Whole Foods credits delivery startup Instacart with sales growtih

Whole Foods this week credited grocery delivery service Instacart for a jump in sales, offering kudos to the startup as competition in the delivery space really heats up.

Whole Foods, the high-end purveyor of organics and immaculately prepared health foods, and a favorite grocery store in the foodie-centric Bay Area, said its sales through Instacart are 2.5 times the size of their brick-and-mortar counterparts. Rather than go to the grocery store themselves, Instacart customers can shop Whole Foods online, put in an order through the Instacart app, and a driver will shop and deliver the food within a couple hours.

According to the Wall Street Journal, the growth in part has to do with the fact that customers don’t have to spend time walking around a grocery store and searching up and down aisles, and are more likely to buy more when shopping is made quicker from a tablet or smartphone.

“When you can shop in a fraction of the time, you’re open to probably having a much larger basket,” Whole Foods CIO Jason Buechel told the Journal. Using Instacart, Whole Foods can also recommend products or push promotions directly to customers’ phones.

Buechel added that the partnership with Instacart has also helped surface new customers who may have shopped at other stores out of convenience, perhaps not wanting to drive to or battle for parking at Whole Foods. The public acclaim from one of the nation’s biggest grocery stores will likely catch the attention of other grocers looking to serve more customers on their laptops and smartphones, and give Instacart more credibility.

Whole Foods is one of the few grocery stores that Instacart partners with that has embraced the startup service. Instacart doesn’t strike official deals with grocery stores before it begins delivering from them. The startup, for instance, used to deliver from Trader Joe’s until the grocer kicked them out. And Berkeley Bowl, a local grocery store in Berkeley that Instacart delivers from, has publicly rebuffed the idea of having a relationship with Instacart, making it clear that it does not condone what the startup is doing. Its concern is that produce would show up at a customer’s door battered and bruised, or ice cream melted, and Berkeley Bowl would get the blame when the Instacart driver was really at fault.

Instacart also delivers from Costco, Safeway, Bianchini’s Market and other stores in the Bay Area and more than a dozen cities.

Instacart has flourished since it was launched in September 2012 by ex-Amazon engineer Apoorva Mehta, but whether the company can survive in the long run has been a constant question. It is strikingly reminiscent of what might be the most notorious dot-com bust — Webvan, a grocery delivery service that formed in the 1990s and spectacularly failed in 2001. Instacart has the same investor — Sequoia Capital — as Webvan. What’s more, many have questioned how a startup could achieve a retail model that major companies Amazon and Google continue to struggle to figure out.

But two years later, Instacart is not only still around but is aggressively adding new cities and hiring new drivers. And with backing from Whole Foods, Instacart will be more prepared to take on Amazon’s grocery delivery service, which is expanding in the San Francisco area. The Postal Service too is vying to get into the grocery delivery area, following a trail partnership with Amazon in San Francisco. Google also does same-day delivery from Whole Foods, Smart & Final and Nob Hill Foods.

Mehta has spoken of expanding his business beyond groceries, and the company tested those waters last month. Instacart partnered with local merchants to open a seasonal online Halloween shop in Seattle and offered same-day delivery of costumes through Halloween evening.

Photo: Instacart founder and CEO Apoorva Mehta in the company’s new offices South of Market in San Francisco, Calif., on Friday, Nov. 15, 2013. (Laura A. Oda/Bay Area News Group.)

 

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  • Chris

    Hi Heather,
    You failed to mention that Instacart up charges items 20-30%.

    It’s funny no one seems to make that point when writing about them. That’s because they’re fairly deceptive about that practice.

    Just fyi.

    • Hi —

      You’re completely right, and I probably should have mentioned that here. I did mention it in a larger article I wrote last year: http://www.mercurynews.com/business/ci_24986836/startup-instacart-hopes-dominate-grocery-delivery. But I would agree that’s too often overlooked. Interesting that you think they are deceptive about that practice; I’d agree they certainly aren’t open about it.

      Thanks.

    • Andres

      I find it funny how some people make lucid comments like Chris sometimes. Hey Chris did you think their business was a free concierge service? Are you kidding?! Instacart is definitely not a website you go to find discount prices, they actually have to earn a living and charge for their services. Maybe that’s why the editor didn’t feel the need to write it again after she wrote about it in a previous article.

      Common man! Don’t be ridiculous!

 
 
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