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What is Instacart really charging? the breakdown (reddit.com)
90 points by jawngee on March 5, 2017 | hide | past | favorite | 87 comments



Instacart and some of these other apps charge a LOT of money, so they go to pretty great lengths to hide the amount they are actually charging. Instacart is being especially clever by raising the price of the item then charging an additional service fee and delivery fee with, apparently, surge pricing. It also isn't clear how much of any of this goes to the actual person doing the work, so you still need to tip around 20%.

For me, this isn't just about whether it is "worth it" to not have to shop for groceries, but also whether there is a much cheaper option available through either your grocery store or a non-Instacart personal shopper.

It boggles my mind that people are paying this much for the privilege of being able to use an app rather than having to interact a bit more with an actual human being.


Several of my friends have raved about Instacart recently, saying the convenience and time savings are well worth the meager delivery fees. Normally I'm not that into such services. However, I desperately needed groceries yesterday, but I was feeling sick and didn't want to get out of the house. So I decided to give it a try.

I got on the site as a first-time user and entered my zip code. From a list of stores around the area, I pointed it to a grocery store in my neighborhood. Then I started searching for items.

When I saw the prices on the Instacart list, I did a double-take. Turns out there is a margin, and it is at least 20%, if not much more. The reason I noticed this is because I shop at that store every week and am very familiar with the prices of the items I was browsing. Keep in mind I was browsing around 11 am, with a delivery window of 2-3pm, so it wasn't (or shouldn't have been) subject to surge pricing either.

And like you say, the exact margin is hidden, and even the fact that they do have a margin isn't explicitly stated anywhere that I could see. So if I wasn't familiar with the prices at that specific store, I may have just gone with it.

This lack of transparency (and in fact I can go one step further and claim it is purposeful obfuscation) immediately eliminated all my trust in Instacart. I closed the window without completing my order. I have since received three emails from them (in 24 hours) reminding me that I have an incomplete order. Suffice it to say, I have no intention of logging back in, ever.


> Turns out there is a margin, and it is at least 20%, if not much more.

This is not true. In some stores Instacart offers the same as in-store prices, other it does not.

The same is true of anything one buys on Amazon. Low-cost items that ship with Prime shipping are usually marked up a bit, but I order from Amazon (and Instacart) in spite of this because of the convenience offered.

You can pick a basket of goods in Instacart where the percentage is high, but there are many other baskets where the percentage is low.


Maybe it is based on store. I don't know - and that's the problem. Like I said, Instacart (as far as I could tell at a glance) doesn't make the information easily available. That's the problem.

I did some casual searching and discovered that they supposedly have page (https://www.instacart.com/store/prices) where they list their markups per store, but it doesn't work for me.


Why is this such a big deal? It's not like safeway tells you what markup they are charging.


It's not just apps. Amazon is making it really easy to purchase on a whim via Echo or subscription to staple items. They even offer a 20% discount if you subscribe to a minimum number of items.

However if you actually go and price this stuff out, it's often 30-50% cheaper at Walmart or Target. I get the convenience factor, but it really adds up when you're talking about daily necessities.


The Amazon pricing makes sense though, because Amazon is paying the cost of shipping it to your door rather than you paying the cost of time, money, and gasoline to go fetch it at a store and bring it back. Amazon's model is at least price-transparent.


Well, to be fair, I think both models make perfect sense. But I don't think Amazon is necessarily more transparent. In case it wasn't clear, I was talking about list prices, not including shipping.

In either case, you have to go seek out the on-premise retail prices, and in fact this is no different than traditional price comparison shopping whereby you learn that different stores have different loss leaders to get people in the door, and if you really want to get the cheapest price you have to shop a lot of different places. I'm not sure whether Amazon's model of centralized distribution with direct delivery has greater economies of scale then the big box store model, but I'm worried people are blinded by Amazon's convenience and don't realize how often the prices are really quite bad.


Isn't that what Instacart is doing I.e bringing it to your door the same day, which I presume is much more costly?


Yes. Not sure why people don't see this.


but shipping is an additional charge - YOU are paying to have it shipped to your door, not amazon.


There is no shipping charge for Amazon Subscribe & Save items (the subscriptions with discounts he referred to). You don't need a Prime membership either.

https://www.amazon.com/Subscribe-Save/b?ie=UTF8&node=5856181...


From my experience, there are plenty of stores on instacart that are same price as store and they are transparent about it. Why not shop there? This seems like a store which they mark up.


> there are plenty of stores on instacart that are same price as store and they are transparent about it

What stores do they not mark up and how do you know that? What do you mean when you say they're transparent - that they tell you there's no markup?


I've never used Instacart but it seems to be a weird thing to outrage over, when apparently you are told the final payment upfront, and you know you are ordering from a premium service that is fundamentally a luxury offering. And I'd expect most people to have some basic ballpark idea of how much everyday groceries cost.

Does this person also expect businesses to disclose their profit margins before he's comfortable doing business with them? Ever bought a bottle of water at a stadium? We're looking at several 100 percents of markup there.


While some people do get outraged by high margins, the main issue I see here is that they do pretend to publish their markup, but it's widely out of whack with reality. 63% may technically fit into "15%+", but it's highly misleading. They should just remove it.


Exactly. It is like saying this item only cost a few dollars. When in reality it is a $100,000. I didn't lie but it is surely misleading.


Wow.


It might be misleading to you but to them its increased revenue.


I have no idea how you think "15%+" is misleading. You can't simply ignore the + sign to make your case. That says the markup STARTS AT 15% and goes up from there. Also, the markup on store items wasn't 63%. That was after additional fees, tax, tip, etc. The markup was 42.8%.


I didn't ignore the plus sign, that's why I called it misleading and not outright fraud. There's an expectation that when a number is quoted, that the value is somewhere in its ballpark, otherwise it'd be completely meaningless: they say "it may be 15%+", which if you read it as a pure logical statement, it can literally be any amount. It's only meaningful because of that common expectation, which they are exploiting.

Fair enough regarding the 42% vs 63%, though.


I think it's just the degree. Instead of saying we charge 10% on gross plus a delivery fee of $x based on demand, they add margin to everything and double charge (service fee vs tip) for things people are unsure about. On the other hand, it is indeed a luxury service and people are free not to use it. The market will correct it if it needs correcting.

In the UK, this would never fly as pretty much every supermarket has home delivery with identical online v in store pricing + delivery fee. It's much more honest.


I think the convenience/laziness economy has an effect on younger people who have never lived as adults without it. They don't develop the same basic knowledge of the inherent/ideal cost of groceries or the ability to measure the total cost over time of car ownership vs. perpetual taxi service. I have friends who call an Uber even though our company buys us monthly public transportation passes. In a city with a good system.

Meanwhile I partition my everyday purchases among grocery stores, CVS, and Target based on a detailed knowledge of which product categories are inherently cheapest in each and which are currently or regularly go on sale at each and how aggressively. For someone with a six-figure salary I probably micro-manage it more than I need to. But I look at Instacart and Uber prices and just laugh.


> Does this person also expect businesses to disclose their profit margins before he's comfortable doing business with them?

Is that really such an unreasonable demand?


> Is that really such an unreasonable demand?

Yes. That's how price controls and messed up economies start out.

Sometimes profit margins are highly misleading. For instance, the profit margins for software development are extremely high if you calculate them a certain way. ("You're only paying how much for capital and electricity and you're charging me how much?")

The main thing is what value the business brings you. They can charge whatever they want. As long as you value their service/goods more than what they're charging you, who cares how much it costs them?


Do you expect a restaurant to give you the ingredient cost and labour cost of your meal on your bill, so you can tell how much the privilege of having somebody cook for you was?


I've thought of that before, and think it would be really great to know. I love to know which restaurant is simply reheating Sysco pre-prepared foods, and which ones are spending extra on organic free trade ingredients. If the food tastes delicious but the chef is underpaid because they're buying more expensive ingredients relative to the less tasty restaurant which buys cheaper ingredients with a larger markup.

Though; I've also considered how a reverse BlueApron service might work - you bring ingredients to a chef and kitchen, who then cooks the food for you. My cooking ability, limited to the occasional meal prepared after work is nothing compared to a master chef who's gone to school and practiced their art for every day for years as a job, and I'd gladly pay to see a master at work. (I doubt that particular niche is big enough to sustain a business though because, well, restaurants exist.)


> reverse BlueApron service

Like a cooking class, but without any lab work?


Why do you care what the profit margin is? Either the product or service is worth more to you than the money that they're charging, or it isn't.


>>Why do you care what the profit margin is?

Because not knowing it creates an information asymmetry and makes it more difficult to make a rational decision about whether to pay for the product or service, or look/wait for alternatives.

It's not just about what the product or service is worth to me. It's also about a sense of fairness. I'm OK with a 20% markup on bottles of water at ball games. I'm not OK with a 200% markup, because even if I'm really thirsty, on principle I don't want to pay several times more for it than I otherwise would. So if I knew the exact margin, I can make an intelligent decision between paying for it then, or waiting X hours for the game to end so I can drink the water I have in the car.


I find that attitude a bit strange. Carried to its logical conclusion, you wouldn't want to buy a used car from someone if they received it for free, regardless of how much they're charging vs. market rates.

It makes sense to compare a product offering with other offerings on the market, but it doesn't make sense to me to care about the profit margin. What if one firm can offer a product cheaper than all equivalent competing products, but with a much higher profit margin?


The point I'm making is that a buying decision depends on much more than just the price you're paying. All kinds of information go into people's decision-making process. For instance, if you knew that the duck-fur coat (or whatever, I don't know if that's a real thing) you are about to buy was made by torturing ducks, you would be less likely to buy it, even if the price, by itself, was reasonable. This is why a lot of companies that sell animal products go to great lengths to keep such information from consumers: because the resulting information asymmetry benefits them.

The idea that at the end of the day the product/service is either worth it to you at X price or it isn't is simply wrong.


I suppose you have a point: if I thought earning profit (or a certain level of profit) was immoral, then I would want to know the profit margin before I made a purchase. I personally don't hold that moral belief, but undoubtedly some people do.


> Carried to its logical conclusion, you wouldn't want to buy a used car from someone if they received it for free, regardless of how much they're charging vs. market rates.

Great point. These objections to Instacart are not just bizarrely irrational, they are at odds with how the service economy works.


> makes it more difficult to make a rational decision

Your arguments are the opposite of rational though - and I'm not insulting you, I mean in the economic meaning of a rational person that just considers the cost and the benefit. Your arguments are irrational and emotional.

But I think you have a better argument that you haven't made clear - the markup gives you information in that if the markup is high then it is more likely that someone else is willing to sell to you for less if they can tolerate a lower margin. If a margin is very low then that's less likely, as there's nowhere to go.


Many comments saying something to the effect of "$140 for $80 worth of groceries? Robbery!"

What's $80 worth of groceries? It's what you're willing to pay $80 for. The grocery store is marking up the food from their suppliers, is that a rip off? Grocery stores in urban areas charge more than in rural areas, rip off? When there's only 1 small store in an area (food deserts) they charge 10-30% more - an outrage?

This is great information to have and a benefit to consumers that they know the difference, but if Instacart gives you a price and you pay it then that's a fair price by definition. It's not an outrage in any way.


The outrage is that they are intentionally obfuscating the cost of using their service. It's not unreasonable at all to want to know how much more using their service costs than if I were to go shopping myself; that's how I can do the cost evaluation of whether it's worth it for me to spend that extra money to save me the time of a shopping trip.

Information is critical for driving free markets. Instacart is pulling some sleazy shenanigans, sending them down a path pretty similar to where Uber has ended up. I don't make it a habit of patronizing businesses that use deceptive pricing practices to try to rip me off.


The price of their service was $140 for the groceries the customer selected. Hard stop. The grocery store doesn't tell you what the underlying cost of their food was, nobody does that. It's not a requirement.

Now it could be something consumers DEMAND which would give a competitor an advantage if they did it (see Everlane with their transparent pricing) but it's not unethical or sleazy not to disclose the underlying costs of your goods.


It seems unethical for a company to tell you "our markup for this grocery store is 15%+" when in reality it was ~50%.


Is it unethical for stores to advertise "savings up to 50%" and have most items not be on sale for 50%?


The difference here is that shoppers in that store can see the final price and actual savings before purchasing. Can you do the same with Instacart?


> Can you do the same with Instacart?

Instacart shows you the final price. The price they paid for the goods is immaterial - you're choosing the convenience of not having to write your own delivery app, recruiting employees, or set up payment.

When you walk into a book store, do you demand to see the book price broken down into manufacturer's price, store rent, employee pay, and store profit and complain when the difference between the manufacturer's price and the retail price is too high?


That I agree with.


No, not hard stop. If understanding the cost of a service/product is expected (via getting an itemized receipt), and the cost of service is separated from the product (as is done via delivery fee, service fee, etc) then it is unethical to build in markup on the product itself.

It's the same reason I think mechanics are shitty when they charge 50%+ markup on parts for auto repair. I'm paying you for the service - the right thing to do is to show the cost of the service separate from the market price of the product.

Alcohol/food at a restaurant is different - it is clear and known that service and product are interwoven in the list price.


There are plenty of same as store price grocers on instacart. Why not shop there?


> It's not unreasonable at all to want to know how much more using their service costs than if I were to go shopping myself

They're not intentionally obfuscating anything. You know how much your bill will be before you order. What it costs them is immaterial.

Would you expect a clothing store to tell you what their individual per-unit cost is for clothes you're buying, and to tell you how much money they're charging you for opening a storefront and negotiating with the manufacturer?


$160 for $80 worth of groceries is insane. $160 for $80 worth of groceries that you claim is worth $130 is fraud.


If you rely on a lot of service companies like Uber & Instacart, appified dry-cleaning and maid service then it may actually be cheaper for you to hire someone for 8 hours a day to do your chores.

This guy ended up paying $70 for a single grocery trip, do that and take Uber twice a day, and you're verging on "I can hire personal staff" territory.


> it may actually be cheaper for you to hire someone for 8 hours a day to do your chores.

Whatever math calculation one does, it has to factor in the hassle of becoming an "employer" which is a complication that most consumers don't want. E.g. If you pay someone more than $36 a week[1], a law-abiding tax payer would have to file a W2 to the IRS reporting the income. (Yes yes, most parents don't actually file W2 for their neighborhood babysitter but that's technically "tax evasion".)

You can legally circumvent the W2/employer relationship by using an agency and that staffing firm becomes the "employer of record." However, there's no such thing as a free lunch and that agency has its own 50% to 100% markup on the personal assistant's hourly rate. This gets right back into Instacart pricing territory or even exceeds it.

Without any survey data, I'm guessing that there's a huge market of customers willing to pay Instacart profit margins instead of becoming an "a W2 employer" or paying 3rd-party agency.

[1] http://www.usatoday.com/story/money/personalfinance/2013/04/...


As an employer, W2 forms aren't terrible hard to fill out and I don't know why everyone seems so scared of them.

People have had this viewpoint that filing taxes is 'hard', but recent improvements have made it 100% electronic and really cut down on the effort needed to compile it legally.

And then of course, no one would pay a babysitter a W2. You'd count them as a 1099, but not need to file till they made more than 10,000 a year.

What's more interesting is having an actual employee though who can do nannying, picking up dry cleaning, and all of the other personal chores you just put off or have apps do. They're your personal assistant, and honestly if filing taxes is a hassle for you, you can have them fill out the forms because what else are assistants for?


>As an employer, W2 forms aren't terrible hard to fill out

You're taking my example too literally. The "W2 filing" is shorthand for all the extra legal complications such as withholding taxes, paying employer's portion of Social Security, Medicare, and any state mandated payments such as worker's comp, etc. All of that is a big leap of complexity compared to just pushing a few buttons on an iPhone and getting a service-on-demand.

>And then of course, no one would pay a babysitter a W2. You'd count them as a 1099,

Unless the IRS (or even the babysitter) wants to reclassify the relationship as W2 instead of 1099.[1] Now the consumer owes back taxes (and possibly penalties) which is more complicated (and more expensive) than using a phone app.

>What's more interesting is having an actual employee

Sure but probably 95%+ of consumers who want to periodically use Instacart / Uber / Blue Apron / etc do not want jump to the next level of complexity with an actual employer+employee relationship. The threshold for inflicting that bureaucracy on oneself is high. Lastly, the extra employee taxes a consumer would have to pay makes the W2 relationship more expensive than a naive calculation would suggest.

[1] https://www.nytimes.com/2015/03/14/your-money/contract-worke...


Well technically, thats what they are doing already in your example, just on an ad hoc basis, rather than full time. Which I concede, is likely a better deal for many people. Hrmm, where does one hire this type of pa?


Networking. I simply asked around with my friends, and someone was found who needed steady work.


Initial post removed, here's the imgur link to the receipt that was accidentally left in the bag and screenshots of the instacart list.

https://imgur.com/a/r6KGn


Hi there, I'm one of the mods on /r/boston. I've fixed it.


And the text of the original post:

http://pastebin.com/raw/9K9jP016

Edited - because of the wall of text I've linked to a pastebin of the original text


Highway robbery


wellll, I'd wondered how instacart worked, when my nearby nice grocery store got bought by safeway. Originally I thought it was just the delivery fee, and I felt like the delivery people couldn't possibly be getting a living wage out of the work.

Here at least I can see that instacart gets enough revenue to probably be sustainable and pay someone a reasonable wage for doing the actual work of going to the grocery store on my behalf.

That said, I've just been finding great small grocery markets in the outer sunset to shop at. I'm lucky to live in a place where I can walk to a number of excellent small markets, so I just do that instead of paying for grocery delivery.


I'd love to hear about some great small groceries in the outer sunset. Please share!


Assuming you mean the Outer Sunset of San Francisco:

Noriega Produce Mart (gus's, but I love that it's NPM) has almost everything I need, except the meat / fish selection is pretty low. Noriega and 43rd(ish).

Other Avenues (judah and 41st-ish) is a worker-owned cooperative. They don't carry meat at all, but they have a great bulk food selection.

Both have excellent produce selections and a surprising amount of useful dry goods - with the exception of meat / fish, the only real pull to Andronico's was the parking lot.

I went to Guerra Quality Meats for the first time last weekend, and it was pretty great as a butcher, and had some fish selection. They're at taraval and 15th. I'm considering going back to marin sun farms for their CSA meat boxes. There's also a fish seller going in at irving and 42nd (or so) where the old cajun restaurant was. That's a long-term thing, though, since it's been "coming soon" for a while.

There's a couple great Asian markets up on irving - sunset super at 25th and irving is really great, although a tad overwhelming at times. They've got a lot of meat and fish.

No grocery store in the area is as cheap as going to safeway and shopping frugally (or quite as satisfying as Berkeley Bowl, but since I don't go to the east bay often anymore, it's hard to justify a really long drive to the grocery store), but these places sell high-quality organic food and other good brands of dry goods (I can get both king arthur and antimo caputo flours for my breads and pizzas, respectively, at NPM) and are local stores rather than chains, so I'm willing to pay the premium to support them.


How is this robbery exactly? They're not holding a gun to your head and making you use the service, and the price is disclosed up front.


When buying commodity items like most produce but in particular packaged goods, there's still an unsolved problem of "how much should I be paying for this?" and oftentimes I see even unit prices which are straight up miscalculated.

The problem seems compounded when shopping for this stuff online, when each individual item is so cheap, it takes too many clicks to realize how badly you are being ripped off.

I find even when grocery shopping online through a store's own site the prices are inflated over in-store. It compounds the anxiety over someone else picking low quality/old stock to the point where I won't grocery shop online as much as would really like to optimize the process.

I also find the menu system and scrolling lists of items an incredibly frustrating way to pick out the right gallon of milk.

I think the underlying fact is that it's extremely expensive for Instacart to provide their service.

I think an automated / lights out grocery store where you order through an app and drive by on the way home to pickup the food would be an order of magnitude more efficient. But you have to build the warehouse (like Amazon does) to allow robots to fill the order.

If you're paying for the overhead of food to be stocked on shelves nicely enough for picky customers to look at it, and then only after that point are you filling an online order, that's hugely wasteful.


It depends a lot on how many online orders you are filling.

In a lot of areas there wouldn't be the population density to support a pickup only location, but it's easy for an existing store to implement pickup and delivery services. A locally owned store here has done it using Rosie: https://www.rosieapp.com/


Eventually the only option will be pickup only. It's the simple evolution of removing as much of the (human) cost as possible.

Of course it seems crazy to make the claim today that people won't o inside a store to pick their own groceries. About as crazy at it will seem to people then, that we used to do exactly that.


Breaking news: business charges margin above cost of goods to support employees and make profit.

We don't ask Walmart to disclose the prices it pays to its suppliers. Why care about Instacart's suppliers?


I think the reason why people are outraged is because Instacart already has a service and delivery fee. You would assume that the fees is where they're making the money.

In grocery stores, etc. there isn't a service fee, so it's expected that the prices are marked up. In Instacart, there is already a service fee, but the prices are also marked up.


$150 for $80 worth of groceries, wow.


Another way to look at it is that it is $150 of groceries.

I'm sure not going to be using a service with such a high mark up, but I can see how someone with a high income might be willing to spend extra for the convenience.


This may be a confusing thing, I suspect Instacart may get volume discount from stores for bringing the extra business.

So this markup may be based on discounted cost instacart pays, not necessarily what YOU would pay at the store.

Still think it's a crazy premium, but I enjoy grocery shopping.


Can you explain further? Because this makes no sense on its face. If they get a discount on what the grocery store charges, then the final price after their markup should be closer to the store's price, not further.


His insinuation is that the "Instacart receipt" that the customer received is the discounted one that reflects the bulk discount. If an individual went to the store and got the same list of items, it would be more expensive, so the markup wasn't $140 - $80 but more like $140 - $100.

I have no idea if that's true or not..


> So this markup may be based on discounted cost instacart pays, not necessarily what YOU would pay at the store.

Doesn't that just make things even worse?


Do people really expect corporations to be ethical and not make the most money possible given the circumstances? It sounds like many people expect to leave corporations to their own whims while at the same time expecting them to be fair, self-correcting, and a benefit to society. Sounds pretty delusional to me. That's like sitting each day staring at the computer for years on end and expecting a finished program to emerge while having done nothing. Maybe that's why this business model is exactly the same as that of supermarkets that offer delivery direct to consumers (in the US), down the opaque pricing.


I used to shop on instacart but the lack of transparency made me switch back to going-to-the-store shopping. Started using prime now for about 2 months and love how much more transparent it is about its costs. They charge the same as the store and add a default $5 tip as suggested tip. Wish instacart would get their shit together. Delivery business is a growing market and would love to have multiple great providers. Also feel for instacart since it was so much early to the game than all of its current competitors.


I just used Amazon Prime Now for the first time. As a long time Instacart user in the main target demographic, I just don't see how they can compete. The delivery fees are already rolled into my existing Prime account. On top of that most prices are actually lower than the stores, rather than marked up.

The issue all comes down to scale. Automated robot warehouses and delivery vans are far more efficient than individual drivers searching through grocery stores.


The main problem is that Amazon Prime Now isn't available everywhere


I wonder how transparent they have to be legally, and who decides that. Saying your fees are 10%+ and having it be 60% seems highly misleading. Then again I saw a TV commercial that advertised free shipping and handling for a fee. I guess if no one notices and no one can force them to be reasonable, you can do just about anything.


I do wonder which People are too busy to shop but won't pay 50 USD per hour for the shopping premium?


There are plenty of people for whom $50 is a pretty good deal to save an hour of time. Whether that will scale is another question entirely.


Wow, I knew there would be a markup but that is way more than I expected.


When i worked in UAE (United Arab Emirates) grocery delivery was like magic: you can just call any grocery shop to bring food to your flat and they bring it to you in a few minutes. Delivery was performed by cashier - he just take required items and bring in in a bag to you. So simple, so cost-effective and so useful. I wonder if anyone is done something like this at scale?


Does Instacart ramp it over time? I've only used it once and there was no markup at all.


My housekeeper here in Thailand costs about $290 a month and fetches groceries for my household daily, so this makes me feel quite lucky.


is this markup present for items advertised as same in store prices?


Come on dude, can't you add the 43% on the title ? Why do you have to make it clickbait?


I make it 63%, including the "service fee" and delivery fee but not the taxes or tip.


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