Instacart adds 'tech provider' to its already lengthy resume

The news: Instacart unveiled Instacart Platform, a collection of omnichannel solutions that grocers can implement on their own properties, per a company release.

The platform includes:

• Ecommerce services including custom-built storefronts and product discovery tools
• Access to Carrot Warehouses, microfulfillment centers that enable retailers to offer 15-minute delivery
• Tools to enhance the in-store experience, including the ability to incorporate scanless shopping
• Carrot Insights, a data analytics tool that allows retailers to optimize operations by monitoring key metrics such as item popularity, delivery times, and gross merchandise value
• Carrot Ads, which allows retailers to leverage Instacart’s advertising capabilities to show ads on their own sites and apps

Competitors catch up: While Instacart usage soared during the pandemic, the company no longer controls the third-party delivery market like it used to: We forecast its share of the market will drop to 69.4% this year.

• One of the biggest threats to Instacart’s delivery model is the prospect of retailers building out their own fulfillment network, which Walmart, Costco, and others are already doing.
• Walmart has also encroached on Instacart’s turf with GoLocal, a service that lets retailers leverage Walmart’s own delivery capabilities.
• Rapid delivery startups like Gopuff, as well as established delivery platforms such as DoorDash, are also chipping away at Instacart’s dominance.

Diversifying revenues: Instacart has expanded the types of retailers it serves as well as the services it offers as it tries to stay ahead.

Recent tactics include:

• Partnering with non-grocery retailers like Lowe’s and Office Depot to provide same-day delivery
• Expanding into rapid delivery
• Offering ready-made meals and meal kits

Capturing ad dollars: Instacart is also looking to advertising to drive profits. The company hopes to generate $1 billion from its ad business this year, per The Wall Street Journal.

• Instacart ranks higher than any grocer on our 2022 “Retail Media Networks Perception Benchmark,” thanks in part to the traffic its platform sees.
• But with Walmart, Kroger, and others building out their advertising platforms, Instacart will have to develop more sophisticated capabilities to attract advertisers’ attention.

However: Instacart’s new initiatives have yet to restore investor confidence: Last week, Instacart cut its valuation by more than a third, to $24 billion.

• While a company spokesperson said the markdown was due to “market turbulence,” the move came shortly after several investors devalued Instacart’s shares by 18%.
• While Instacart’s revenues increased by 20% in 2021, DoorDash’s revenues rose by 70% in the same period, per The Information. DoorDash reported $4.89 billion in revenues for 2021—three times what Instacart generated.

The big takeaway: With its new technology suite, Instacart is hoping to reduce its reliance on delivery while establishing itself as the partner retailers can rely on to support their businesses.