Instacart's founder wants to make grocery shopping effortless
(CNN Business)When Amazon bought Whole Foods in 2017, the outlook appeared bleak for Instacart. Not only did the grocery delivery startup suddenly have to compete with one of the most sophisticated delivery companies in the world, it also counted Whole Foods as one of its biggest partners at the time. But as the shock of the deal settled, calls started pouring in from grocers who wanted to work with Instacart to gird their businesses against the new threat Amazon posed to them.
Four years later, Instacart increasingly resembles Amazon, with hundreds of thousands of workers, deliveries that range from food to office supplies, and reported interest in building high-tech warehouses.
Many tech startups model themselves on Amazon’s approach to business; few actually try to reverse engineer Amazon and compete with it. But that’s part of Instacart’s DNA. It launched in 2012 by comparing itself to Amazon and was positioned by the tech press as wanting to be “the Amazon Prime of grocery delivery.” That may have sounded like hyperbole at the time, but in recent months Instacart has looked more and more like a mini-Amazon.
“When Amazon bought Whole Foods, it was really a wake-up call for the whole grocery industry … and it ended up being a huge boon for Instacart,” said Chris Benner, a professor at UC Santa Cruz and the coauthor of a recent report on e-commerce and the future of work in food retail.
Nilam Ganenthiran, president of Instacart, echoed this sentiment in a statement to CNN Business. “In many ways, we’ve become the grocery industry’s antidote to Amazon because we believe that brick and mortar retailers are critical to the future of grocery,” he said.
While Amazon is known as the “everything store,” Instacart is now expanding what it delivers — from sporting goods to makeup and televisions. Like Amazon, Instacart has emerged as a major beneficiary of the pandemic as people looked to the company to deliver household essentials. Instacart’s valuation doubled — twice — to $39 billion when it brought in $890 million in fresh financing over three funding rounds since the start of the pandemic.
Instacart has filled its ranks with at least four dozen former Amazon staffers who’ve jumped directly from the e-commerce giant to the startup since early 2019, in positions ranging from engineering to ad sales and operations, according to a CNN Business review of LinkedIn profiles. Instacart’s chief revenue officer, Seth Dallaire, was a former VP at the ecommerce giant, and Ryan Mayward joined Instacart this month as VP of ad sales after nearly a decade at Amazon. Instacart’s founder and CEO, Apoorva Mehta, is a former Amazon supply chain engineer who has cited Amazon founder and outgoing CEO Jeff Bezos as one of his role models. (Instacart, which is on a hiring blitz, said it is seeing employees join from a number of top tech companies, including Amazon, Google and Netflix.)
Mayward’s hire may signal another similarity between the two companies. Like Amazon, Instacart views allowing brands to advertise their products to its customers as they shop its platform as a key part of its future. Instacart’s Ganenthiran said it aims to develop “a leading advertising platform that supports the entire grocery ecosystem.” While a newer area of focus for Amazon, it has quickly become one of its fastest growing divisions by revenue.
And Instacart appears to be taking another page from Amazon’s playbook, as it’s reportedly exploring the use of robotic warehouses to fulfill orders. If it does so, Instacart would be in more direct competition with Amazon and potentially some of the startup’s grocery partners. (Kroger, for example, recently opened its first US-based automated warehouse with a partner and Walmart is working on a network of automated fulfillment centers with partners.)
“While we have no updates to share, we’re constantly evaluating our services in deep partnership with the nearly 600 retailers we work with. Instacart’s entire product and model is predicated on being a chief ally to our retail partners,” an Instacart spokesperson said in a statement.
“We’re not a retailer and our business is only successful when we’re driving value for our partners,” the spokesperson said, noting that the company is “continuing to invest in and explore new tools and technologies” to support retail partners.
Still, Brittain Ladd, a food supply chain consultant who formerly worked in strategy at Amazon, said the report of Instacart exploring robotic warehouses shows the startup may be focused on the big WWAD question: What would Amazon do?
“Amazon’s argument would be, why are you delivering all these groceries for retailers? Why don’t you just become your own grocery retailer? That’s the way Amazon thinks,” he said. “Because so many people from Instacart used to work at Amazon — I believe that’s really the end game for Instacart. Because that’s what Amazon would do.”
Instacart already has one valuable asset that Amazon covets: data.
As Benner pointed out, Instacart becomes a main “channel to the consumer” for grocers through its service. And because it owns that relationship, “it gets data across all those customers.” That data can be used to Instacart’s advantage, as Amazon has long done. Amazon, which started as an online bookseller, eventually opened up its own brick-and-mortar stores, leveraging the data it has gleaned from selling books online for many years, all while being criticized for making it difficult for traditional booksellers to stay in business.
But in its quest to build an alternative to Amazon, Instacart is running into some similar criticisms. Both have faced similar issues over their treatment of workers, who’ve raised concerns over everything from inadequate safety protections amid the pandemic to the usage of algorithms to assess productivity. They’ve also both come under scrutiny over how they’ve handled unionization efforts among some workers.
Amazon has pushed back aggressively at a milestone union election currently underway at a Bessemer, Alabama, warehouse. Earlier this year, Instacart let go its only unionized workers as part of broader layoffs as the company has scaled back its use of part-time employees, citing changing needs of partners, all while growing its workforce of independent contractors, who don’t have the right to unionize. (Instacart said the fact that unionized workers were included in the layoffs played no part in the decision.)
“It is much more likely they want to lower their costs and make it impossible for the workers to unionize,” said Rebecca Givan, an associate labor studies professor at Rutgers University. “Any company that wants to compete with [Amazon] has to look at using many of the same strategies so they, too, can cut costs, squeeze workers, and try to maintain low costs at the expense of workers rather than at the expense of profits.”
In response, Instacart said it cares about its workers and is committed to ensuring they have a positive experience working for the company. The company said its shopper “net promoter score” — which measures happiness and overall sentiment — is at its highest level ever.
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