Instacart announces new micro-fulfillment grocery business
Instacart Inc. is entering the warehouse business, seeking to expand its reach in an increasingly competitive food delivery market.
The grocery delivery company said it would start building fulfillment centers for supermarkets over the next 12 months, in partnership with technology company Fabric, in or near grocery stores, with capacity for 10,000 to 50,000 items.
In such fulfillment centres, the company will use robots to pull items from warehouses and ask Instacart employees to place and pack orders. Instacart currently deploys shoppers who pick up products from grocery stores and drop them off at people’s homes. The company did not say how many centers it would set up, where it would be or how much it would invest.
The company said the warehouses, which will be automated, are expected to expedite the delivery process.
San Francisco-based Instacart has grown rapidly during the pandemic, as more consumers have moved their purchases online. It is facing new challenges as businesses reopen; Online grocery sales are slowing down and shoppers are turning to personal shopping. Delivery companies are still struggling to make a profit, as labor and transportation costs eat into profit margins. Many grocers remain concerned that they’re sharing customers and earnings with Instacart — which deducts commissions for each order — and say they have more options as delivery companies to stand out while offering favorable deals.
“People want what they want when they want it,” said Mark Schaaf, chief technology officer at Instacart. He said the company has spent recent years looking for ways to offer warehouse services to grocers.
Instacart added over 250 retailers in the US and Canada last year and now delivers from more than 600 businesses. Amid a boom in business, it raised nearly $700 million in fresh capital over the past year and is valued at $39 billion. The company plans to go public and has strengthened its leadership team. It has hired a chief financial officer of Goldman Sachs Group Inc.
The new CEO, Fidji Simo, has said that she sees opportunities to provide more technology to retailers and expand internationally.
As e-commerce grows, smaller warehouses are becoming more mainstream. Industry executives and analysts say fulfillment centers can cut costs over time and keep shoppers out of stock and online shoppers in store space, but this requires upfront investment and typically results in a year’s worth of profitability. reaches. Instacart said it will also help retailers manage inventory across fulfillment centers.
Instacart is focusing on identifying new technologies and handling e-commerce for retailers, Mr Schaaf said, adding retailers will own inventory in warehouses.
Instacart is exploring various avenues of growth. The company is focused on expanding its rapidly growing advertising business, which makes money by working with manufacturers to offer discounts on its platform. It has also indicated its international ambition.
