While Amazon Fresh has been dominating the headlines lately, a San Francisco-based startup led by a former Amazon employee is looking to revolutionize the way people get groceries.
We’ve all had those days: you meant to go out and get groceries, but something came up, and there just wasn’t any time.
Grocery delivery is supposed to be the way forward: instead of going to the store, the store comes to you. That’s nothing new, but what if you could order groceries from Whole Foods or Trader Joe’s, and then have them delivered to your doorstep within an hour?
Instacart, which is currently only available in the San Francisco Bay Area, hopes to provide just that, but takes an interesting approach to the logistics of getting your food to you.
Rather than focusing on building a fleet of trucks to fulfill orders like Amazon, Instacart uses a crowd-sourced delivery system not unlike Lyft or Uber. When you order a bunch of groceries from Instacart, a personal shopper is dispatched to go to the stores you chose to pick up the items you wanted.
The service is the brainchild of Apoorva Mehta, a former software design engineer from Amazon’s Fulfillment Optimization division. Mehta realized that with the current saturation of smartphones, grocery delivery doesn’t require a massive logistical pipeline, and decided to build a service that made getting food easy and cost-effective.
He’s been nothing if not audacious when it comes to securing opportunities for Instacart, either. Last June, he wanted to get into YCombinator, but ran into a problem: he was two months behind the application deadline. After hitting a number of brick walls, he used Instacart to send a six-pack of beer to Garry Tan, one of YCombinator’s partners. That move eventually ended up grabbing him a spot at YC, despite its lateness.
That audacity is a hallmark of how Instacart does business. Last week, they announced Instacart Plus, which delivers products at prices that are cheaper than most local stores. Especially compared to Amazon Fresh’s notoriously high prices, Instacart looks like a pretty good deal.
I talked with Mehta about the future of grocery shopping, how a crowd-sourced delivery service can take on an e-commerce titan and how they find someone to pick the perfect avocado.
On how the idea for Instacart came about: “When I was working at Amazon, I was sort of studying the way we were doing our fulfillment, and as an Amazon Fresh user, I realized that it just wasn’t providing me the services that I needed. For example, the same day delivery, the one hour delivery, the two hour delivery, not to mention it wasn’t giving me the selection. I love Trader Joe’s. I wasn’t able to order from Trader Joe’s on Amazon Fresh. And as well, the prices were just way too expensive. And so it was really a cross-section of my skills from fulfillment at Amazon, plus the fact that I needed something like this. That’s how the Instacart idea came together.”
On how they can compete with Amazon Fresh: “What we have seen from our data is that customers want selection. Customers want to be able to order from Trader Joe’s and from Whole Foods. They have loyalties associated with the ‘two-buck chuck,’ with the frozen burritos at Trader Joe’s, as well as organic produce that only your Whole Foods carries.
“The second thing that we have a huge advantage on is the fact that we could provide the one-hour, the two-hour and the same-day delivery options. Because Amazon uses a fleet of trucks and the warehouse model, they just do not have the agility to be able to provide that… Because we have personal shoppers who have their own car and their smartphones, we can actually provide that from day one. And the third point is prices. Amazon Fresh prices…are higher than the store in most cases. What we offer, especially with Instacart Plus, is that our prices are actually lower than the store.”
On the future of grocery shopping: “You can look for milk, and you can see 15 different types of milk that we think are the best for you, and you can sort them by the organic nature of them, or the nutritional value of them. And that I think is really important, and people are really demanding for that, versus having a model which has really not changed for about a hundred years, where you have to sort of walk to the store and get your weekly grocery shopping done. I think it’s time for a change, and obviously I’m a little biased, but I think Instacart is the way people are going to be shopping for groceries in the next five to ten years.”
On how they choose personal shoppers: “The fact is that anyone with a car and a smartphone is eligible to become an Instacart shopper. But only one in 15 people who actually apply to become an Instacart shopper are chosen to be one. We look at a significant amount of points that tell us if these guys are going to be responsible, are they going to be detail-oriented, for example, to pick the milk from the back of the aisle. We have one most important goal for us in terms of the personal shopper experience, which is: are the personal shoppers going to be able to pick out groceries better than you are yourself? If we know, if we’re confident that they will be able to do that, that’s when we hire them.”
On Instacart’s plans for expanding: “When you think about the old conventional model, which are like the Amazon Freshes of the world, they require the infrastructure. They require the fact that you have to have a warehouse and a fleet of trucks in all the zones that they go to. For us, it literally doesn’t require any infrastructure. We can launch new cities within days. And that’s what we did for Berkeley and Oakland. That being said, our expansion plans for the beginning of next year are that we want to be in ten major zones. So, the Bay Area, for example, as a whole is one zone, and we want to be in ten major zones by the end of next year.”