DISCUSSION
Should retailers just say ‘no’ to Instacart?
Written by RetailWire Staff
Photo: Instacart
By special arrangement with the authors, here is an excerpt from the forthcoming book “Instacart for CMOs,” launching on March 10th.
Many traditional retailers are living on borrowed time, with their own ecommerce efforts lagging far behind online marketplaces. But is the current reliance on Instacart to handle the notoriously challenging “last mile” of retail fulfillment really all that bad?
Instacart solves several thorny challenges for retailers, like:
- Providing the required technology, which many retailers are lagging behind on.
- Avoiding the profit-sucking “last mile”. Delivery costs are the biggest hurdle to profitability, particularly in online grocery. Instacart has already done the hard work to figure out factors like “route density,” optimizing routes and scaling nationally;
- Instacart is a demand aggregator. The farther behind retailers get with meeting customer needs with a native solution, the more appealing it is to simply join the shopper where they are already transacting.
- Losing the customer connection: personal info, product info and household info all sits with Instacart. Retailers lose both their current and future direct relationship with the customer.
- The quandary of servicing both in-store “gig” shoppers who need to find items and exit the store quickly and the end customer shopping for themselves. Each has vastly different preferences and measures of value for retailers.
- Margin erosion: Instacart charges a five to eight percent platform fee to retailers. Some choose to pass this on as a markup; others absorb it and lose margin.
- Instacart may put vendor allowances and retail media spend in jeopardy as brands shift their marketing budgets online.