Instacart: the supermarket Uber

Enrique Dans
Apr 26, 2015 · 3 min read

I have to admit that I find business models like Instacart’s attention-grabbing. This is a company valued at two billion dollars, set up by a former Amazon employee determined to make his mark who has failed with some 20 other projects until he came up with this one, which has already been dubbed by some pundits as “America’s most promising company.”

How does it work? It couldn’t be simpler: you sign up by providing your zip code, and if the service is available in your area, you are then asked which supermarket you use. You then provide a shopping list, and a part-time worker does your shopping for you and brings it to your door in less than two hours. This is a business built entirely on third parties: the company has no warehouses, no lorries, no logistics, nothing, nix. A lighter business model is hard to think of: buying from supermarkets using part-time workers who work when they want and where they want and can theoretically earn up to $25 an hour using their own car, although there is already talk of exploitation.

In its brief history in a sector with the slimmest of margins, Instacart has already been put to the test. Its business model has developed from earning money through shipping costs and by overcharging on certain products, to becoming a platform for supermarkets to outsource their online sales. The company has recently begun to notify its users on its website about which products cost the same as in the supermarket, which less, and which more.

Instacart is convenient for users, as well as offering the possibility of buying in supermarkets like Costco, which usually only sell to customers who have bought their loyalty card. Aside from the logistics provided by part-time workers, the company is also experimenting with shipping carried out by third parties so as to grow more quickly. As soon as you make your purchase, the application allows to follow the steps of your personal shopper: you can see where he or she is on a map and how your shopping is making its way to your home. If any of the products you have asked for are not available, you can opt to replace it with another when making the order, or even talk to the shopper to suggest alternatives. Finally, the buyer arrives at your home, hands over your groceries, and most of the time, is tipped.

The company’s founder, Apoorva Mehta, has tried different models until he came up with this one, which has been called “the supermarket Uber”. He applied to the Y Combinator incubator too late, but was finally admitted out of persistence after one of the partners tortured the Instacart system by ordering two hundred two-liter bottles of Coca-Cola (which the buy was not able to fit in his car and in desperation ended up having to be helped by Mehta). The service began to spread thanks to word of mouth, and so began a growth story that has led us to where we are today.

This seems to be yet another company that has become a sign of our times: a supermarket with no warehouses, no lorries, no shops, no staff, but is worth more than $2 billion dollars and is growing fast.


(En español, aquí)

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

Enrique Dans

Written by

Professor of Innovation at IE Business School and blogger at enriquedans.com

Enrique Dans

On the effects of technology innovation on people, companies and society (writing in Spanish at enriquedans.com since 2003)

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