
Instacart has raised another $200M at a $4.2B valuation - smaili
https://techcrunch.com/2018/02/12/instacart-has-raised-another-200m-at-a-4-2b-valuation/
======
clay_the_ripper
I have never had a good experience with instacart. I’ve ordered from them
probably 10-15 times and every single time, without fail, they either forget
an item or replace an item with another item that I don’t want. This makes the
service unusable, because if I’m cooking dinner that night and want to order
instacart, there’s a high likelyhood I’ll be missing something crucial for my
recepie, meaning I’ll have to go to the store anyway.

Not to mention the shady fees. The last time I used instacart, there was a box
checked called “service fee”, I clicked on it to see what it was and it said
“this $10 charge is optional and helps us keep running instacart”. Meanwhile
the tip for your driver box is not checked. I bet a large number of people
assume the service fee is the tip, and leave tip blank. Blatant tip stealing.

Plus they mark up everything you buy, and obfuscate this so it’s impossible to
really know how much extra instacart is skimming off the top.

Amazing prime now on the other hand has never messed up an order. They always
deliver on time. The prices are actually cheaper in some cases than in store.

I can’t wait for instacart to go out of business.

~~~
octernion
as an engineer at instacart, it's very disheartening for me to see the top-
rated comment on HN is "I can’t wait for instacart to go out of business."

even if we did not provide value to you (which i apologize for -- it is a
priority of ours to improve the replacement experience in particular as it is
very frustrating to customers), i am not sure why that implies that we do not
provide a valuable service for others and why you would wish ill on us.

perhaps it is because you think of us as an overall unscrupulous company
("shady fees", "mark up everything you buy"), which i would contest -- we
strive for transparency when possible (see [1] for screenshots around how we
describe the pricing of our service). but the larger point remains -- why do
you think that there can only be one victor here, and that is has to be
amazon? (or "amazing" as you put it).

right now, amazon is very explicitly coming for the grocery industry -- an
$800+ billion industry that is almost 100% offline -- and we are attempting to
be one of the (hopefully many) independent companies that enables it online.
grocery companies have built amazing fulfillment pipelines and relationships
with both farms & customers that we are building a front-end and logistics
system for.

anyways, i do not speak for instacart as a company, just for myself as an
employee who usually enjoys HN.

[1] [https://imgur.com/a/j47ls](https://imgur.com/a/j47ls)

~~~
tfehring
Saying “we charge markups, but we won’t tell you what they are” is still not
sufficiently transparent, in my opinion. Yes, Amazon and grocery stores do the
same thing (at face value, anyway) by not disclosing their COGS. But the key
difference is that my next-best alternative to Instacart is to just go to the
grocery store myself. My next-best alternative to getting something delivered
from Amazon isn’t to get it more cheaply from a brick-and-mortar Amazon store,
or to buy it directly from their suppliers - it’s to get it from a different
retailer entirely, and I can trivially compare all-in prices between other
retailers and Amazon. So I can easily assess whether it makes sense from a
cost/benefit perspective to buy something on Amazon, but I can’t make the same
assessment for Instacart.

I do think the service creates value. But I still hope that, at the very
least, it soon faces enough competition that it’s at least forced to be fully
transparent about the cost of its service. I want to see one number - the
difference between what an order of groceries costs me on Instacart all-in,
and what it would cost me to go to the grocery store and purchase the same
items myself. As long as I can’t trivially find or calculate that number, I
won’t use Instacart again.

~~~
octernion
i am very confused why you have a higher bar for this than other services.
would you actually create a spreadsheet that values your time (against other
alternatives), gas/lyft/train fare to and back from the store, the extra costs
associated with actually being in a retailer (and seeing the specials in store
etc) and compare that against our offering?

and again, we aren't the ones doing the markup -- those are coming from the
retailer directly, who may (or may not) mark up prices, which is their
prerogative. we put all of our costs in the checkout screen transparently.

~~~
tomnipotent
>> and again, we aren't the ones doing the markup

So you claim, but since you refuse to list what the IC markup is then it's
impossible for us to tell. You're essentially using the retailer markup as an
excuse to hide instances of when you do it yourself.

Thus the lack of transparency.

In any given transaction, I have NO idea what the actual % that was added by
IC. I do not have this problem with Amazon Prime.

~~~
octernion
again, in 99.99% of the cases, we aren't doing the markup.

and, in the one case where we do not have a signed relationship with the
retailer, we do explicitly note the percentage.

we aren't hiding anything. and, you have that precise problem with amazon
prime -- what markup are they charging?

~~~
sk5t
If any markup exists, and if Instacart splits some of that markup with the
retailer, it seems like obscuring the facts to state that Instacart does not
charge a _separate_ markup.

------
subpixel
Imagine that Netflix launched as a courier service that would take your order
and then go to the video store and try to get it and bring it to you. That
seems kind of crazy even with the knowledge (in hindsight) that videos would
later be digitized and Netflix would be in a position to move from middleman
to market-maker.

But I just don't see any opportunity for Instacart to get out of the middleman
role. Maybe they can make a lot of money helping grocery conglomerates try to
spend their way out of a technology deficit vis-a-vis Amazon. But if that were
true they would they need hundreds of millions of VC dollars?

------
jedberg
From an outsiders perspective this looks like a bad investment. But I'm an
outsider, so I know I don't have all the information. I would love to get an
insiders perspective on why this is a good investment.

My two main concerns:

1) Amazon and Whole Foods: Are they not a concern?

2) Economic downturn: Will people still order groceries at a premium?

~~~
roymurdock
I assume instacart has a liquidity event (IPO) lined up for the near future
(next 12 months), and a few late stage and previous investors are laying down
a cash runway to get the company there. Notably this round ($200m) was less
than their last round 1 year ago ($400m) so it seems growth has slowed and its
time for an exit.

So its not a bet, its a holdover cash infusion until the IPO, and is not
exactly risky given how mature and well-capitalized the company is at this
point.

The only real bet is that they'll be able to IPO before a market downturn,
which seems pretty safe, I have yet to see anyone put forth and truly
plausible triggers for another large global recession - there are no debt and
enforcement chains I can see that would drag the system under again. But I'm
not a financial expert, just an armchair economist, and if I knew what would
trigger the next recession I wouldn't be posting here ;)

~~~
gruez
>I have yet to see anyone put forth and truly plausible triggers for another
large global recession - there are no debt and enforcement chains I can see
that would drag the system under again

that's not an indication of anything. has there been anyone who were able to
predict the last few recessions with reasonable accuracy?

~~~
roymurdock
ok, and yes there were a few traders and economists who did ("the big short"
follows 3 of these traders' stories), but in order to trade you need to have a
thesis for what and when to buy.

there are tons of gloom and doom traders and economists (usually trying to
sell "safe" or alternative assets) but i have yet to read any clear,
compelling cases laying out what and when to buy when the first domino falls
that will set off the next recession. i'd be interested to read anything
you've found noteworthy

~~~
lazerpants
The typical advice for the beginning of a market downturn is to buy bonds,
which usually act as a safe haven from those fleeing stocks (perhaps untrue
currently though). Alternatively, some propose purchasing blue chip dividend
yielding stocks, as money moves from risky stocks to tried and true ones.

During a recession/large market correction, you're looking to hold all cash
and just buy stocks cheap after they drop all the way to their lowest point
(think Ford or AIG in 2008).

The problem with these strategies is that market events usually occur over
sufficiently long time frames to obscure their size and direction. Looking
back at 2007/2008, Lehman was the obvious "moment" but the market and economy
didn't nose-dive instantly to their nadir on the collapse of Lehman Bros. It
feels like there was a "moment", but it was only obvious in hindsight.

~~~
roymurdock
I'm not talking about safe assets, I'm talking about what to buy now in
advance of whatever crash is coming :)

For example leading up to the 2007 crash the pros that saw weakness in the
mortgage market created and bought "credit default swaps" allowing them to bet
against mortgage-based securities

~~~
lazerpants
Ah, well if you could go back in time to last week, you could have made a
fortune with put options on VIX ETFs before some of them failed. Volatility
being at such a tremendous low is definitely unusual and the possibility of
ETF failures was baked in. Maybe in a few years we'll see a movie about people
with foresight making money off of that event.

------
habosa
As I remember, Instacart's main business was Whole Foods delivery. When Amazon
bought Whole Foods they obviously lost that market, but there was some
optimism presented because now suddenly every store has to compete with Amazon
and would look to Instacart as a ready-made provider of this service.

But I am not so sure this will work out. Instacart builds some of their fees
into item prices. If you're shopping at Whole Foods you're already signaling
some price insensitivity, and you likely won't notice a few nickels added to
these already premium items.

However if you shop at somewhere like Safeway, this may not work. The price
competition is way more intense and consumers are much more sensitive to the
price of essentials.

Maybe the idea is that anyone who orders groceries from a hip mobile app like
Instacart is someone who can afford the convenience premium? I am just not
convinced that they can really ever recover from Amazon here. Plus these other
chains may want to do business with Instacart today, but in the long term
they'll probably invest in their own delivery services and cut out the middle
man.

Instacart is a pretty legit business, but $4.2B is a lot for a middleman in an
industry that is synonymous with low margins.

~~~
lobster_johnson
Instacart hasn't lost Whole Foods. You can still get deliveries. (Though who
knows whether this will last, or whether it can compete on price with Amazon's
own offerings.)

------
veritas3241
Surprised nobody has mentioned a different, sort-of competing model. Here in
Nashville (and I assume other locations), Kroger offers ClickList[0].
Basically, order ahead of time via their website and select when you want to
pick up from the store (w/o leaving your car).

It doesn't have the convenience of delivery, plus you typically have to order
a day in advance, but it seems like the benefits would be that a) the people
doing the picking are employees of the store, b) you're unlikely to not have a
deliverable order, and c) you're probably out anyways and can schedule around
your pickup.

Maybe this is more valuable outside of bigger cities, but I see people using
it all the time around here. I haven't used it myself quite yet.

[0]
[https://www.kroger.com/topic/clicklist](https://www.kroger.com/topic/clicklist)

------
spiderPig
Wow, so they've raised close to $1bn so far! Wonder how many of these delivery
services like Doordash, Postmates, Grubhub, Caviar, Uber eats etc will survive
the next economic downturn.

~~~
jimmy1
As a former restaurateur, I would like to tell you, contrary to popular
opinion, during the last major economic downturn in 2008 (2009 for me since I
was in a southern state, and the downturn hit us a bit later than most),
spending money out to eat actually went _up_.

The theory goes a little something like this -- people actually spend more
money on themselves to cheer themselves up when life gets shittier. So folks,
too depressed to cook, would go out and at least try to eat, drink, and be
merry.

Now how this correlates to these dining services has yet to be determined.

~~~
jotm
Surprisingly, most poor people order takeaways the most around here, as well.

~~~
jimmy1
It's not surprising to me, it all ties back to the reality that it is more
expensive to be poor than not. If you are poor, you most likely don't have the
ability to keep a kitchen stocked with cooking essentials (spices are
expensive), pots, pans, the increased water and heating cost to run a
dishwasher and oven. Never mind the fact that most people living paycheck to
paycheck are going from job to job and are physically exhausted at the end of
the day. And that's for the people who were able to afford housing, then you
have poor people stuck in shitty motels because they can't afford first
month's rent and a security deposit. Those usually only have microwaves and a
mini fridge.

Often times, going to McDonalds is your best option. The Government also
subsidizes Big Food, so that factors. Getting 4 McDoubles for 4 dollars in 5
minutes driving through the drive thru next to your house so you can get back
home to your kids and see them for the couple hours you have in between jobs
versus spending 30 min to an hour buying a pound of ground beef, buns, cheese,
lettuce, tomatos, the energy and utilities cost and the lost opportunity cost
of the time spent cooking and cleaning when you could be working, it isn't
hard to see why poor people choose the fast food.

~~~
maxerickson
The energy and other utilities for 1 meal will be like $0.30.

So that barely registers compared to time and ingredients.

~~~
jimmy1
Bad credit affects utility costs. Most impoverished people have bad credit.
Again, being poor costs more in almost all areas of life in America. Contrary
to popular belief, utilities are not a right. Utility companies have the right
to refuse you if you have enough delinquent payments, can't front the deposit
(if you have bad credit) or even outright refuse you (if you have terrible
credit). Even on the FTC's website, their advice if you have trouble paying
your utilities is basically to "budget harder"

~~~
jotm
Wow, I didn't know it was that bad. Being denied utilities based on credit
score... damn. Do you have prepaid meters by any chance?

It's the standard option for those who fail to pay their bills on time here.

With a prepaid, you load up money and it turns off your gas/electrical once
the prepaid amount is exhausted.

Water is exempt, no one can turn off the water at a residential address, no
matter how long you haven't paid...

------
matte_black
Terrifying, considering this one will be one of the first companies to go the
minute this roaring economy goes sour.

------
free2rhyme214
Instacart's biggest issue is not knowing real-time inventory. Amazon will
never have this issue, because they just bought Whole Foods. Instacart, on the
other hand, relies on crowdsourced shopper data to manage this.

The results is basically a hit and miss experience. My guess is they hope to
get this inventory data direct from the stores one day, but who knows if they
will.

------
s73v3r_
So with that money, can they finally afford to pay living wages to the people
who make their service possible?

------
vthallam
As soon as Uber launches UberEverything , Instacart will be bleeding tons of
money. I already left Postmates and Seamless for UberEats. Fast, predictable
and more options.

If Uber could get more grocery delivery services and keep the onus of packing
things on the stores vs delivery boys picking things, it will be more
reliable.

------
bluetidepro
I really hope this money goes towards their customer service infrastructure,
and the quality of their workers. As an Instacart Express customer (their
premium offer for free delivery) since 2013, I can say the customer service
has gone downhill significantly. I can elaborate some here more...

\- Their quality of workers have gone down. I don't know if they have just
lowered the bar for who they hire, or if the workers are too focused on
competing orders that they just don't care anymore. I'm not exactly sure.

For example, in the app there is a setting option you (as a user) can set to
explicitly request a phone call me if there is any replacements to confirm
them. In the past year, I don't think any workers have followed this setting.
And I understand that is maybe because Instacart has added some of that
functionality in app, but that doesn't really work all the time. I have also
recently had more and more Instacart workers who will make the "replacement"
requests in the last 2 seconds of shopping so you have no ability to actually
"approve/deny" the things they pick. I believe they do this on purpose so they
don't have to do as much work trying to communicate with their user they are
shopping for. It probably shaves off time they have for completing other
orders. So, by this "evil" tactic I've seen them start to use more and more,
you can't actually control the replacements. You just get what they assumed
you may want for the replacement. This is incredibly frustrating as a user to
have happen to your order. Instacart has been good at refunding me for the bad
replacements, but if they would have just called (like I marked in the app),
we could have resolved the issue in store, and it would be all good. I don't
understand why Instacart still has this setting if no workers are going to
follow it anymore. They need to get this sorted out. Either informing their
workers, or forcing app users to explicitly approve/deny in app before it
closes that opportunity.

\- Their up-sell fees have gotten outrageously greedy. It seems they are just
rounding up to the highest potential possible and then charging that. They are
transparent that some stores have higher prices, I understand that, but it's
frustrating when certain items are way too up-priced. Meat being a perfect
example. If you just want to get 1 ribeye steak, the app will say it will be
$20, but then when you get the piece of meat it will still have the price
label on it saying it was say $8. Instacart doesn't do any price adjustment to
factor that and just charges $20, unless you contact their customer support
and complain. On top of that, last time their customer support wouldn't even
change it until I complained on Twitter. Then they finally took care of it.

\- They used to give debit/credit card refunds for mistakes. Now they just
give you a credit to your next order. I absolutely HATE this practice that
companies sometimes do. It's so anti-consumer. You can't call it a refund if
I'm forced to use your service again to actually be redeemed. That's a credit,
not a refund. I don't get why they changed to this model, other than to
speculate that their poor customer service has bit them in the butt so it's
easier to give the user "monopoly" money to be forced to come back to use it,
rather than just giving them a true refund. I'm not sure.

Those are just a few things that I've started to notice way more frequently.
And I'll be 100% clear, this has all happened within the last year. I had 0
problems until the past year. I have no clue why it took such a dramatic fall.
In the past year, there hasn't been a SINGLE order where I haven't had to
contact customer support to fix something. And it's getting obvious that even
their support is caring less and less about helping. Like making me have to go
as far as get "social media justice" for them to fix their problems.

It's a bad trend I've seen. I'm optimistic that they can turn it around, and
hopefully this money can help with that. I will not be renewing my Instacart
Express this year, that's for sure. Will probably give them a few orders to
redeem themselves after that and see. If it's still poor service, they will
have lost a loyal customer all because of poor quality/scaling. But I'm also
just 1 user. I get everyone may have different experiences.

------
ryanmarsh
I know these businesses are very regional. Where we are Instacart has some
insane prices and Shipt is absolutely kicking their butts on service. I'm
having trouble understanding the $4.2B valuation given their execution.

------
jxub
Another valueless "disruption" being injected play money to destabilise the
semblance of healthy capitalism we had on a macro level.

Venture capital enables subsidies to speculative companies in hope of a small
probability of profit, which destroys perfectly good small companies [0] , and
acts as a libertarian version of socialism [1]. This exposes the fabric of a
normal economy to small stressors, a couple of which may hit it big and
destroy entire industries. This has its brutal repercussions [2] which are not
only economical, but also social, as the sum of jobs destroyed is bigger than
the new ones created, at least in low innovation sectors, and which makes
extremist movements grow out of the general frustration with the state of
things (isn't Trump the result of "disruption" in politics too?).

However, in my opinion Universal Basic Income will fix all the major problems
acting effectively as a universal VC - and paradoxically a healthy one as not
guided by buzzwords or credentialism, which should be the only way any subsidy
work, as it frees everyone from black swan risks which are fruit of unexpected
outcomes of technological advances (and a good thing per se), and enables them
to work on bettering the world in an amazing way (my speculation). Until the
AI comes along... Well, that's for another story.

[0] [https://m.signalvnoise.com/venture-capital-is-going-to-
murde...](https://m.signalvnoise.com/venture-capital-is-going-to-murder-
medium-656cbccf4829)

[1] [https://medium.com/@willszal/venture-capital-as-
socialism-47...](https://medium.com/@willszal/venture-capital-as-
socialism-478770b9715b)

[2] [https://www.technologyreview.com/s/515926/how-technology-
is-...](https://www.technologyreview.com/s/515926/how-technology-is-
destroying-jobs/)

Edit: build an argument

~~~
Judgmentality
Even though I agree with you, it would make for a much better conversation if
you provided some evidence yourself instead of insisting the onus is on others
to prove you wrong.

~~~
jxub
You're right, I sound like a prick even though I hadn't meant it.

I'll grab some data later on to construct a more compelling case against this
type of funding.

~~~
octernion
as an instacart engineer, i'd be super curious as well. i haven't seen many
actual data-driven cases (noting this honestly and thank you for acknowledging
the attitude in your initial comment :)

