Two years ago, grocery delivery platforms like Instacart saw huge gains thanks to pandemic-induced consumption changes. Now, the road is a little bit bumpier.
But Instacart’s vp of retail partnerships Ryan Hamburger is conservatively bullish about the future — both for his company and the overall grocery delivery industry. He joined the Modern Retail Podcast and went deep into the trends he’s observing as of late. One thing is for sure, though: given the tough economic climate and recent industry-wide rocket ship growth, gains won’t look like what they did a year or so ago.
“What you’ll see in ’23, is we have a new resting heartbeat,” Hamburger said. “We’ve had all of these gains in the sense of e-commerce penetration in the grocery space ramp since Covid hit that haven’t gone back, and so that new resting heartbeat is how we all need to be acting in this industry. And so you’ll see probably ’23, from a growth perspective look more like pre-pandemic years.”
This resetting of expectations comes amid some industry tumult. For example, e-commerce growth is beginning to flatten out, a number of quick-delivery grocery platforms have started to fizzle and even Instacart itself recently reportedly slashed its valuation.
But Hamburger still sees big gains ahead for both grocers and platforms. One things he’s focused on, for example, is Instacart’s Canadian expansion. Over the past year, the platform has grown its presence in the country by 60%, he said, and has plans to grow that store fleet even further.
Additionally, Hamburger has been working to get retail partners to use a variety of in-store tech that Instacart powers. This includes smart carts and other omnichannel bells and whistles that the platform is trying to introduce. “We’ve been a delivery company, but we want to bring some of that magic to our retailers’ stores,” he said.
But even with these areas of growth, Hamburger is cognizant of the precarious economic environment. “I think the unfortunate reality that we’re in today is customers have a weekly budget that they use for their grocery shopping, and that we haven’t really seen change,” he said. “So while they might still be spending that same $100, they’re coming home with fewer items, which means they need that money to stretch further.”
For retailers and platforms like Instacart, that means there’s a newfound focus on affordability and accessibility. This is a big topic Hamburger said he works with retail partners on. And, in his mind, the problem isn’t going away anytime soon.
“At the end of the day, grocery costs are not coming down anytime soon,” Hamburger said. “And so we’re still going to be in a world in ’23 where your grocery bill is higher than it’s ever been.”
Here are a few highlights from the conversation, which have been lightly edited for clarity.
Instacart’s new in-store focus
“I’ll start with re-envisioning the in-store shopping experience. So when we acquired Caper carts — that’s a technology that’s been in the works for a decade at this point. It’s an AI-powered smart shopping cart. So, imagine a world where you just walk into the grocery store, you use your login with the retailer and all of a sudden the lists and the recipes that you have been looking at all week populate on the screen. And not only that, it’s going to help you navigate the store. So as you find the items, you just drop them in the cart — [it] automatically scans them and adds them to your checkout total. And if you can’t find something, push a button on the cart and our electronic shelf tags will actually light up in the aisle and blink for you so that you can go find it. And so a lot of it comes to: how do we inspire and reimagine that physical grocery shop in a digital way? Because we’ve been a delivery company, but we want to bring some of that magic to our retailers’ stores.”
Affordability is top of mind
“I do believe retailers need to stay very focused on how they continue to bring their costs down and prices down for customers in ways that are sustainable. Of course, everyone is experiencing these higher costs, but the retailers that are able to crack this affordability component and really show value to their customers. And that can be in a variety of ways, that doesn’t just mean lower prices — it could be things like personalized offers, or more entrenched loyalty programs or, quite frankly, offering the value of ‘get your groceries how you want them.’ There are customers out there that want it delivered and don’t need it in an hour. Sure, so get it later today and pay a lower fee. And so there’s a variety of ways our retailers will lead in there.”
Instacart’s category expansion
“We had made the decision to start to go in other categories, and two weeks later Covid hit. And I said, oh boy. And so the timing was a little bit serendipitous. But our view was: okay, we always wanted to focus on grocery first, it’s our core business. And we believe it to be the hardest to offer same-day delivery on. Picking a $100 grocery order and finding all of the right fresh items and getting it delivered to the customer in a quality way — that’s not easy. So we got really good at that over our first eight to nine years. And then we said: okay, we know we have a great following, and we know she is shopping from places outside of grocery. And so we started to think, okay, when we look at our customer base, who are the brands that they engage with outside of Instacart today? And how do we help bring those brands on our platform, and provide that same magical experience that we do in grocery in other areas as well? So whether it be Sephora… we have Petco and other pet players on our retail platform. We cover home, we cover home improvement, which is brand new for us this year which has been a massive success. And the list goes on. And the idea is if something happens in your house and you need something now, we want Instacart to be in your frame of reference for why you’re going to get same-day delivery with our retail partners as opposed to going to Amazon.”