A New Study Shows Instacart Has Been Beneficial for the Grocery Industry

If you have followed any of our previous posts about Instacart, you know we’re concerned about the ongoing impact the company has had on the retail food industry. Instacart — possibly in response to broad concerns of this nature — published a study touting the positive impact the company has had on the industry.

Started in 2012, Instacart gained unicorn status early on, aided and abetted by the grocery industry. Retailers that wanted to claim they had full-ecommerce capability signed on early, aiding in the company’s growth as it expanded from its San Francisco roots and ultimately went national.

Instacart claims it has been very beneficial to the industry both before and since the COVID pandemic

In 2016 Instacart paid $4.6 million to settle a class-action lawsuit on filed on behalf of its workers. The treatment and compensation of gig workers for many companies remains a point of contention, particularly in California.

Instacart’s valuation has been a study in upward mobility. The company’s valuation of nearly $20 billion exceeds that of many of its customers. The difference is that Instacart owns virtually no assets, while its customers are brick and mortar retailers with hundreds or thousands of stores.

Getting back to the new study, Instacart claims it has been very beneficial to the industry both before and since the COVID pandemic.

Instacart’s valuation of nearly $20 billion exceeds that of many of its customers.

Following is a section of the conclusion:

“This study provides strong evidence of a causal connection between Instacart adoption and economic growth in the grocery industry before and during the COVID-19 pandemic. The results demonstrate that the Instacart Effect, i.e. the causal relationship between economic outcomes in the grocery industry and Instacart adoption documented in Kulick (2020), is a national phenomenon creating significant gains in grocery employment and revenue throughout the United States. Furthermore, there is no evidence that Instacart adoption has changed the composition of jobs within the grocery industry resulting in lower average wages for grocery workers.”

We can’t really argue with these points. Instacart created a boatload of new jobs, starting before the pandemic. Since March 2020, when much of the world — including supermarkets — either went on lockdown or people just stopped going out, Instacart has been a candle in the darkness of COVID. Consumers who would otherwise have been at a loss for getting groceries flocked to Instacart as an oasis in the desert.

Retailers were grateful as well, and Instacart’s presence — along with its influence — grew exponentially, seemingly overnight. Suddenly stores were full of shoppers again, they were just shopping for someone else. Consumers found a new way to shop, and even as restrictions and fears have declined, home delivery has continued to flourish.

But the truly masterful aspect of this study is its misdirection. By placing the focus on the creation of jobs and resulting improvement of what would otherwise have been a catastrophic outcome for both consumers and retailers, Instacart has accomplished a sleight of hand Houdini would envy.

The truly masterful aspect of this study is its misdirection.

The fact is that Instacart has not been good for the grocery industry. While it filled a gap — and continues to do so — that gap only existed because retailers were slow to get into the e-commerce game; many were hoping it was a fad that would soon go away.

Those same retailers invited Instacart inside and effectively shifted their customer relationships to an outsider with its own agenda. Instacart’s power and influence continue to grow to the point that supermarkets serve only as fulfillment centers. Brand loyalty — already in decline — has virtually disappeared. The consumer cares even less about where the shopping is being done, only that they can get their order quickly with a minimum of out-of-stocks.

Instacart has changed the supermarket industry — forever, if not for good. It has created jobs, although most of those jobs aren’t anything that a typical college graduate went to school for. But mostly it has changed expectations from shoppers while taking those shoppers under its own brand umbrella.

Instacart has changed the supermarket industry — forever, if not for good.

To quote the opening line from the study’s Executive Summary: “In recent years, the U.S. grocery industry has witnessed the development of several new technologies with the potential to transform how stores operate and interact with consumers.”

Yes, the industry has witnessed significant change. But virtually none of that change was driven by the industry. The industry is now about to witness its own demise, and the only thing it has been a part of is allowing its executioner inside.

Originally published at https://ssrretail.com on September 26, 2021.