Town Hall Recap: Checkout the New Changes to Tips and Fees
Thanks so much to everyone who participated in our recent Full-Service Shopper Town Hall. We had a great list of questions from shoppers — over 500 submissions! For those shoppers who weren’t able to attend, we’re providing a recap of the highlights below.
First, a quick overview of the new changes: the default tip increased from 0% to 5%, and the default service fee decreased from 10% to 5%. Also, the service fee changed from waivable to fixed.
Without further ado, a few top questions we covered at today’s Town Hall:
Q: What was the impact of the changes on tips? Is this good or bad for my earnings?
- We think this was a positive change for Shopper earnings. The new tip default has resulted in a nearly 2x increase in the percent of orders with tips, so tip earnings have become more consistent. Additionally, largely because of fewer zero-dollar tips, tip dollars per order have increased.
Q: Why does Instacart charge a service fee?
- Instacart covers the costs of completing every order by collecting money primarily from retail partners and customers. For customers, in addition to a standardized fee for delivery, we charge a percentage-based service fee to account for the varied size of each order; we think it’s fair for a customer to pay a higher service fee for a larger order (and less for a smaller one). The service fee supports our operating costs, including Shopper pay and Community Support call centers.
Q: Why did we decide on a 5% default tip as opposed to 10% or another value?
- We want to make sure Shoppers have the opportunity to earn as much as possible. We also need to make sure the service isn’t too expensive for customers: our data indicates that if the total cost of the service gets too high, factoring in fees and tips, customers don’t order as frequently. Historically, customer service fees were 10%, and so splitting this 10% between a 5% service fee to cover our operations cost and a 5% default tip for Shoppers seemed a fair compromise and a good place to start. We’ll keep watching the data to make sure this change is the right solution for both Shoppers and customers.
Q: What about other industries, like restaurants, where the standard is 15–20%? Or other delivery companies, where the default is often higher than 5% . . .
- First, we deeply care about the total amount Shoppers can earn, including commissions and tips. Second, grocery shopping and delivery is a new industry so comparisons to other industries are hard to make. In restaurants, for example, servers’ hourly wages are typically low, but an established tipping norm exists. With meal delivery service, a flat-rate tip is common. With grocery delivery, however, there’s no established tipping norm, and unlike meal delivery, the grocery basket size/order total is significantly higher than in meal delivery. We think the current solution — a 5% default tip as a starting point — is fair and transparent for both customers and Shoppers. That said, we plan to monitor the impact of these new changes and will continue to gather feedback from customers and Shoppers alike to ensure we’re on the right path.
Q: Some customers may still think that the 5% service charge is a tip. Is there a way you could make it clearer in the app that the service charge is not a tip for the Shopper?
- To ensure this is not an area of confusion for customers, we made it extremely clear in the updated design. The tooltip on the service fee line item at checkout makes it very clear that the 5% service fee goes to Instacart and is not a tip. There is also a prominent “Driver Tip” line item, which further clarifies where a customer can tip the person delivering their order.
We hope this Town Hall recap has been helpful and informative, and we look forward to doing it again soon!