On March 23, Instacart announced the debut of Instacart Platform, a new suite of tech offerings available a la carte to retailers to support everything from ultrafast delivery—via Instacart-managed "nano" warehouses—to smart carts to online advertising and advertising-integrated product recommendations. Platform, said Instacart CEO Fidji Simo, reflects an "evolution of the company strategy."
In an exclusive interview with Winsight Grocery Business, Simo described how Platform represents Act 2 for the 10-year-old, San Francisco-based online grocery pioneer and why Instacart sees bringing the best of online to the physical grocery store and vice versa as key to unlocking "the future of grocery."
Christine LaFave Grace: You're launching a range of services designed for both online and in-store deployment with Platform, and retailers including Publix, Schnuck Markets and Plum Market have already signed on as early adopters for various new offerings. Why was it important for Instacart to go as broad as it has with Platform? How does it refine or redefine the company?
Fidji Simo: It’s important to think of Platform as the evolution of the company strategy, where Act 1 was kind of bringing grocery online, and we certainly did that successfully, but through the process we built a lot of consumer understanding and consumer capabilities that our retailers started asking us for for their own properties. That’s how we started building e-commerce sites and apps as well as bringing our fulfillment capabilities to them for their own properties.
With Platform, we’re expanding that vision and looking at all of the things that retailers need to make their digital transformation and how we can apply our own capabilities that we’ve developed on the Instacart Marketplace to their own businesses.
What were some of the biggest pain points Instacart heard from retailers with respect to their digital transformation? What walls were they hitting that you wanted to help them address?
That’s a great question. I think there’s basically two different kinds of needs. There are needs that are really about a particular thing they’re trying to do, so Carrot Ads (which bringing the best of Instacart advertising—technology, products, engineering and sales talent, and data insights—to retailers’ owned and operated e-commerce sites) would be a good example, where every retailer wants to stand up a retail media business, because they know that this is going to be a big part of making their online business more profitable, but they also know that standing up an entire retail media business is very hard. And so that’s why we’re bringing our entire technology stack, our ad sales power, etc., to retailers so that they can do that in a much easier fashion.
There’s another set of needs that’s really interesting to me, and that’s retailers telling us that they might find some vendors for very specific needs—and of course the biggest need that they have is really how the whole technology stack connects together so that for customers, they can build a shopping list online, and then when they go into the store, that shopping list can appear on a smart cart; it’s building a loyalty program that works across online and offline, and that’s an even harder challenge. We see a lot of retailers that started their digital transformation by relying on a bunch of these vendors but even when they have multiple vendors, it’s still a huge technology challenge to piece together all of these different components so that if you’re a customer of, you know, Schnucks or Publix, it feels like one connected experience. And so that’s why we’re building the Platform the way we’re building it, with modular solutions that you can use a la carte but also in a connected way so that if you want to use multiple of our technologies, they all communicate with each other.
It kind of calls to mind how, 15 years ago, if you went out for a run, you might have your mobile phone and a separate GPS tracker and an iPod. And now it’s all integrated on your smartphone or smartwatch.
I think you nailed the analogy, and that’s definitely what we want to move toward. Retailers are telling us that they really want to serve their customers wherever their customers are, and that’s not going to be just online or just offline. That’s going to be across multiple channels and multiple use cases. Then it’s like, on a Thursday night when you’re craving ice cream and you need it in 15 minutes, to on Sunday when you need the weekly shop. So all of these different use cases need to operate seamlessly if retailers really want to retain these customers for all of their occasions, and that requires a technology platform that makes that happen seamlessly.
"Retailers are telling us that they really want to serve their customers wherever their customers are, and that’s not going to be just online or just offline."
What was the genesis of the Carrot Warehouses—the microwarehouses where you're looking to enable 15-minute grocery delivery?
When we were talking with retailers about what they wanted to do for their customers, all retailers were telling us that they really want to offer all of the modalities of commerce for their customers. And that means everything from 15-minute delivery to two-hour delivery to next-day delivery. And 15-minute delivery, or what the market calls “quick commerce,” is not the entirety of needs, but it is a subset of needs that we think will continue to grow for a portion of consumers. So we got hard at work on figuring out how we could enable grocers to do that.
The way to get to 15 minutes is usually to have small, dedicated facilities close to consumers. So with Carrot Warehouses, we’re enabling all retailers to rent these facilities and really deliver. It’s a partnership between us and retailers where we do a lot of the managing of the warehouse, delivery, and they own their own inventory and they own their supply chain, which is very different from the rest of the quick-commerce players who are really retailers and disintermediators. For us, it’s a completely different strategy where we’re trying to empower them to have all of these capabilities.
When we’re looking at Instacart Platform offerings, how do they help make local retailers more accessible to the communities they serve and better able to serve their local markets?
A big part of Instacart Platform is really to help retailers with technology so their unique differentiator can shine. If you’re a local retailer and you’re spending all of your time trying to solve some of these big technology challenges, that means you’re not spending time on the craft and care of serving your customers within your core skill set. So the goal is to give them access to turnkey technology solutions so that they can focus on what they do best. And we think that when that happens, customers win.
I’ll give you a couple of examples: We were one of the first ones to pioneer EBT-SNAP online, and 50% of grocers who have received that EBT-SNAP certification (online) have received it through us, through the process that we put in place with the USDA to certify them. Now we’re hoping to bring EBT-SNAP not just to our consumers on Marketplace but retailers on their enterprise properties as well. That’s a way for a local retailer to be able to serve their local population no matter what their socioeconomic status is in a way that’s a lot more helpful, because we take care of a lot of the technology behind it.
When we look at some of the other players in the space—these retail giants like Walmart, Amazon, Target that are investing in their own ad businesses and services for other retailers—if I’m a retailer considering my options for sourcing some of these services, why choose Instacart?
I think there are a couple of reasons. One is all of the big-name retailers you’re talking about compete with our retailers. So if I was a retailer, I would want to go with a platform that certainly has the consumer knowledge but is a platform that’s never going to compete with me, never going to disintermediate me.
If you look at the market, there’s no one doing that, whether it’s Amazon, Walmart, DoorDash—they all know have first-party retail businesses. Our retailers really appreciate the fact that we are not going to do that and we are instead going to really focus on empowering them. So I think that’s one big piece.
The second piece is that we’ve built a lot of the technological know-how through our own marketplace, and we’re now bringing that to our grocers. If you look at kind of the last 10 years, we’ve been able to innovate in the industry at a pace that very much outpaces some of the technological giants. We were the first one to bring grocery online; we were the first one to really nail the consumer experience from that; we were the first one to really build an advertising business that is custom-built for grocery and understand the needs of grocery buyers and grocery retailers, and so we bring all of that expertise and know-how from our consumer marketplace to retailers, and I think they appreciate that.
Can you expound a little more on the discovery element—how you see capabilities within the Instacart Platform helping support product discovery online?
I’m really excited about that one. Basically on the Instacart app right now, you can search for a variety of products, and we have very advanced search technology that allows us to surface the right product at the right time, and a search technology that is also integrated with advertising, so that it can also surface new products to consumers through advertising. We also have great recommendation engines telling you, hey, if you’re searching for that, you might want to look at all of these related products. If you’re buying salad, we might suggest dressing.
In the past, this is something that was only available on the Instacart Marketplace and only in our storefront solution, so if you were a retailer, let’s say Sprouts, using our storefront solution, you would have access to that technology. But if you were a retailer that had already built your own e-commerce website, you wouldn’t have access to that technology. And so the change with the [Platform] announcement is we’re taking this technology and making it available through an API for grocers who already have their own e-commerce websites [so] that they can use the parts of Instacart that they like for their own properties and as a result also enable advertising and product recommendations.
You're a consumer yourself, of course—what does a seamless experience look like to you?
We think the world is fundamentally omnichannel, so the thing that creates a great experience is really helping customers with a personalized experience whether they shop online or in store.
I was giving the example of Shopping List, which is a very popular feature where you might create that online using your basket that you’ve created for online grocery delivery, but you might want to be able to take that in-store and have a richer experience maybe through a connected smart cart where we can tell you, "Hey, this is your shopping list; this is exactly where the product is in the store so you don’t have to walk around dazed; and you can check out by just putting products inside your cart and walking out of the store," and that’s a pretty seamless, magical experience.
These are the kinds of experiences that we really want to enable. So the way I think about it is bringing the best of online to the store, and in my mind the best of online is personalization, and then the best of the store to online, and I think the best of the store is very often product discovery, inspiration.
We hear from consumers that walking through the aisles of the grocery store gives them ideas of things to buy, it gives them ideas of recipes. So if we can take that and bring that online and make the online experience less utilitarian and transactional and more inspiring, I think we will have cracked what is fundamentally going to be the future of grocery.