Dive Brief:

• Instacart will spend $40 million to build and staff a so-called Customer Experience Center in Atlanta to support its growing e-commerce service. The center will be the company’s second largest office outside of its San Francisco headquarters, and will have 400 employees. “It will be a key asset to develop support services for new Instacart products,” a company spokeswoman told Food Dive.
• Positions at the new center include customer support representatives, data analysts, process improvement specialists and various management-level employees. The center’s construction and hiring process will happen over the next two years.
• Instacart currently partners with grocers in more than 240 markets to offer on-demand delivery, and recently secured $350 million in Series E funding.

Dive Insight:

With a year of breakneck growth in its rearview mirror, Instacart is focusing on investing in its services and deepening its retailer relationships.

The Customer Experience Center reflects this focus. And while it may not exactly be HQ2, Amazon’s much-anticipated second headquarters, the center promises to play a pivotal role as the company tries to prove its long-term value to retailers and consumers.

Aside from its ordering and same-day delivery capabilities, Instacart will look to add more bells and whistles to its platform. This could include voice ordering, digital coupons, recipes and enhanced lifestyle content — all add-ons that will require additional staff support. In January, Instacart acquired Unata, a digital services firm that offers many of these capabilities.

Instacart, which is primarily a technology company, should have no problem finding top talent in Atlanta. The city has become known as “the Silicon Valley of the South,” and has a steady supply of graduates from nearby Emory University and Georgia Tech. According to the Atlanta Chamber of Commerce, the city’s tech jobs grew by 47.6% between 2011 and 2016.

The challenges to Instacart’s top position in grocery home delivery are growing. Whole Foods and Walmart are steadily expanding their service — the former through Amazon’s Prime Now platform, and Walmart through Postmates and DoorDash. Both retailers currently deliver in Atlanta, giving Instacart a front-row seat to its two fiercest rivals as it builds and staffs up its support center.  

Instacart also has to contend with on-demand delivery companies that are muscling into the grocery delivery space. Deliv, Uber Eats and Postmates all work with various supermarket chains, while DoorDash’s Walmart deal marked its first foray into grocery delivery. These companies could undercut Instacart to sign deals with retailers, and they promise to rapidly evolve their services in order to get a slice of an online grocery market poised to reach $100 million in as little as four years.

Instacart’s strongest asset against these incumbents is its online ordering platform, but even that may not be enough to secure its positioning. According to Recode, Walmart and Instacart couldn’t come to an agreement because the latter wanted to feature the retailer’s products on its site, while Walmart just wanted a delivery provider.

Shipt, Instacart’s closest competitor, is rapidly gaining ground through its expansion with new owner Target. It’s also recently signed with Rouses, and announced it had delivery available to Bi-Lo, Target, Kroger and Publix in the Myrtle Beach, South Carolina area.

Instacart also has to contend with thorny worker relations. Some personal shoppers say they’re getting paid less than minimum wage, despite the company’s goal of $14 an hour — achieved through a combination of tips, commissions and per-item payments. Last year, workers in two markets staged a walk-out in protest of low payments and what many shoppers say is a convoluted tipping functionality in Instacart’s app. This month, Instacart introduced a default 5% tip on each order, and also established a mandatory service fee for customers.

Against all these headwinds, investing in improved service for its employees, customers and retail partners seems like a savvy move for Instacart.