Speaking at the Shoptalk retail event in Las Vegas, Instacart’s chief business officer, Nilam Ganenthiran, outlined how he sees the grocery ecommerce channel evolving.
Same-day delivery partner 300 retail partners
Instacart is a technology and logistics company that is focused on being a retailer marketplace. It utilises a network of over 80,000 crowd-sourced personal shoppers to pick and deliver groceries for around 300 retail customers across North America. With a focus on same-day delivery, its service currently reaches around 80% of US households and 62% of Canadian households.
Over the last two years it has seen significant growth as it has developed several new retail partnerships, including entering the Canadian market. In the US, key partners include Kroger, Albertsons and Walmart’s Sam’s Club. Consequently, it has become a major operator in grocery ecommerce, enabling retailers to enter and scale-up in the channel. At Shoptalk, Ganenthiran shared his perspectives on the channel’s ongoing evolution.
1. Brick and mortar will continue to matter
Instacart’s model helps retailers to optimise their existing stores for grocery fulfillment. Several different solutions are being piloted in the North American market, with a recent focus on store-based micro-fulfillment. The company views recent press reports of Amazon’s plans to develop a new retail format as validation of its model and the importance of taking an omnichannel approach.
2. Stores will see a dramatic change
However, the company expects to see new store formats emerge. Most of today’s grocery stores were designed for operational efficiency, not for entertainment or ecommerce. Instacart expects stores to be reorganised into one-part ecommerce and one-part focusing on delighting and inspiring customers.
3. Online baskets will become more profitable
While grocery ecommerce has developed slowly in the US, its rapid growth over the last two years has led to a shift in conversations between Instacart and its retail partners. No longer needing to prove the model, discussions are focused on how to add more high margin items to baskets and create impulse and discovery opportunities, with a view to improving basket economics.
4. New solutions and services will emerge
To fully capitalise on the opportunities in the channel, grocery retailers will need to continue raising the bar, translating what they do so well instore to the online environment. Instacart aims to help retailers achieve this through optimising its deep engineering and data science capabilities. Marrying these with retailers’ expertise in operations will enable digital ideas to become new products and services. This year, the company will aggressively roll-out a new store pickup programme, providing customers with more flexible shopping options.
5. Grocery ecommerce penetration will grow significantly
Compared to other categories, grocery ecommerce is relatively under-penetrated in North America. Over the longer-term, the company expects one in five transactions to move online. However, it will be important that the cost of ecommerce to customers also falls. Recently Instacart reduced delivery fees and the cost of its annual membership programme.
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