Instacart

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Instacart
Instacart logo and wordmark.svg
Type of site
Private
Founded2012; 9 years ago (2012)
HeadquartersSan Francisco, California, US
Area served5,500 cities in the United States and Canada
OwnerMaplebear Inc.[1][2]
Founder(s)Apoorva Mehta
Max Mullen
Brandon Leonardo
Key peopleFidji Simo (CEO) [3]
IndustryRetail
ServicesGrocery Delivery
RevenueIncrease $1.5 Billion(2020)[4]
Employees10,000[5]
URLwww.instacart.com
www.instacart.ca
Native client(s) oniOS, Android

Instacart is an American company that operates a grocery delivery and pick-up service in the United States and Canada.[6] The company offers its services via a website and mobile app. The service allows customers to order groceries from participating retailers with the shopping being done by a personal shopper.[7]

History[edit]

2010s[edit]

Instacart was founded in 2012 by entrepreneur Apoorva Mehta, a former Amazon.com employee.[8][9][10] Apoorva was born in India and moved with his family to Canada in 2000.[11][12] He studied engineering at the University of Waterloo and graduated in 2008.[13] He was a participant in Y Combinator's Summer 2012 batch, which eventually led to the creation of Instacart.[14] In 2013, Mehta was included on the Forbes 30 Under 30 list.[15] Apoorva previously worked at BlackBerry, Qualcomm, and then Amazon as a supply chain engineer, where he developed fulfillment systems to move packages from Amazon's warehouses to customers' homes.[16] Before founding Instacart, Apoorva had tried to start at least 20 other services.[15][8] He tried building an ad network for social gaming companies, and developing a social network specifically for lawyers, among other start-ups.[17]

Instacart originally launched in San Francisco.[18][19][20][21] By April 2015, the firm had about 200 employees. It introduced a new policy around June allowing some shoppers to choose to be part-time employees, starting with Chicago and Boston[22][23] and extending its offer to shoppers in Atlanta, Miami, and Washington D.C. the following month.[24]

In September 2016, the company announced an expansion to its zone on the north side of Chicago.[25] In October 2016, it announced the expansion of coverage areas in Orange County, California,[26] and Minneapolis.[27] In November 2016, the company changed its policy and removed the option to leave a gratuity in exchange for a service fee that would be used to pay workers instead. Backlash against the policy from customers and some shoppers forced the company to reinstate the option only weeks later with modifications that placed the tip under the service fee section on a separate page.[28][29]

In March 2017, Instacart agreed to pay $4.6 million to settle a class action settlement stemming from the alleged misclassification of its personal shoppers as independent contractors. The suit, filed in March 2015, alleged 18 violations, including improper tip pooling and failure to reimburse workers for business expenses.[30][31] The same year, Instacart raised $400 million in funding at a valuation of $3.4 billion.[32][33] In November 2017, the company expanded to Canada by announcing a partnership with Loblaw Companies to begin delivery from select locations in Toronto and Vancouver.[34][35] That same month, some Instacart workers participated in a strike action, alleging wages as low as $1 an hour. Instacart claimed that the strike had no impact on its operations.[36]

In January 2018, the company acquired Toronto-based Unata, a white-label platform for grocers, for $65 million.[37][38][39] In February 2018, Instacart withheld tips given by customers to shoppers, blaming a software bug. In addition, customers were often charged for service fees that were supposed to be waived.[40] In April 2018, Instacart made a few additional changes to its pay service by instituting a mandatory 5% service fee on all orders. It originally offered an optional 10% service fee that went directly to Instacart that could be turned off. It also returned the gratuity option back to the checkout screen and raised the default value from 0% to 5%.[41] By mid-2018, Instacart was available for use in 11 Canadian markets and was planning expansions for five more markets.[42] Later in 2018, the company raised $200 million in a funding round led by Coatue Management, as well as Glade Brook Capital Partners and existing investors.[43] In October 2018, Instacart raised another $600 million in a funding round led by hedge fund D1 Capital Partners; the round valued the company at $7.6 billion.[44] In the fall of 2018, Instacart announced national expansions with retailers including Walmart Canada stores, Staples Canada, M&M Food Market,[45] Kroger, Aldi, Sam's Club, Publix, and Costco.[46][47] In November 2018, Instacart announced the national expansion of Instacart Pickup, a grocery click-and-collect service, whereby users pick up their pre-packaged orders at the grocery store.[48] In November and December 2018, Instacart again changed its pay system for its personal shoppers; shoppers claimed this pay system resulted in substantially lower pay and boycotted. Instacart customers complained on social media that their orders were being delayed.[49][50][51] At the end of the year, Instacart raised an additional $271 million from investors including Andreessen Horowitz, Sequoia Capital, Kleiner Perkins, Comcast Ventures, Thrive Capital, Coatue Management, and Valiant Capital, bringing its latest round of fund raising to $871 million and valuation to $7.87 billion.[52]

In February 2019, an online organizing campaign, including shoppers providing examples of payments as low as $0.80 per delivery, attracted media and customer attention. The company announced that it would revise its pay system and give back pay to some workers.[53][54] Under the revised pay system, tips were no longer factored into the minimum base wages, which were newly set at $7–$10 for a full-service shopping order (based on delivery market) and $5 for delivery only.[55][56] In March 2019, Instacart expanded its same-day alcohol delivery service in the U.S.[57] On April 11, 2019, the company expanded its services to offering an on-demand option for its workers, in order to allow workers to work more flexible schedules.[58] Effective May 2019, Whole Foods Market ended its partnership with Instacart.[59][60] By the end of December 2019, Instacart's alcohol delivery service included over 30 new partners in more than 20 states and Washington, D.C. such as Albertsons, Aldi, Sam's Club, BJ's Wholesale Club, Sprouts Farmers Market, The Fresh Market, and Total Wine & More.[61][62]

2020s[edit]

In February 2020, Instacart employees in Skokie, Illinois voted to unionize. Instacart said it "will honor" the vote, pending certification of the results. In the lead-up to the election, high-level Instacart managers distributed anti-union literature at a Skokie grocery store where some of the unionizing workers pick up groceries for delivery.[63] At the time, about 12,000 of Instacart's 142,000 workers were employees with the option of unionizing.[64]

From mid-March to mid-April 2020, Instacart hired an additional 300,000 workers to meet the surge in demand for grocery deliveries during the COVID-19 pandemic.[65][66] Data from Apptopia demonstrated a 218% increase in daily downloads as social distancing measures increased.[67] Instacart also introduced new services in response to the pandemic, including a contactless delivery option, safety kits and guidelines for shoppers, and new sick leave policies and pay for those affected by COVID-19.[68][69]

In March 2020, Instacart workers threatened to strike on March 27, 2020 due to a lack of COVID-19 safety measures. A group called the Gig Workers Collective called for a nationwide walk-out to be held on March 30. They had been asking Instacart to provide workers with hazard pay and protective gear, among other demands.[70] As of April 18, 2020,[needs update] Instacart reportedly had not provided the safety kits to a majority of its workers, who describe a complicated process to order them.[71]

In May 2020, Instacart began a partnership with Rite Aid, offering its service across 2,400 locations in 18 states.[72] In August 2020, Instacart entered its first partnership with Walmart in the U.S. to offer same-day delivery services. The partnership is a pilot program beginning in Los Angeles, San Francisco, San Diego, and Tulsa.[73][74]

Additional operations in June include C&S Wholesale Grocers and Staples U.S.[75][76]

In October 2020, Instacart raised $200 million at a valuation of $17.7 billion in a financing round led by Valiant Capital and D1 Capital Partners.[77]

On January 14, 2021, Instacart announced a vaccine support stipend to provide financial assistance to company shoppers who choose to get the COVID-19 vaccine.[78][79] On January 21, 2021, the company planned to lay off nearly 2,000 employees, including all of its employees who had voted to unionize. Instacart said that the layoffs were due to stores increasingly using Instacart to have consumers place orders, but have their own employees fulfill the order instead of Instacart's workforce, reducing reliance on Instacart's in-store shoppers.[80][81][82]

As of its most recent funding round, in March 2021, Instacart raised $265 million at a valuation of $39 billion from existing venture capital investors including Andreessen Horowitz, Sequoia and D1 Capital Partners, as well as existing institutional investors like Fidelity and T. Rowe Price.[83]

Service model[edit]

Orders are fulfilled and delivered by a personal shopper, who picks, packs, and delivers the order within the customer's designated time frame—within one hour or up to five days in advance.[84][85] Customers pay with personal debit or credit cards, Google Pay, Apple Pay and EBT cards.[86] The delivery fee is $3.99 for orders of $35 or more and $7.99 under that amount. Regardless of the cost of the order, there is a 5% service fee with a minimum of $2 owed. Instacart offers a membership service called Instacart Express for a monthly fee of about $9.99 or an annual fee of $99. The membership service waives delivery fees on orders over $35, but customers must still pay the service fee for the shopper. Customers are also requested to leave a gratuity.[87] Retailers participating in Instacart's partnership program set the price of individual items on the Instacart marketplace, which are mostly the same prices as in-store.[88] In addition, customers can pickup their pre-made orders from the store through a separate service.[89] For stores that do not participate in Instacart's partnership program, customers can be charged a markup of about 15%-40% per order with individual items ranging from a negative markup to over 50%.[90][91]

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