Can own brand credit cards drive loyalty for Instacart and DoorDash?
Instacart, the nation’s leader in grocery delivery, and DoorDash, the largest restaurant takeout delivery platform in the U.S., are both planning to launch their own credit cards. The Wall Street Journal first reported on the developments.
Both platforms saw explosive growth last year as delivery took off during the pandemic. Both scaled operations, cemented their positions as leaders in their respective channels and were rewarded with lofty valuations by Wall Street.
Instacart is estimated to account for about half of the online grocery delivery market.
According to Second Measure, DoorDash captured 55 percent of U.S. consumer meal delivery sales in February, followed by Uber Eats, 21 percent; Grubhub, 16 percent; and Postmates, six percent.
The credit cards are expected to help the companies hold onto those pandemic-driven gains, including incentivizing sign-ups for each platform’s membership program. With its DashPass program, DoorDash offers free deliveries for about $10 a month while Instacart Express offers free delivery on orders of $35 or more, also for $10 monthly.
The credit cards can also be used to retain the many new members that tried delivery during the pandemic. Delivery will likely moderate as COVID-19 vaccinations support more visits to restaurants and grocery stores.
Finally, a strong rewards-based credit card reinforces each company’s position as a go-to delivery platform and provides leverage against efforts by restaurants and grocery stores to lower commissions.
As reported by the Journal last December, grocers have been grumbling about commissions from Instacart that can amount to more than 10 percent of every transaction. Other complaints include Instacart exercising too much control over customer interactions and its advertising that competes against grocers’ own co–op programs.
DoorDash and similar takeout delivery platforms have received even more criticism for charging fees to restaurants ranging from 15 to 30 percent per order.
Cards can also be a source of data, although they come with exorbitant interest rates for consumers. According to a recent analysis by CNBC Select, the top-five store credit cards based on rewards, special financing offers and free shipping perks are Target RedCard, Walmart Rewards Card, Amazon Prime Store Card, Costco Anywhere Visa Card by Citi and Lowe’s Advantage Card.
- Instacart and DoorDash Plan to Launch Their Own Credit Cards – The Wall Street Journal
- DoorDash and Instacart look to dive into the credit card space – Business Insider
- Instacart Looks to Credit Card Offers to Spark More Business – Progressive Grocer
- DoorDash Plans To Launch Its Own Credit Card – 1851 Franchise
- Instacart Said to Ink Card Deal With JPMorgan Amid Lockdown Boom – Bloomberg
- Instacart Announces $265 Million In New Funding From Existing Investors – Instacart
- Instacart raises $265 million, more than doubling its valuation to $39 billion. – The New York Times
- Instacart’s valuation doubles to $39 billion – CNBC
- Which company is winning the restaurant food delivery war? – Second Measure
- Has the pandemic proven Instacart’s business model? – RetailWire
- Chipotle battles escalating delivery costs – RetailWire
- The best store credit cards of April 2021 – CNBC Select
DISCUSSION QUESTIONS: Do own brand credit cards make sense for Instacart, DoorDash and other delivery platforms? What competitive threats, if any, do you see for the retailers and restaurants they serve?