The Predictable Rise of Instacart
Predicting the future is inherently difficult, even if you work in a futuristic industry like online grocery. But only nine months ago, Instacart President Nilam Ganenthiran did exactly that.
In a not-much-noticed press release published by the company on Jan. 14 — before COVID-19 would change the world — Ganenthiran proclaimed that 2020 would be “the year for online grocery pickup.”
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“It’s crazy to think about this, but in a two-to-four week period, we experienced the adoption of grocery e-commerce that we were expecting to see in a two-to-four year period,” Ganenthiran said. “We saw a 500% jump in order volume. Almost overnight, we saw basket sizes expand 35% and Instacart become a lifeline for people across North America looking to get their groceries and goods delivered. We saw things that normally are always in stock — toilet paper, bottled water — just disappear from store shelves. And we had over 500 retailers, across nearly 40,000 retail store locations, more than half of North American grocery e-commerce basically, looking at us and saying, ‘Hey, you got to be there and show up for our customers.’”
Fast-forward eight months. Today, Ganenthiran and the rest of the Instacart executive team have moved a bit beyond worrying about toilet paper stocks. They’re now laser-focused on leveraging the growth opportunity before them, and on building a future vision to help the grocery industry thrive during the next pandemic and beyond.
Founded in San Francisco in 2012 by former Amazon engineer Apoorva Mehta and his friends, Instacart’s mission was then, and remains now, to help brick-and-mortar grocers be successful online. Since then, the company has been measuring that success by scale, expanding rapidly into new geographical markets and launching new features designed to make grocery e-commerce irresistible to consumers.
Then in March, irresistible turned into essential.
Bringing things back in balance means “using technology and scale to be able to lower costs while also making sure our retailers’ P&Ls are healthy,” he explains. It also means building great apps and websites on behalf of the company’s retail partners, turning technology into something they can use to create custom experiences and build online stores to connect with their shoppers. Instacart has a robust Enterprise business building websites for grocers such as Wegmans Food Markets and Heinen’s.
All of this growth is driving the company to upgrade its value proposition to all four sides of its marketplace.
“We are benefiting from a tremendous tailwind, and we have been very fortunate to be able to partner with the best retailers out there,” Ganenthiran asserts. “We take the position that they have given us, as their partner, the e-commerce partner, to lift up brick and mortar, very seriously. And we can’t rest on our laurels. We have to do everything possible to lift our retailers.”
The Future Is Already Here
“If Prop 22 doesn’t pass, things will probably have to change. Our accessibility may be impacted, we may no longer be able to provide earnings opportunities to all of our shoppers in California, and the cost to customers may increase. We’re committed to finding an approach that preserves what’s best about our model for customers and retailers, while finding solutions that further support shoppers, such as benefits like earnings guarantees and health care.”
In the meantime, Instacart has overhauled every part of how it hires, trains and onboards shoppers, from background checks, to converting physical ID cards to digital cards, to recruiting efforts via social media and referrals. The company has even teamed up with big-name employers such as Hertz and Hilton to hire some of their furloughed workers.
Most Popular Search Terms on Instacart in 2020
- Cleaning products
- Toilet paper
- Bird food
- All-purpose flour
- Pumpkin spice
- Hair dye
- Tanning lotion
- Mason jars
- Protein supplements
- Açai drinks
The company gives retailers access to a lot of data science modeling showing how to shave seconds and minutes off the picking process to save costs. But, Ganenthiran says, there’s one thing he wants grocers to realize:
“The most important thing that grocers need to understand about Instacart is we have not, and will not, compete with our grocers. If you’re a grocer, we want you to consider us as a true partner and extension of your team and think about us through the lens of, ‘Okay, how can I work in partnership so that I can use Instacart’s strengths to make my strengths even better?’”
Delighting customers is something that Ganenthiran also thinks the industry needs to focus on, and that goal was a guiding principle when the company expanded its customer service team, early in the pandemic, from 1,200 to 18,000 agents. Grocery e-commerce customers, whether on Instacart or other platforms, often complain about late deliveries, missing items, inappropriate item substitutions or out-of-stocks.
“We had a lot of first-time consumers trying grocery e-commerce,” he says. “And, you know, every minute of every day that we’re disappointing customers, I feel it personally, because I understand that’s a single human being who is disappointed with their strawberries. So we work night and day to try to rectify the situation and are constantly focused on how we can improve our overall quality and deliver customers an exceptional experience. And that included a few things.”
The company made the decision to overstaff its customer service department, and became comfortable with not trying to forecast staffing down to the second. It also started not just retraining agents, but “overtraining” them to make the customer happy, no matter what. The third thing that the company did was re-evaluate how customers could contact Instacart Care.
All three will matter, and no matter how many competitors spring up (Uber, DoorDash, Shipt and Amazon, to name just a few), Instacart’s value proposition will remain helping grocers win in e-commerce.
“There’s two big differences between Instacart and all of its competitors,” Ganenthiran points out. “The first is Instacart doesn’t compete with our retailers. The second difference is our commitment not just to a marketplace, a multi-retailer marketplace, but the retailers’ own sites, via the Instacart Enterprise offering. We believe Instacart will be successful if brick-and-mortar grocery is successful. Competition is inevitable, and competition has always existed. So we just have to keep doing better.”
Doing better and being nimble is what Instacart has proved that it’s capable of. But the real challenge going forward will be proving that it can become a profitable, sustainable business.