Instacart, the grocery delivery app, now delivering from Petco

This post has been updated to accurately reflect how items on Instacart’s app are priced. Previously, the post had incorrectly stated that Instacart determines prices for all items on its platform. That was Instacart’s previous model, and for the most part, is no longer used. In most cases, retailers set the prices for items that appear on the app.

Instacart, the grocery delivery startup that recently landed a $220 million investment, will now deliver food not just for humans, but also for their four-legged companions.

Instacart announced on Wednesday a new partnership with Petco, a national retailer selling pet food and supplies. The deal marks Instacart’s first — likely of many — expansions outside of groceries, and suggests that the fast-growing startup is convincing more retailers that on-demand delivery just might be a good idea — and Instacart just might be one of the first to make it a profitable proposition.

The San Francisco-based company, which launched in 2012, will offer delivery from Petco stores in the Bay Area and the Greater Boston area. Instacart says customers will be able to choose from about 11,000 Petco products, including food, toys and supplies for all sorts of critters, from dogs to fish and birds. Customers shop through the Instacart app and select a delivery timeframe — within one hour, within two hours or at a scheduled time.

“This is more of an extension that allows us to fulfill the grocery needs of the entire family, not just the human members,” said Nilam Ganenthiran, head of business development and strategy at Instacart.

Based on Instacart surveys of their customers, and the amount of pet food customers were already buying through the app from mainstream grocery stores, the company decided that “a good chunk of our customers are pet owners,” Ganenthiran said. “Pet owners have the same sort of dynamics as parents — they are time-starved and they are responsible for this third party. Because they are time-starved, the last thing they want to do is to go to the store and carry home a 40-pound bag of dog food.”

Instacart Founder and CEO Apoorva Mehta has since last year talked vaguely about plans to deliver more than groceries. The Petco partnership is a tentative step towards more robust offerings, but Ganenthiran said the company is taking it slowly.

“We will stay squarely focused on groceries in the near term,” he said. “We are going to go cautiously and you won’t see us jumping into any new categories in the next three months.”

The company’s most recent funding round, a $220 investment from venture capital firms and hedge funds that closed in December, gives Instacart the war chest it needs to deliver in categories other than groceries, and continue its geographic growth and technology enhancements, Mehta said.

Also on Wednesday, Instacart announced it would expand service in San Jose and add deliveries to homes and businesses in ZIP codes 95123, 95136 and 95118. The company operates in 15 markets, including most of the Bay Area. It has more than 100 full-time employees and 4,000 contract workers, who do the grocery shopping and delivery.

While some grocers such as Whole Foods have credited Instacart with bringing more sales to the stores, others have butted heads with the startup. When it first launched, Instacart didn’t sign contracts with grocers or get permission from them to sell their products on the app. That prompted stores like Trader Joe’s to ban Instacart from putting its inventory on the app, and Berkeley Bowl has refused to work with the company, saying it fears bad service by Instacart would reflect poorly on Berkeley Bowl.

The company, however, has more recently signed partnerships with “the majority” of the 60 grocery retailers on the Instacart app, Ganenthiran said. Instacart realized it needed the grocers as allies, and many grocers realized Instacart brought in more business from shoppers who couldn’t be bothered to battle for parking at the store or lug bags of groceries on public transportation.

“You’ll see a steady stream of partnerships” in the coming months, Ganenthiran said.

Retailers that have a partnership with Instacart upload their inventory to the app and set the prices. In the case of Petco, all merchandise — even the specials — will be the same price through Instacart as it is in the brick-and-mortar stores. Instacart makes money not just through delivery fees and its annual subscription model, but also charges grocers who sell through the app.

In the few cases where Instacart does not have a partnership with a store, and yet still delivers from there (such as Berkeley Bowl), Instacart sets the prices itself. Some products are cheaper on the app than in the store, others are significantly more expensive.

Photo courtesy of Instacart


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