- While industry analysts initially viewed Amazon’s acquisition of Whole Foods as bad news for e-commerce providers like Shipt and Instacart, the opposite has been true, according to Bloomberg.
- Instacart has expanded to more than 100 additional markets this year by forging partnerships with big names like Kroger, Albertsons and Wegmans. Shipt has pushed into 22 new markets and expects to hit $1 billion in revenue next year.
- Supermarkets felt the need to insulate themselves in the wake of the Amazon deal, according to a Bloomberg Intelligence analyst. With online sales still a fraction of overall grocery sales — just $16 billion out of the $800 billion food retailers take in annually, according to RBS Capital Markets — retailers are mainly adopting e-commerce as a marketing tool, she noted.
In hindsight, it was foolish to think that Amazon’s acquisition of Whole Foods would deal a crushing blow to e-commerce companies like Instacart and Shipt. Grocers were — and still are — very nervous about the e-tailer’s evolution in the channel. Many that had not invested in their own platforms suddenly wanted to scale up quickly, and e-commerce providers offered an out-of-the-box solution that was cheaper and faster to implement than building a program from scratch.
Instacart, which counted Whole Foods as its largest client and a major investor to boot, appeared to be in dire straits. But in the following months, the company and CEO Apoorva Mehta capitalized on grocers’ Amazon anxiety, forging dozens of partnerships as it grew its market penetration fivefold. Last month, Instacart signed a deal with Albertsons to provide same-day delivery from more than 1,800 stores by the middle of next year.
Competing company Shipt has also grown considerably this year, if not as much as its close competitor. It’s now in 70 markets, and plans to be in twice as many by the end of next year. Since June, when Amazon made its Whole Foods acquisition, Shipt has seen a 60% boost in orders.
Although its expansion rate hasn’t matched Instacart’s, Shipt has managed to deepen relationships with key retailers like Meijer and H-E-B, and recently partnered with Lidl in the Carolinas. It now delivers from more than 200 Meijer stores, and has branched out into additional services like click and collect and nonfoods delivery. Launched back in 2014 and based in Birmingham, Alabama, Shipt focuses mainly on markets in the South and Midwest.
In an interview with Bloomberg, Shipt CEO Bill Smith downplayed Amazon’s incursion into the grocery industry.
“Amazon is a very good machine, but they haven’t been able to crack the code on grocery,” he said. “It’s a very different business.”
Looking to the future, online grocery fulfillment stands to change significantly, and could disrupt Instacart and Shipt’s business. Grocers who see their e-commerce sales become a significant part of their business likely won’t be able to rely on the store fulfillment model that those companies currently operate. They’ll need to shift to warehouses and fulfillment centers optimized for large-scale picking and packing.
Also, research indicates store pickup is becoming the preferred fulfillment method for consumers. Kroger and Walmart have invested deeply in their click-and-collect services, and stand to make large gains here. But Instacart and Shipt, not ones to be sidelined, have begun trialing their own services as well.