An independent study commissioned by Instacart reveals the third-party grocery e-commerce enabler—though often viewed with some suspicion as cannibalizing of grocery sales—is playing a significant role as a revenue and job creator for its partnering retailers and the markets in which it operates.
The 32-page study, conducted by Robert Kulick of NERA Economic Consulting, White Plains, N.Y., on behalf of San Francisco-based Instacart, found that in four states studied in the report—California, Illinois, New York and Washington—Instacart increased incremental grocery sales by $620 million in 2019 and led to the creation of 23,000 grocery jobs.
“It is often assumed that disruptive innovations necessarily displace traditional modes of commerce and employment,” Kulick said in a release. “However, with Instacart, the opposite is true. While Instacart is changing the way customers interact with grocery stores, it is an example of how innovation can benefit industries and their workers.”
Instacart has ridden growing consumer interest in online grocery shopping over the past five years to staggering growth. Due to rapid adoption by grocery retailers, many of whom see Instacart as a cost-effective, turnkey point of entry to e-commerce, Instacart went from covering 35% of U.S. households in 2017 to 80% in 2019, and today has more than 350 retailer partnerships, up from 10 in 2015.
The rise has not been without controversy. Instacart has encountered multiple spats over how it compensates its contracted drivers and shoppers, and it has attracted industry critics who worry that retailers are losing control of customer data—and perhaps, brand loyalty—by introducing a third party between them and their shoppers.
The study, however, shows a “robust relationship” between Instacart adoption in local markets and employment and revenue in the grocery industry, which it called “the Instacart effect.”
“Change in a business sector often comes at the detriment of incumbents, and we’ve seen this play out again and again across industries. But, it doesn’t have to be that way. Since day one, our goal at Instacart has been to lift up our brick-and-mortar grocery partners and give retailers of all sizes an edge in an increasingly competitive industry,” said Nilam Ganenthiran, president of Instacart. “While we’ve long seen in our own internal data that Instacart can incrementally boost retail partner sales between 50% to 80%, this study shows that when Instacart enters a market the tides turn and ‘the Instacart effect’ drives meaningful job creation and increased revenue for the grocery industry.”
The study applies a broad array of rigorous statistical methods using data from California, Illinois, New York and Washington to evaluate whether Instacart increases grocery employment by creating incremental demand for the retail grocery industry and quantifies Instacart’s effect on incremental grocery sales. Instacart said the findings are based on the results of three distinct statistical models, with multiple statistical techniques applied to each model to rule out alternative explanations for the relationship. The evidence for a causal relationship is further supported by the application of seven falsification—or “placebo”—tests to the results of each model.