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Instacart: Albertsons Solidifies Brick-and-Mortar Alliance vs. Amazon

On-demand offering to bolster proprietary efforts

The grocery e-commerce landscape is turning into a three-way battle. There’s Amazon, there’s Walmart and then there’s everyone else.

Albertsons Cos.’ announcement that it will roll out online grocery ordering and delivery through Instacart at 1,800 of its stores by mid-2018 adds nationwide muscle to the latter group, according to Nilam Ganenthiran, chief business officer of Instacart.

Nilam Garenthiran

“It’s a great signal that the grocery industry is uniting amid the threat of Amazon,” Ganenthiran says of the significance of the Albertsons deal. “It really seems right now that it’s brick-and-mortar vs. Amazon, and it’s nice to be able to arm the industry with technology and logistics to meet that challenge.”

According to Ganenthiran, the addition of Albertsons will expand Instacart’s reach to approximately 175 U.S. markets, giving it the capability of reaching roughly 68% of the U.S. population with same-day delivery. A year ago, Instacart operated in 28 markets and reached just 16% of U.S. shoppers; its goal is 80% of the U.S. population by the end of next year, he says.

San Francisco-based Instacart is not a retailer, but a facilitator of sales originating at grocery stores. It provides ordering technology as well as contracted personal shoppers who fulfill orders. It negotiates fee schedules with grocers, and charges customers for subscription or per-delivery fees. Instacart also generates revenue through suppliers for special offers available through its shopping platform. Grocers set their own prices in Instacart; some may include an upcharge.

With the exception of all but the nation’s leading food retailer, Wal-Mart Stores, Instacart’s partners now include five of the six largest North American grocers in terms of overall sales, including Kroger, Albertsons, Ahold Delhaize, Publix and Instacart’s newly added Canadian partner, Loblaw Cos. Regional and specialty banners including Wegmans, Smart & Final and Aldi have also joined with Instacart over the last year, with at least some of that activity spurred by Amazon’s acquisition of Whole Foods, Ganenthiran noted.

Instacart still maintains a contractual agreement with Whole Foods, although it is widely speculated Amazon will move to expand its e-commerce reach through the grocer.

“This is a pretty exciting time. I think what’s happened over the last six months in this industry has been really dramatic,” Ganenthiran says. “Pre-Amazon/Whole Foods, people were definitely adapting, but what’s happening now is a level of acceleration in grocery taking ecommerce seriously ... It does seem like Amazon, Walmart and everyone else is the landscape right now.”

Brick-and-mortar retailers within Instacart may still battle for sales and share, and Ganenthiran acknowledges concern that losing out on the fast-growing slice of the on-demand delivery platform has been a factor in driving its new business. Albertsons said Instacart’s on-demand offering would bolster and not replace its proprietary e-commerce efforts, which include developing home-delivery and click-and-collect options at stores and its recent acquisition of the online meal kit company Plated. Although some of its division including Safeway have had longstanding e-commerce offerings, it was something of a relative laggard until last year.

“We finally got to a point where they felt comfortable and we felt comfortable,” Ganenthiran says. “There wasn’t a sliver bullet. It wasn’t that one thing changed and then we had a deal. Sometimes it’s just getting to know one another over a long period of time. This is a relationship-driven industry, and making that relationship can take place over a long period of time.”

 

 

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