By 2013 while one believed that digital on-demand startups ideas have been exhausted following the likes such as Uber, Freelance, Taskrabbit, Instacart unearthed another rather untapped errand, grocery shopping.

Business Model
By 2013 while one believed that digital on-demand startups ideas have been exhausted following the likes such as Uber, Freelance, Taskrabbit, Instacart unearthed another rather untapped errand, grocery shopping.
Its business model revolves around unburden the household from the load of grocery shopping. A shopper can browse online, pick the items into the cart, select delivery timing windows and then place an order. It’s value creation relies on the network of close by supermarkets according to shoppers zip codes. Its quick 1 hour delivery is immaculate. Asset turnover has benefited from the reliance of a crowdsourced employment in their delivery platform.
Instacart’s stakeholders can be simplified into 3 which are the Users, Shoppers, and Supermarkets. Users are the normal household who want to delegate the errands task and whom Instacart create value to. Shoppers are freelancers who are willing to do the shopping and deliver the items to users in a return paid by Instacart. And Supermarkets are the close by stores that users normally shop at. Instacart charges a fee for items following a threshold which are fixed with additional fees for instant deliveries or surge times. The user experience trust stems from the satisfaction guarantee that Instacart provides for missing items and deliveries. In addition, to sustain their delivery quality, they established harmonious relationships with stores e.g. guaranteeing a dedicated checkout line.
Instacart key activities are to improve the online shopping experience. They recently introduced the Express service which follows annual subscription model which waive delivery fees on specific volumes. Such improvement helps in retaining customers and reduce churn. Further, to sustain and improve delivery timings, a better crowdsourcing system the allocate tasks to Shoppers according to their availabilities and proximity to stores was key. And to many digital startups, the online experience is an endless endeavor in learning the best gauging interface for shopping. Since inception, the website has gone through massive turn around to be faster, mobile and compatible with the latest technology. Lately they introduced native applications to Android and Apple phones.
Since we are looking at their business model it is useful to note the revenue and cost structure one more time separately. The sources of revenues are three which come from Surcharge on store prices, multiple delivery fees, and the annual membership. On the cost structure side, the infrastructure setup e.g. technology and website, employees’ payroll and commissions to shoppers.


Operation Model
The heart of Instacart’s success is the simplified steps that brought an enhanced grocery shopping compared to the traditional one. Its main assets are clearly the web/app and the shoppers. By using the most recent and well-developed web technology they assured a seamless online experience. Given the vast number of items it was critical to have at least impartial experience to the traditional way. By allowing for the chance of having off list items, it made the process leaner and flexible topped with a guaranteed value stamp.

Further, given the business model relies on proximate stores to users, it is prolific that the backend understands users locations and accordingly provides feasible delivery timings. Clearly there is a harmonious relationship between the business model and its operational model because Instacart well managed the key determinants of its value proposition. It is important to note that the process of getting leads to shopper is as enhanced which goes along naturally with the busy nature of freelancers which are a vital element of the business.

In sum, a user select the proximate preferred store then selects the items that he wants. Then a delivery timings list pops up where the user selects his preference. In parallel the backend rapidly finds the closest shopper who computes to be the most feasible for the task which feeds back into the users pop up list. After the user places the order, an authorized order is placed on the payment method which can be more or less when realized. Before delivery the system sends a reminder to the user of the delivery as well as the chance to tip the shopper. By the time it is delivered, the user can rate the shopper and Instacart experience which feeds back into its internal performance reporting. E.g. the recent tipping feature was introduced after positive feedback from select users and shoppers.

Therefore Instacart could be classified as an innovative solution although a follower in the business. With the right and balanced leverage between technology and life-style assessment, it succeeded in delivering a rewarding service to their users, shoppers, stores and investors which as an example of a harmonies and effective internal management.


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Student comments on Instacart

  1. I love Instacart and use it all the time, but am really surprised that they have a $2b valuation without any signs of profitability in a business with historically thin margins that is really tough to scale.

  2. Agree… it feels like a miracle. Would be wonderful to look at the economics and understand how they can (or can’t) scale over time. Super interesting company, and obviously incredibly convenient.

  3. Thanks to Instacart I have not been to a grocery story in the last 4 months since I started using the app – It has worked seamlessly for me so far. A useful feature that saves time in their operations: a prompt you receive (just before placing the order) to pick similar alternate items in case your chosen items are unavailable. This way the “shopper” is not obliged to call / message the “user” to confirm purchase for alternate items hence saving time and making the process more streamline.

  4. I don’t know what my life would be like without instacart! especially with winter coming.

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