
Instacart Tries to Hang on to Whole Foods as Amazon Swoops In - ErikVandeWater
https://www.bloomberg.com/news/articles/2017-06-16/instacart-tries-to-hang-on-to-whole-foods-as-amazon-swoops-in
======
IBM
Even assuming that Amazon breaks the Instacart contract I'm not seeing the
downside for them. Every single grocer should be more eager than ever to
partner now that Amazon has shaken them to their core. It makes more sense for
everyone to outsource delivery to Instacart than to have every grocery chain
or retailer try to recreate it on their own. The scale of all the non-Amazon
grocers should keep costs down.

~~~
crabasa
Every other retailer handing their destiny to Instacart and becoming
undifferentiated warehouses of goods makes tons of sense for Instacart, but
little sense for the retailers.

Sure, a bunch of small/desperate retailers will do this in the short term, but
the small handful that will still be around in 5-10 years know that owning the
_direct_ relationship with the customer is non-negotiable.

~~~
toomuchtodo
Instacart should pivot to a delivery platform enabling other grocers, not
running their own last mile operation.

Amazon-level supply chain management and logistics as a service/consultancy.

~~~
maxerickson
Like Rosie?

[https://www.rosieapp.com/](https://www.rosieapp.com/)

~~~
gogopuppygogo
Safeway uses Rosie in Sacramento and its a terrible experience. Often they
show inventory that isn't in stock and as someone who cares about the way
things look, the overall website looks like 1998 wants it's tables back.

Amazon started doing grocery delivery in the Sacramento area this year and I
haven't touched Safeway again since.

With the Whole Foods purchase I cannot wait for them to completely change how
I buy food.

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jroseattle
Looking at this move in terms of Instacart-vs-Amazon is most likely short-
sighted. Amazon plays the long game just about better than anyone else around.

I'm sure they care about it, but I wouldn't be surprised if they view the
Instacart business as tangential. No offense to the fine people at Instacart!
I love the service, am a big fan and customer, but objectively I think the
business is going to change. Self-driving cars, drones, etc. -- last-mile
delivery is going to change in the next 5-10 years.

What I find more interesting about this acquisition: real estate. Amazon just
acquired 450 or so locations in high-density areas that are likely in the
sweet spot of their target customers.

They are trying out some revolutionary concepts at Amazon Go. I'd say Amazon
feels ready to move on changing the user experience in-store, as opposed to
"old-school" delivery.

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jhowell
I don't see Amazon buying Instacart. I also didn't see Amazon buying Whole
Foods. Maybe Walmart saves this sinking ship.

~~~
dawnerd
Amazon does have Prime Now which does close to the same thing instacart does.
I could see it making a lot of sense to buying them out to get all those extra
markets.

~~~
djsumdog
Prime is not the same as Instacart. You can't get ice cream or tine
sensitiveness orders with Prime. You're thinking of Amazon Fresh, their
grocery delivery service, which is in fewer markets than Instacart (as started
in the article, 20 vs 69 cities).

~~~
jdauriemma
IIRC, Prime Now sells some groceries and essentials with two-hour delivery.
It's a last-mile service not unlike Instacart.

~~~
dawnerd
And it's included with a prime subscription. No percent or delivery fee
markups. There's also restaurants in some areas.

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krat0sprakhar
> “Instacart’s core value proposition is last-mile delivery at scale,
> something Amazon has always struggled with,”

Is this really the case? I was under the impression that the e-commerce giant
is great at last mile delivery.

~~~
saosebastiao
Nope. Amazon absolutely struggles with it. They can hide how bad they are with
it because they have a lot of cash and don't need to appeal to VCs every
couple of months.

That isn't to say that Instacart is better. They're nowhere near a sustainable
business under their current business model.

Since >75% of the costs of parcel delivery are due to the last mile, and
because parcel delivery margins are so low, we can use parcel delivery prices
as a rough proxy for last mile delivery costs.

Last mile delivery is only viable at scale due to delivery density. USPS has
extremely cheap parcel delivery because they have a government enforced
monopoly on letter delivery, ensuring they basically visit every house every
day no matter what. The UPS/DHL/FedEX crowd can do 1 day delivery at
reasonable-ish prices due to their scale for all parcels. But Amazon and
Instacart are cutting delivery windows down to 1 hr, and that absolutely
destroys your delivery density...on the order of 10-15x.

For the PrimeNow/Instacart business model to make sense, they need costs that
are comparable to the current large parcel carriers...meaning _they would need
to scale their businesses to 10-15x the size of the large parcel carriers_ to
get their prices in the range where their businesses are viable. Amazon is
closer than instacart, but that is like saying a car is more likely to get you
to the moon than a bicycle.

~~~
twic
All the supermarkets in the UK do delivery, although not to really rural
places. They charge a few pounds on top of the cost of the shopping for it,
with popular time slots costing more. Here are the prices and conditions from
a couple of years back:

[https://www.theguardian.com/money/2015/may/02/online-
shoppin...](https://www.theguardian.com/money/2015/may/02/online-shopping-
supermarkets-home-delivery)

The UK is, overall, denser than the US, but there is plenty of the US as dense
as the least dense areas of the UK which get these services. Plus, you have
cheaper petrol and cars. What would stop this model being used in the US?

~~~
saosebastiao
Nothing is stopping that model from being used...it is already being used in
some cases. And at least from what I can tell, that model has an actual shot
at making a profit.

But it is important to note that _delivery in general_ isn't impossible to
make viable, but rather the specific type of delivery that Prime Now and
Instacart are offering...where you order and get it an hour later. There are
plenty of ideas out there that could work quite well, but Amazon and Instacart
have already hooked their customers on a higher service standard that will
never pay off for them, and if they want to change it to make it viable they
are gonna have to piss off a lot of customers.

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zghst
I’m afraid that most of this audience has an affinity for the noble business
model Instacart has, but our morality does not guide markets. I’m extremely
concerned for what this means for Instacart. They are now in a cloud for four
years. Does anyone really think that within the next four years, Amazon, Uber,
etc will be stagnant? They already have existing delivery infra in place, is
the price of an Instacart acquisition worth four years of opportunity and
innovation in this space?

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yueq
WFM invested in InstaCart so AMZN is going to be InstaCart's investor's parent
company.

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bluebluetimes
Instacart is a good company I hope they win in the long run and help the
grocery companies

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noloblo
Are there any non- obvious reasons why Amazon acquired whole foods other than
declaring war on the grocery industry or the Pe being at a low

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idibidiartists
I can't go inside Whole foods after this. Same reason I won't answer an Amazon
recruiter's email. It's disturbing to think of the race to the bottom (in
terms of worker compensation and benefits) that Amazon brings to industries
it's taken over.

~~~
djsumdog
I too stopped shopping at Amazon a little over a year ago after returning to
the US. I stopped shopping at Wal-Mart in 2009 and simply see Amazon as the
new Wal-Mart.

But you and I and everyone else who decides not the shop there; we don't make
a dent. You cannot vote with your dollars. There are still way too many people
who don't care or who follow the advertising. It's the reason why Uber will be
around for decades.

Public Relations/Propaganda/Marketing is amazing. McDonalds convinced millions
of Americans the girl who sued for spilling coffee on herself had fought and
won a frivolous lawsuit when the reality was far from the truth:

[https://www.youtube.com/watch?v=KNWh6Kw3ejQ](https://www.youtube.com/watch?v=KNWh6Kw3ejQ)

~~~
Treegarden
sorry if this is a silly question, but whats so bad about amazon? Do you mean
they threat their workers badly?

~~~
gaius
There was a big thing about it a couple years ago
[https://www.nytimes.com/2015/08/16/technology/inside-
amazon-...](https://www.nytimes.com/2015/08/16/technology/inside-amazon-
wrestling-big-ideas-in-a-bruising-workplace.html)

Anecdotally all the ex-Amazon folks I know have horror stories of their own...
Having said that as a customer I LOVE Amazon, I have de-Googled my life as
much as possible, but Amazon is addiction and my (not so) secret shame...

~~~
cududa
All my Amazon friends aside from two teams hate it there: Prime Video, and
Alexa/ Kindle software.

Fun fact - Brian Valentine, a well revered engineering director in Windows up
until ~2010 went over to Amazon and basically rebuilt the exact same Windows
software team there - employees, structure, and all. The same team that gave
you Vista gave you Alexa and basically every other Kindle product (that's not
meant to be a knock against vista or that team)

