they are found to be misclassifying their workers, their ability to compete on price will be affected.
In other cases, companies charge a premium for a service that offers convenience. If they are found to be misclassifying their workers and are forced to pay their workers as employees, the premium charged to consumers would either have to increase or the company would need to be able to live on reduced margins.
The effects of reclassification would be particularly significant for transportation companies. For example, in California, under Labor Code Section 2802, employers are on the hook for expenditures or losses incurred by their employees "in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer." This includes expenditures related to travel/mileage.
It's going to be very interesting in the coming years to see which of these on-demand companies continue to thrive because I personally think it's inevitable that many of them are going to be forced to reclassify their workers as employees. I suspect some investors aren't giving this enough consideration in their due diligence.
If there is nothing else I've learned from Hacker News it is that there is a non-trivial percentage of the startup community who not only don't care if a tech startup breaks the law, but they actively support and encourage it. Besides that, companies treating contract workers as employees in this way has been a thing for a long time, and I suspect it will take massive disgruntlement to fuel an equally massive lawsuit in order to get any of them to change.
> I suspect it will take massive disgruntlement to fuel an equally massive lawsuit in order to get any of them to change.
As I noted, there are already lawsuits targeting some of these startups and there are prominent class action attorneys who have publicly stated that they're eying some of the startups that haven't yet been sued.
To file a class action, plaintiff's counsel needs as little as one lead plaintiff. If and when class certification occurs, plaintiff's counsel represents all members of the certified class. Members of the class who don't wish to be a part of the class must opt out. In other words, you do not need "massive disgruntlement" to have an attractive class action. Even the largest of class actions frequently have just a handful of named plaintiffs.
Note that there are practical reasons class action attorneys have not rushed to sue all of these companies. One of them: with their rapid growth, the number of potentially misclassified independent contractors is increasing quickly. Given the applicable statutes of limitations, patience can be rewarded with a larger class and damages that span a greater period of time.
Another reason we couldn't move totally to IC is how they handle credit cards. We get 6% cashback at grocery stores using the Amex Blue Cash card. (And have a 5% cashback Visa for the stores that don't take Amex). Unfortunately, IC charges come thru as internet services, not grocery. So that's a 6% price increase right off the top, in addition to mark-ups on products and delivery fees.
We purchased their "prime" and will continue to use the service, but i still have the dream of being able to replace all my in-store grocery shopping.