Instacart CEO Says It Has 70% Share in Digital Grocery Baskets $75 and Higher

Instacart has solidified its leadership in the grocery industry by driving digital transformation and integrating online and in-store shopping experiences to meet changing consumer needs, according to CEO Fidji Simo.

Since 2019, grocery prices have surged by 25%, Simo noted Tuesday (Feb. 25) during the company’s fourth-quarter earnings call, adding pressure to traditional brick-and-mortar stores that already face high fixed costs and low margins. Meanwhile, online grocery shopping continues to grow at an accelerated pace.

“Online grocery is outpacing in-store grocery growth by more than 3X, making this a pivotal moment for grocers to compete digitally,” Simo said in her shareholder letter. “With high fixed costs and low operating margins, winning a point of share can drive incremental profit dollars and margin expansion for grocers, while losing a point of share can mean double-digit percentage losses in profits. But the vast majority of grocers don’t have the technology, time, or resources to adapt alone — they need an ally.”

That is a “huge advantage” for Instacart, Simo added.

“Because we partner with over 1,800 retail banners on our marketplace and power the enterprise storefronts for approximately 600 retail banners, we can invest and innovate more than retailers could on their own,” she explained. “We can also make integration more seamless than other technology providers.”

At the heart of Instacart’s strategy is its ability to provide tools that make grocery shopping more affordable and more convenient. As consumer expectations rise, with shoppers demanding a better balance of convenience, selection, price, and speed, Instacart has adapted its platform to meet these needs, Simo said.

One example is the recent reduction of the minimum basket size for free delivery from $35 to $10 for Instacart+ members. This adjustment helps increase order frequency by making it easier for consumers to use the service, even for smaller purchases, and strengthens the platform’s subscription model.

Fourth-quarter revenue rose 10%, to $883 million while transaction revenue also grew 10%, to $616 million. Full-year revenue increased 11%, to $3.37 billion while transaction revenue also rose 11%, to $2.42 billion.

What’s next?

“The future is clearly omnichannel,” Simo said. “In addition to winning online, there’s a massive opportunity to crack omnichannel because we know the future of grocery won’t be about choosing between shopping online and in-store — most of us are going to do both.

“And research shows that omnichannel customers are more valuable, with higher purchasing power and more annual shopping trips than brick-and-mortar-only customers. Our deep integrations with retailers position us well to win in omnichannel.”

Consumers are also focused on omnichannel shopping. A PYMNTS Intelligence report, “2024 Global Digital Shopping Index: U.S. Edition,” created in collaboration with Visa Acceptance Solutions, shows about one-third of U.S. consumers are Click-and-Mortar shoppers, using digital features during their in-store experience. According to the report, 19% of consumers prefer shopping in-store with digital technologies, while 11% opt for online orders with in-store pickup.

To capitalize on the trend toward omnichannel shopping, Instacart has invested heavily in solutions that integrate online and in-store shopping experiences. Innovations like artificial intelligence (AI)-powered Caper Carts, electronic shelf label technology (Carrot Tags), and FoodStorm’s catering management system are helping retailers enhance their in-store operations while creating a more integrated experience for consumers who shop both in-person and online.

“Performance is just as important as scale,” Simo added. “This is why we’re constantly tuning our AI and ML [machine learning] models to enhance search relevance and contextual recommendations, in addition to new types of targeting, measurement, and optimized bidding tools on our platform. Rich data is even more important with the rise of AI.”

In the past 12 years, Instacart has built a dataset that provides insights into consumer preferences, product details, and shopping behavior, Simo said. Leveraging real-time data from shoppers and advancements in AI, Instacart is developing tools like AI-powered shelf scanning to further optimize the shopping experience.

“Our edge begins with the breadth and depth of our product catalog, encompassing more than 2 billion product instances across our vast network of retailers” Simo said.

“We refine this into 17 million unique items, and layer on detailed product insights, like nutrition facts, which can help with personalization, such as addressing dietary needs. We’re also developing a real-time view of store shelves, powered by over 10 million data points collected daily by Instacart shoppers.

“Soon, we’ll begin testing advanced store-shelf scanning using AI to analyze videos from shoppers, and in the future, from our Caper Carts as they move through the aisles.”

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