How could I not be smitten with Instacart when their customer support contact email is email@example.com?
After my first order with free shipping, I was exciting at the prospect of saving an hour a week using Instacart (that adds up to five 12-hour days a year!). But something just didn't add up. How was Instacart making money?
The overhead for Instacart, disregarding website costs, is simply paying the "personal shoppers" to go to Trader Joe's to get my European Thick and Creamy yogurt, and deliver it to my door. If these shoppers are paid minimum wage ($10/hr in CA), then they must complete three trips an hour to break even. The shoppers must do parallel runs to the grocery store, so let's say they average 10 shopping trips + delivery every hour. That's $30 in delivery fees minus $10 to pay for the personal shopper's salary. So $20/hour profit for every 10 Instacart users, or about $2 per person -- less than a latte. And this isn't even accounting for costs of website infrastructure, paying back Yc investors, etc.
So there's only one other way that Instacart is monetizing: they systematically raise their prices relative to the in-store price. Is this true, Instacart FAQ?
Are your prices different from the store?
Yes, Instacart prices are our own and vary from the store’s price. Our prices can be lower, the same, or higher than the store price. If you notice an item that you believe is priced incorrectly or unfairly, please email us at firstname.lastname@example.org.
Well, it certainly doesn't sound like they raise the price systematically. Maybe Instacart has some kind of business arrangement with the grocery stores, with some monetary incentive for sending customers along? I emailed customer support to find out.
Alexandre Colavin Mar 09 06:58 pm (PST) Dear Instacart
This was my first order, and I'm happy with how it went. I do have some question about how your company works... From navigating your site, it's not transparent how your business operates. Do your personal shopper employees simply go to the store on my behalf? Is there a formal relationship between TJ's, Whole Food or Safeway and Instacart?
Mike Price (Instacart) Mar 09 07:04 pm (PST) HISo prompt and so nice! They must be a good company. But from a user's standpoint, this response is plain fishy. I'm not a lawyer, and I'm uncomfortable with the idea of buying food from a third party. I asked a TJ cashier if they ever saw the Instacart personal shoppers. I imagine them coming to the cash register with three of every staple, like milk, eggs and almond cocoa spread.
Thank you so much for your order! I am super glad to know that your experience with us has been a good one. Instacart does not have any type of relationship with any of the stores. We receive your order and our shopper is alerted of the order and does personally go to the store and shops for your groceries. Please let me know if you have any other questions.
Hope you have a great night!
So here's some quick stats of in-store versus instacart prices that I put together (retrieved June 2013, and from above photo.)
Screw you, Instacart. We're over. Not because you raised your prices, but for being so damn sneaky about it, and for not trusting your customers enough to let them know how you make money. Why don't you just disclose that all prices are 30% higher on your website? 30% is a big deal. That's four times the state sales tax. I feel betrayed, and I'm making sure my friends in Oakland know.
Of course, Trader Joe's is also run by an ultra-secretive German company. Let be honest: the real reason I can't rely on Instacart is because they don't deliver booze. Insta-deal breaker.