After serving as a lifeline to many grocers that needed help picking online orders during the surge of e-commerce usage last year, it seems that Instacart is now exploring micro fulfillment as a new service for its customers, as the company looks to further solidify its growth. A recent report in The Financial Times revealed that San Francisco-based Instacart has sent requests for proposals and has been in talks with micro-fulfillment companies, including Alert Innovation and Fabric, in the past year, reportedly with plans to build as many as 50 automated facilities across the country. Some industry watchers even speculated that Instacart is moving toward becoming an online retailer itself, similar to DoorDash’s launch of DashMart.
Contacted by Progressive Grocer, an Instacart spokeswoman neither confirms nor denies the report, but she maintains that Instacart isn’t interested in becoming a retailer. Instead, she reiterates the company’s dedication to its retail partners: “While we have no updates to share today, 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. We’re not a retailer, and our business is only successful when we’re driving value for our partners. Our goal has always been to lift up grocers and give retailers of all sizes an edge in an increasingly competitive industry. We’re committed to supporting our brick-and-mortar partners and continuing to invest in and explore new tools and technologies that support the needs of their customers and further enable their businesses to grow and scale over the long term.”
It makes sense that Instacart might be considering such an action. The company is on the verge of going public; launching fulfillment operations either for itself or for other grocers would signal the kind of evolutionary growth that would make investors happy. Then again, competing with its retail partners could adversely affect those relationships.
Industry watchers are mixed on their opinions about whether supermarket companies would want to outsource micro fulfillment.
Marc de Speville, partner, e-commerce at the Partnering Group, in Cincinnati, says that while “it makes sense for Instacart to look for ways to get more involved in fulfillment,” retailers might not be so willing to align with the company in this way. “I’m not sure it makes sense for them to do it from an operational, financial or strategic perspective,” he adds.
Meanwhile, Joe McMenamin, director of e-commerce for KPS Global, based in Fort Worth, Texas, believes that the idea has legs. “With Instacart’s recent cash influx from another round of fundraising, combined with their portfolio of customers, the thought of Instacart reshaping the supply chain seems virtually a lock,” he notes. “Instacart’s technological approach disrupted the industry, and now they have leverage. If you were a gambler, the odds look pretty good for this bet.”