Instacart has raised $265m in new funding led by its existing investors to drive further growth and development of the business. This values the company at US$39bn.
Rapid expansion in 2020
Instacart is the leading on-demand grocery fulfillment company in North America, working with over 600 retail partners, including over 200 added in the last year. This has enabled it to expand its reach to over 85% of US households and 70% of Canadian households. Its pandemic-fuelled growth has also seen it expand its same-day delivery and pickup services into new categories, including prescriptions and over-the-counter medications, office supplies, electronics, health, beauty and wellness, home décor and sports equipment. Instacart’s $39bn valuation cements its leadership position in the sector and reinforces its growing influence on further channel growth.
Three key investment platforms
The company plans to invest the additional funding in three key areas, in addition to expanding its corporate headcount by 50% in the first half of the year. It plans to further develop the Instacart Marketplace, its core app, Instacart Enterprise, which offers end-to-end ecommerce solutions for retailers, and Instacart Advertising which enables CPG suppliers to target customers shopping online.
Pressure on marketing dollars
Instacart Advertising is a growing part of its operations and one which places further pressure on suppliers’ advertising budgets. Many CPG companies will already be funding marketing initiatives with retail partners which are driving fulfillment through Instacart, leading to questions about where is the most effective area to invest. However, working more closely with Instacart in this way could open up opportunities for further collaboration, particularly around evolving the app experience and developing branded stores.
Given the rapid rise of companies such as Instacart over the last year, many suppliers are looking to align themselves more closely with last-milers to fully capitalise on the online opportunity. However, the large number of operators, and continued consolidation, makes it challenging to identify relevant partners and investment levels. These companies have, however, become a key part of the ecosystem, enabling retailers to scale their ecommerce operations at pace and with lower capex requirements. They also help retailers to compete with the shorter delivery windows offered by Amazon and other online specialists. This ensures they will remain an important part of channel solutions.
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