Member Exclusive   //   May 9, 2024

Research Briefing: Why more retailers are partnering with Instacart

By Li Lu

In this edition of the weekly briefing, we examine Instacart’s recent announcement of its expanding delivery partnerships with Kohl’s and Uber Eats as seen in data from Modern Retail+ Research.

Interested in sharing your perspectives on the future of retail, technology and marketing?

Apply to join the Modern Retail research panel.

Instacart’s expansion could lead to other partnerships

Breaking News: Instacart has announced same-day delivery service for Kohl’s and an Uber Eats restaurant partnership. Instacart traditionally delivers groceries but has been expanding to other industries and has partnered with retailers as well.

Kohl’s has recently posted decreasing sales. To counteract this, it has partnered with Instacart in a bid to boost online sales. Kohl’s decision to use Instacart will also expand Instacart’s retailer coverage. Similarly, Instacart’s partnership with Uber Eats adds restaurant delivery to its list of services. The partnership is to keep up with its competitor Doordash which already offers restaurant delivery. 

Questions: What other partnerships does Instacart have? What are the benefits of working with Instacart?

Answers From Research:

Diving into some recent drugstore upgrades may help explain why more retailers are partnering with Instacart and seeking to boost their e-commerce offerings.

According to the Modern Retail Index, all the retailers we analyzed within the drugstore cohort have partnered with third-party delivery services, like DoorDash and Instacart, and all offer free delivery for orders over $35. This has resulted in high product accessibility scores across the cohort. The lowest score drugstores received was for returns and online payment options. Walgreens and CVS only accept PayPal for online orders. Rite Aid brought the cohort average up by allowing more quick-pay options like Apple Pay and Google Pay, as well as perks for American Express members. 

Aside from relying on third-party delivery services to fulfill online orders, drugstore chains have also worked to cut down on costs across their supply chains through initiatives like leveraging automated technology for increased warehouse efficiency and shortening distance of delivery miles by storing goods in locations closer to consumers — their neighborhood drugstores. For online orders of consumer products, Walgreens and CVS are looking to their retail stores to help fulfill local orders for delivery. 

Other publications have reported on the increasing rate of stores taking on double duties as warehouses and fulfillment centers for online orders to make more use of their physical sites, including CVS and Walgreens. The Wall Street Journal reported Walgreens closed a warehouse dedicated to e-commerce orders signaling the company’s commitment to utilizing its retail stores as micro-fulfillment centers, following the lead of other retailers like Target, Walmart and CVS. CVS Health sold a distribution center in Alabama for $22 million, instead relying on stores for online deliveries.

Aside from building up localized fulfillment solutions in physical stores, Walgreens and CVS have also automated fulfillment by building more AI-backed fulfillment centers to support their pharmacy businesses. Walgreens began using AI to accurately forecast demand and to optimize its network of fulfillment centers. It also implemented centralized services to control inventory and reduce workload. In 2021, Walgreens announced plans to open 11 fully automated micro-fulfillment centers by 2022. So far, nine of the automated centers have opened, but the company is now taking a step back to re-evaluate the benefits of its strategy. CVS currently uses AI-driven fulfillment centers to support more than 4,300 stores and to fill over 2.3 millions prescriptions each week across 29 states. 

To promote more repeat customer purchases, CVS and Walgreens have tested subscription memberships, similar to Walmart Plus and Amazon Prime. At the start of 2024, CVS announced a new tier to its ExtraCare membership called ExtraCare Plus. For $5 a month members are eligible for free same-day delivery on consumer products and prescriptions — as well as other perks like 20% off CVS Health brand products, a 24/7 pharmacist helpline and a $10 monthly bonus reward.

Want to learn more: Modern Retail+ Research’s Annual Fulfillment Index examines retailer fulfillment strategies and where they are headed. 


See research from all Digiday Media Brands:

Modern Retail+ Research
Digiday+ Research
Glossy+ Research