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Retail View: Instacart raises bar on home delivery

Like many new companies in this era of technology, the needs of the owners led to the launching of Instacart, an online grocery shopping and delivery service.

“It was a problem that we personally had that we wanted to solve,” said Max Mullen, a co-owner of Instacart. “We wanted to get high-quality groceries and have them delivered quickly, and nobody was doing that.”

He and a couple of partners launched Instacart in July 2012 in the San Francisco market and since then have expanded it to 12 metropolitan centers across the United States. Mullen said five new metropolitan areas will be opened by the end of 2014 and he expects exponential growth in 2015, with most major population centers being served by the end of next year.

Mullen said other online grocery companies have not survived for various reasons that Instacard has been designed to avoid. For example, he remembers the famous flameout of Webvan, which was also launched in the San Francisco Bay area, and said that company was “extremely costly to run from an infrastructure perspective. And it was over-leveraged.”

Webvan could not support that infrastructure as it searched for customers and it died a spectacular death.

Personal-ShoppersPersonal shoppers on their way to delivering an order. Produce is included in 95 percent of all orders and makes up about 35-40 of total orders.Instacart has a simple model built on partnering with existing retail grocery stores and offering very fast delivery. Using the company’s technologically advanced software either on a computer or a smart phone, a customer can order groceries, including fresh produce, and often receive that order within an hour. In fact, if certain geographic criteria are met when the order is placed, Instacart guarantees the delivery within an hour.

Mullen said the company is targeting busy moms as well as urban professionals. He said both groups are challenged for time and appreciate having their high-quality groceries delivered the same day they order them. It is the speed of delivery that he believes will help Instacart survive as giants such as amazon.com and Google enter the home delivery grocery space.

Instacart can make good on its delivery guarantees because it has shoppers in stores throughout the metropolitan area waiting for orders to appear via their own smart phones. Instacart partners with specific independent retailers and chains in each market area. Often the personal shopper is already working on another order when the new order is placed. The items are bought via a previously established account and delivered quickly.

Mullen said the delivery can happen so quickly that a mom making a meal and missing an ingredient can place the order and have it delivered while still making that dish.

For orders under a $ 35 ring, the delivery charge is $ 5.99, while for orders above that threshold the charge drops to $ 3.99 per order. In addition, most customers tip the delivery person.

Mullen said the model works financially for several reasons.

First, the retailers that are involved share the cost of the service. The benefit to that store is that it often gets access to new customers.

For example, in San Francisco, Rainbow Grocery is a very popular independent grocery co-op, but its single location makes it difficult for consumers who live several miles away to frequent the place. With Instacart, they now have access to the high-quality produce and other items for which the retailer is noted.

Mullen said that as Instacart moves into a new metropolitan area it partners with popular retailers with high-quality products that many consumers want access to. This gives the service instant credibility and instant access to customers.

Other retailers that are currently serviced by Instacart include Whole Foods, Costco, Kroger and many smaller chains throughout the country. As it opens new markets, Mullen said its rate of growth in each market is increasingly faster.

Many items on the Instacart website are sold to the consumer at the exact same price that is available in the store, but Mullen said some retailers do adjust their pricing both up and down. They might charge more for some items and make others available at a lower cost as a special promotion for online shoppers.

When Mullen and his partners launched Instacart, they thought fresh produce, like other items in the store, would be on the average consumer’s shopping list, but Mullen said its popularity has been a bit surprising.

“Produce is on 95 percent of our orders and makes up about 35-40 percent of the total orders,” he said.

The company does train its shoppers on picking top-quality produce, including such intricacies as how soon an avocado will be ripe. Mullen said customers do have the option to buy produce in various stages of ripeness so the personal shoppers need to be able to accommodate those requests.

“It is our biggest selling category, so we need to get it right,” he said.

He said the training module includes written material, an online video and in-person training.

The top sellers in the produce department for Instacart mirror the top sellers for any brick-and-mortar store. Bananas are No. 1, with other top-10 categories being berries, packaged salads, avocados, citrus, onions and grapes. Overall, fresh fruit is a better seller than fresh vegetables.

The company’s personal shoppers are typically students or stay-at-home moms looking for extra income. Shoppers are paid based on their number of deliveries in a given time frame, so a quicker shopper can make more money. While many are part-time, Mullen said there are some who do it all day long as their main source of income.

When the company first launched, Mullen said the initial users were from higher-income levels, but the low cost of delivery and access to the same price in the stores has created customers from every price range. What they have most in common is lack of time.

In each metropolitan area that it enters, Instacart maps its service area carefully so that the customers can be reached efficiently and quickly.

For example while the East Bay in the San Francisco area is covered by Instacart, my community on the east side of the Oakland/Berkeley Hills area does not yet have coverage, though Mullen said it should open up soon.

The current markets that are covered by Instacart are Atlanta, Austin, Boston, Chicago, Denver, Los Angeles, New York, Philadelphia, San Francisco Bay area, San Jose, Seattle and Washington, DC.

 

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The Lempert Report: Instacart pushes online delivery (video)

Instacart, a San Francisco company that uses smartphone-equipped “personal shoppers” to provide home delivery from supermarkets in as little as an hour, is making significant headway.

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The Lempert Report: Instacart pushes online delivery (video)

Instacart, a San Francisco company that uses smartphone-equipped “personal shoppers” to provide home delivery from supermarkets in as little as an hour, is making significant headway.

Why Register for FREE?

Registering for content on Supermarket News will give you INSTANT access to invaluable articles and media content that industry professionals rely on. You will have access to our special reports, feature articles, and industry analysis. It’s FREE, easy and quick.  What are you waiting for! In addition you will also receive a complimentary copy of SN’s salary survey sent to you by email.
 

Click here to read the FAQ page if you have any questions (opens in a new window)
 

Attention Paid Print Subscribers:  While you have already been granted free access to SN we ask that you register now. We promise it will only take a few minutes! Or visit your profile and add your print magazine account number and zip code.

Already registered? here.

Supermarket News

The Lempert Report: Instacart pushes online delivery (video)

Instacart, a San Francisco company that uses smartphone-equipped “personal shoppers” to provide home delivery from supermarkets in as little as an hour, is making significant headway.

Why Register for FREE?

Registering for content on Supermarket News will give you INSTANT access to invaluable articles and media content that industry professionals rely on. You will have access to our special reports, feature articles, and industry analysis. It’s FREE, easy and quick.  What are you waiting for! In addition you will also receive a complimentary copy of SN’s salary survey sent to you by email.
 

Click here to read the FAQ page if you have any questions (opens in a new window)
 

Attention Paid Print Subscribers:  While you have already been granted free access to SN we ask that you register now. We promise it will only take a few minutes! Or visit your profile and add your print magazine account number and zip code.

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Instacart launches in Seattle

Instacart said Wednesday it has expanded its home-delivery service to Seattle, working with Costco Wholesale Corp. and Kroger-owned QFC there, with additional stores to be added.

Instacart uses personal shoppers who select the merchandise and deliver orders in their own vehicles in as little as one hour. Customers can order virtually any item in the stores and have them delivered in as little as one hour, and they can combine items from multiple stores into a single order.


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Seattle is the ninth city in which Instacart operates. The others are San Francisco, its home base; Boston, Chicago, Los Angeles, New York, Philadelphia, San Jose and Washington D.C.

Founder Apoorva Mehta said the company has had its eye on Seattle for several months. “The demographics are really in our favor,” he explained. “Seattle has a young, vibrant population that’s known for being very tech savvy.

“In addition, the high level of precipitation correlates with higher order volume in the other cities we serve, and we have found customers appreciate having their groceries delivered right to their door in inclement weather.”

Minimum orders are $ 10, with a one-hour delivery charge is $ 14.99, though the majority of users select a two-hour delivery window for a charge of $ 3.99, the company said.

To celebrate the Seattle launch, Instacart said it is offering one month of free delivery for all local customers who place orders by May 18. The company also sqid it will offer a year’s worth of free deliveries to three cuwtomers, chosen via a drawing, who order and then tweet using the hashtag #InstacartSEA.

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Instacart launches in L.A.

Instacart said Thursday it has begun offering grocery delivery in Los Angeles, just a week after expanding to New York City.


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As it does in New York, Instacart will initially pick from Whole Foods Market locations in Los Angeles, with plans to add more stores in the coming weeks.

The company, based in San Francisco, uses freelance personnel to shop from local supermarkets and deliver to customers in as little as one hour. It adds a small increase to the price of each item, plus a delivery fee. In Los Angeles, as in New York, new customers can get free delivery on their first order of $ 35 or more.

Instacart’s initial coverage area includes the following neighborhoods in Los Angeles County: West Hollywood, Hollywood, Fairfax, Beverly Grove, Sawtelle, West L.A., Mid-Wilshire, Santa Monica, Venice and Marina Del Rey.

“We expect that the traffic and long commutes in L.A. will drive demand similar to what cold weather does for the East Coast,” said Apoorva Mehta, founder of Instacart, in a statement. “Instacart will allow L.A. residents to avoid making those detours to the grocery store while continuing to get the healthy foods they love.”

Instacart now offers delivery in seven markets, and said it expects to add three more this year.

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Instacart Delivery Service Expands to Chicago

SAN FRANCISCO — Instacart, the same-day delivery service that uses a fleet of freelance shoppers to pick up and deliver items from local supermarkets to consumers, has expanded from its home base here to Chicago, the company said Tuesday.

The service has launched in 13 Chicago neighborhoods offering groceries from Trader Joe’s. In the coming weeks, Instacart said it expants to also offer groceries from Safeway’s Dominick’s banner, Costco Wholesale and Whole Foods Market — the same companies Instacart sources from in California.


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Chicago is the home market of Ahold-owned Peapod, one of the pioneers of online grocery. It is the first of 10 major cities Instacart plans to expand into by the end of 2014, the company said. It recently received $ 8.5 million in funding from Sequoia Capital and others to assist in its geographic expansion.

“We look for urban areas with tech-savvy consumers who may not have cars and value convenience,” said Apoorva Mehta, chief executive and founder of Instacart. “Chicago fit the bill. We’re really excited to expand our footprint beyond San Francisco. There’s a lot more to come.”

The first 13 Chicago neighborhoods where Instacart is available are: Lake View, Lincoln Park, Logan Square, West Town, Near West Side, Lower West Side, Near North Side, Loop, Near South Side; plus portions of Douglas, Bridgeport, Amour Square and McKinley Park.

Read More: Same-Day Delivery Start-Ups Prepare for AmazonFresh

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Instacart Delivery Service Raises $8.5 Million

SAN FRANCISCO — Instacart, a seven-month-old service here that offers same-day delivery of groceries from multiple local stores, announced that it has partnered with Sequoia Capital and raised $ 8.5 million in Series A funding.

The round was led by Sequoia with additional participation from Khosla Ventures, Canaan Partners, SVAngel and Paul Buchheit, creator of Gmail. Michael Moritz, chairman of Sequoia and former Board member of Webvan, has joined the Instacart Board of Directors.

Instacart plans to use the proceeds of this round to fund expansion beyond the San Francisco area, with a goal of being in at least 10 major cities across the U.S. by the end of 2014. The service is currently available in San Francisco, Oakland, Berkeley, Mountain View, Palo Alto, Menlo Park and Sunnyvale, Calif.

Instacart’s model relies on a crowdsourced labor force that shops for and delivers grocery orders using their own vehicles, with one-hour or two-hour delivery options. Instacart said it keeps track of the price, location and availability of thousands of individual grocery items in the local stores in which it shops, to help its personal shoppers be as efficient as possible and enable rapid delivery.

“We’re really excited to be working with the Sequoia team, who bring extremely valuable and relevant experience to the table,” said Apoorva Mehta, chief executive officer and founder of Instacart, in a statement. “Now that we have our San Francisco operation up and running and we have a great formula for success, it’s time to turn our attention to national expansion.”

Instacart said it plans to target other dense urban areas for its service, including New York, Chicago and Boston, where convenience is valued, many residents don’t have cars, and the crowdsourcing model is already familiar and accepted.

Earlier this month, Instacart launched Instacart Plus, a new option that offers customers the lowest possible prices on national-brand grocery items.

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