The August 14th edition of The Economist considered the business prospects of Instacart. Ms. Fidji Simo originally from France recently left Facebook to assume the position of CEO of Instacart on August 2nd. Her principal task will be to establish profitability and maintain the goodwill of supermarkets that use the services of the company. It is estimated that Instacart has annual revenue of $1.5 billion and a valuation of $39 billion. Profitability is yet another issue.
Following the advent of COVID, Instacart gained prominence as the intermediary between supermarkets and customers unwilling to shop in-person. As the economy opens and brick and mortar receives greater patronage, the role of a delivery service is questioned other than for the homebound. Price sensitivity is evident attested by growth of Aldi and other deep discounters. Instacart faces considerable competition from delivery services provided by Shipt owned by Target, Walmart and Amazon Fresh. DoorDash and Uber Eats have extended their services from meal delivery to groceries.
Based on her experience with Facebook, Ms. Simo will extend the scope of Instacart to become a “high-margin digital-ads business”. Ad revenue attained $300 million in 2020 and is growing at a triple-digit rate. Instacart is also considering robotic warehouses to be installed in collaboration with supermarket partners hence an alliance with Fabric of Israel that has developed technology and installations suitable for integrating supermarket inventory with customer delivery. This strategy may be too late as a number of supermarket chains are establishing their own platforms and installations including Kroger and Walmart, essentially to compete with Amazon Fresh.
The Prospectus issued in advance of the inevitable Instacart IPO will make interesting reading. The filing will denote the intended future relationship of the Company with respect to supermarkets.