
Impact of the Amazon-Whole Foods Deal on Instacart - whocansay
https://www.forbes.com/sites/bizcarson/2017/11/08/amazon-whole-foods-deal-future-of-instacart-grocery-delivery/#450723a76d5a
======
atonse
We've had mixed experiences with Instacart. At first we loved it. They
literally have ONE job to do: make me not have to go to the grocery store.

But then we've had a couple of instances where they didn't pick the right
food, or I rejected their replacement and they still sent it anyway, and I've
had to go to the grocery store to fix the error, which defeats the entire
purpose of Instacart.

At the same time, you feel like such an entitled a __hole for complaining
(even if you 're not mad) that you asked for strawberry preserves and got
raspberry preserves instead (or you ask for boneless chicken since it's easier
to cut, but you get chicken with bones). I mean even typing it, I can't
believe what a spoiled brat I sound like. But at the same time, this is the
entire purpose of their service. If they can't get grocery shopping right, I
just won't use them.

The other thing is, Instacart is aggressive about advertising its Express
product but it's nearly impossible in all their copy writing to see what the
actual price is. I had signed up for the trial but never actually found out
what the price was (and it was "annual" which was even more scary), so I just
never went ahead with it.

~~~
wmccullough
I actually have a crazy conspiracy theory that the reason they swap certain
items is because there is a secondary means of profit where Instacart makes
money through companies paying them to “suggest” certain products. I’ve had
multiple occasions now where they’ve said they couldn’t find an item that I
knew was in stock, and in mass quantities. I’ve had common brands of milk
swapped out for expensive shit like Atlanta Cream Top (which ended up being
tasty). I have no hard proof, but I suspect.

~~~
octernion
I’m the engineer that wrote all the initial replacement algorithms and I
currently work on the Instacart fulfillment system. We never have designed or
even considered a system that would attempt to profit off not found items,
that’s insanely anti-customer and unethical. We do suggest items on the
storefront, pre-purchase, but our substitution recommendation system is
entirely driven based on any specific requests from you (that order or
previously) and a collaborative model driven by prior replacements.

We are also working on better ways to collect preferences from folks; I’m not
sure when any of that would be going live.

~~~
piptastic
Maybe you should consider adjusting your recommendation engine to default to
keeping the price as close to possible as the original item. The majority of
your customers are going to have this as their highest priority. Basing it off
prior replacements (which were most likely not optimal the first time), sounds
like the engine might be perpetuating mistakes.

~~~
octernion
We do use (as inputs) problems folks report with replacements (which include
“too expensive” as an option), so theoretically this is covered, but I do
think that we will be looking at the initial ranking and boosting as it seems
this is a consistent problem. As I noted elsewhere, we will be looking at
better collecting preferences from customers as “the majority of customers”
approaches don’t always work for very personal items like groceries (eg some
folks would prefer to have it organic regardless of cost!)

~~~
atonse
Right but if I’m shopping at Whole Foods, all the red grapes are organic. So
are the eggs, whether they’re $4 or $9 a dozen.

~~~
octernion
Yep, makes sense -- take my comment as "how things stand now" not "everything
is hunky-dory" \-- we will definitely be looking at this.

------
hitekker
>Mehta launched the service in 2012 and applied to Y Combinator, the
prestigious Silicon Valley accelerator that hatched giants like Airbnb and
Dropbox. He was rejected because the application deadline had passed.
Undeterred, Mehta used Instacart to deliver a six-pack of IPAs to a Y
Combinator partner. Within 30 minutes, he was asked to come in for an
interview and the next day was accepted into the program. Shortly after, he
closed a seed investment round.

A classic example of having faith in yourself and your product.

~~~
craftyguy
Wait, do people start companies from the ground up without faith in themselves
and/or their products?

~~~
CamelCaseName
In most cases yes, people just starting do not have faith in themselves and
their product. They have faith in their future selves and their future
product.

If instacart had not even had an MVP ready, the more likely response would
have been to wait for next year.

~~~
hitekker
> If instacart had not even had an MVP ready, the more likely response would
> have been to wait for next year.

Correct.

------
abalone
tl;dr They are "stronger than ever" because all the other grocery chains are
shitting their pants at the Amazon - Whole Foods deal and calling Instacart to
shore up their ecommerce operations.

This does not in any way, shape or form suggest that Instacart actually has a
strong _long term_ position or that their solution will help these grocers
prevail against a direct assault from Amazon. Their largely manual, layered-
over-retail fulfillment model has inefficiencies that cause higher costs and
stocking issues vs. the high-efficiency warehouse approach that Amazon has
perfected.

~~~
djur
I have access to both Amazon Prime Now and Instacart in my market. Prime Now
has access to a high-quality local grocery chain, and Instacart has basically
everything else including Whole Foods. That local chain is much better in
terms of selection and quality than anything Instacart has, especially Whole
Foods, which I find to be overpriced for pretty indifferent quality.

Despite that, the service quality from Instacart is so much better than Prime
Now that I prefer to use them unless there's something I absolutely cannot get
except from that local chain. I'm crossing my fingers hoping that the outcome
of Amazon's acquisition is that Instacart loses Whole Foods and the local
chain moves over to Instacart, because then I will never order groceries from
Prime Now ever again.

By service quality I mean all of these: good judgment in selecting items like
produce and meat (although the meat quality from Whole Foods is very
inferior), ability to add items before the order is shopped (you can't do that
even if you place an order for the _next day_ with Prime Now), ability to
cancel or otherwise alter an order (I had to cancel a Prime Now delivery in an
emergency, and it required calling customer service), interactivity in
selecting substitutions, good judgment in selecting substitutions, and
accuracy and granularity of order status page.

I'm not saying I haven't had the occasional bad experience with Instacart on
any of those, but they're good enough that I'd trust them to get me the
groceries I need before a party I forgot to shop for. Prime Now I wouldn't
trust unless I knew I had a good fallback if they mess up.

~~~
philwelch
Prime Now and Amazon Fresh seem very different to me. I use Prime Now as a
faster version of Amazon.com--if I do something stupid like move apartments
and forget to buy a shower curtain until after the shops are closed, I can put
in a Prime Now order for first thing in the morning. My wife uses Prime Now as
a slower and more cost-effective version of goPuff sometimes.

Amazon Fresh, in contrast, is my primary source of groceries. Unlike
Instacart, prices are consistently reasonable, the website actually knows
what's in inventory so I don't have to make backup plans for everything I'm
trying to get, and when I buy frozen foods, I get handy chunks of dry ice that
I can use to make homemade smoke machines. Amazon Fresh is the first service
I've ever used--and this includes previous incarnations of Amazon Fresh--that
makes me seriously wonder whether I will ever make a trip to the grocery store
again.

~~~
octernion
Can you clarify what you mean by "prices are consistently reasonable"? We do
try to publish precisely what business model we are operating with pretty
prominently on our storefront (e.g., if we have price parity with the store,
or have a markup).

(engineer @ Instacart)

~~~
philwelch
It's been a couple years since I've used Instacart, but I remember Costco
deliveries being consistently expensive enough that I was better off going to
the store myself unless I was literally crippled (which I was at the time).

~~~
octernion
since then, we've formally partnered with Costco and have adopted their online
pricing model (still more expensive than the store, but not by very much):
[http://www.sfgate.com/business/article/Costco-debuts-new-
gro...](http://www.sfgate.com/business/article/Costco-debuts-new-grocery-
delivery-service-and-12257392.php)

------
msoad
This is a press release by InstaCart assuring their investors and employees
everything is fine. We know it's not fine when PR like this comes out

~~~
octernion
it’s “Instacart,” not “InstaCart” and [citation needed]

(disclaimer: engineer @ Instacart)

------
Androider
My experience with Instacart for Whole Foods delivery has been pretty bad
overall. Too many items were consistently being marked as not available / not
found by the shopper. Once, up to a third of my cart or almost 10 items. When
you assembly your list and click "buy", you expect to get what you ordered,
not for a third of your order to be missing come dinner time. I'm afraid
Instacart won't ever be able to deliver a great experience as long as they
have shoppers walking the aisles instead of direct back-of-store integrations
and real time inventory.

The substitutions offered are also frequently terrible, and always without
fail for more expensive items. Sometimes ridiculously so. And I'm pretty sure
the shopper sometimes just doesn't want to buy some of the stuff I've ordered,
like watermelons or water, that I know is available in the store.

Overall, I've found FreshDirect to offer a much more reliable service with
good pricing and selection as well. They seem more professional in all
regards. I also look forward to seeing what Amazon / Whole Foods come up with
together, but I don't think the Instacart shopper model is something I'm
interested in using again, it just seems like a fundamentally inefficient
model.

~~~
martinald
Yes in the UK Tesco suffers from this (not as badly as a 3rd of items),
because they pick out of their local supermarkets for the most part.

Ocado on the other hand uses huge centralised warehouses which have much more
stock. They can also estimate substitutions ahead of time (much better stock
management) based on delivery time and inform you to pick something else
rather than some random choice when it's too late.

The difference in substitution levels is night and day. I feel instacarts
model is really wrong on the logistics side.

------
thisisit
> Instacart has more than 500,000 customers and approximately $2 billion in
> revenue, according to Forbes estimates. (The company, which _counts the full
> price of customer orders as revenue_ , declined to comment.)

What significance does the caveat of counting (recognizing) full price of
customer orders as revenue have? Is it different from traditional retail
business?

~~~
lenley
It's GMV (Gross merchandise volume or GMV is a term used in online retailing
to indicate a total sales dollar value for merchandise sold through a
particular marketplace over a certain time frame. - wikipedia) not revenue
(fulfilling the order through their service). Companies use it to inflate the
topline (revenue) figures.

~~~
thisisit
> Companies use it to inflate the topline (revenue) figures.

So, correct me if I am wrong, this implies Instacart is inflating the topline
figures?

~~~
batiudrami
It is typical to include cost of goods a company onsells at a markup in their
revenue figures. It's just worth noting in this case as they are effectively
just a delivery service so it might be unclear.

~~~
thisisit
I re-read the article. It says -

> Adopting an asset-light model, Mehta first built an app that let customers
> shop from established retailers--charging a delivery fee and, _at least
> initially, a slight markup_. Instacart kept a cut for itself and paid the
> shopper.

So the implication is that they are not selling stuff at markups now.

> It's just worth noting in this case as they are effectively just a delivery
> service so it might be unclear.

In that case, wouldn't revenue be the "delivery service fee" instead and not
the value of what was delivered?

Looking at the article their revenue streams seem to be: delivery fees,
Instacart Express Membership fees, partnerships with stores and advertisement
fees. In which case using GMV seems odd.

So, the original question stands.

~~~
lenley
Yes - In my view revenue (and probably most accountants would also say this)
is the delivery fee only. If you think about it, most marketplaces have this
same issue. This isn't unique to Instacart, Enron did the same thing...(our
accounting prof used them as an example). It's just not useful for analysis of
the company.

Edit: Most marketplaces can charge you the "full price" to keep the
transaction on the platform; however, they are only paid a small portion of
that transaction as revenue -- e.g. Fiverr/Upwork/etc. don't keep the full
amount the service provider charges their client, only a (hopefully) small
fee.

[https://a16z.com/2015/08/21/16-metrics/](https://a16z.com/2015/08/21/16-metrics/)
#6 Gross Merchandise Value (GMV) vs. Revenue "In marketplace businesses, these
are frequently used interchangeably. But GMV does not equal revenue!" The rest
of A16Z's explanation is worth reading.

------
beautifulfreak
Instacart began delivering in my area recently, and my first order was
yesterday. All went well and I'm pleased. It took me back to a time when I
ruminated start-up ideas. Standing in line at a deli, feeling guilty for
making the deli person have to saw through a very tough salami, I imagined it
was a perfect opportunity for robotics. Now I see it was simpler than that,
just give customers a different way not to wait in line, and remove guilt by
creating an opportunity to give the delivery person a tip. Why don't we tip
deli people anyway? It's awfully physical labor they do, when the slicers are
manually powered, and we as customers have to stand there and watch them.
Sometimes it seems humiliating. I rarely feel as thankful as when I thank the
deli person who hands me my order of cold cuts. But I still think the job
should be roboticized.

------
booblik
Costco claim “free drlivery” online, but the prices are 20% higher than in my
local Costco store.

------
mmgutz
I've gotten pretty good delivery service from Safeway in Seattle. What does
Instacart provide over them?

------
robohamburger
I like instacart but its frontend needs a lot of work. Until amazon fresh
exists where I live it is nice to have around.

~~~
octernion
We actually take a lot of pride in our front end (most recently, to make as
accessible as possible). Can you be more specific?

(Engineer @ Instacart)

~~~
hitekker
There's some scrollbar jank on the homepage; the rendering of the page drops
to just above 50fps rather than the buttery smooth 60 scrolling all the way
down.

It's not going to lose you customers but it's the first thing I tested for.

