Instacart: Banking on the Power of Instant Gratification
How empty is your fridge, and how hungry are you? Could you wait one hour to get groceries? How about three hours? Would tomorrow be good enough?
For Apoorva Mehta, founder and CEO of Instacart, those are more than just hypothetical questions. Mehta is betting that millions of ready-for-dinner urbanites will pay his company $15--plus surcharges on some items--to get groceries in less than an hour.
"Ask any mom with kids, and the last thing she wants to do is bring the kids to the grocery store," says Mehta. "Ask any elderly or visually impaired person about going to the grocery store, and they'll tell you how frustrated they are. If you're a young professional, it's really a pain in the ass. You're working 14-hour days and the last thing you want is not to have good food in the fridge."
Getting it there in an hour, though, is pretty ambitious. Mehta is unfazed by the crash-and-burn sagas of companies such as Webvan and Kozmo.com. "This is the first time in history where a company like Instacart is possible," he says. "To do this 10 or 15 years ago, we would have had to build the communication network and the hardware. Today, we have to build an app and provide that to the shoppers."
Instacart is up and running in eight cities, with plans to launch in nine more by the end of the year. The company, which Mehta says has "tens of millions" in revenue, has raised about $55 million from Andreessen Horowitz, Sequoia Capital, Y Combinator, Khosla Ventures, and Canaan Partners, enabling it to hire 40 employees. About 1,000 people are registered to shop and deliver groceries for the company; they receive two hours of online training from Instacart, and Mehta says the speediest of them--who make multiple deliveries in less than 60 minutes--can make $25 an hour.
For Mehta, the big questions are how many people want Instacart's service and whether his company can be profitable offering it. "Most people are willing to go to the store themselves," says Sucharita Mulpuru, a retail analyst at Forrester Research. "And free shipping is the single biggest successful promotion in e-commerce. People don't like paying for delivery. They would rather wait."
Instacart, which has no inventory, no warehouses, and no salaried drivers, has devised some clever strategies to help the company and its shoppers be hyperefficient. (If your shopping list gets too long, you’ll be offered cheaper two-hour delivery instead.) Its shopper app includes maps of every store it works with, showing the location of each item and plotting out the most efficient path between them. The company has calculated checkout times at each store at various times of the day. (Some stores allow Instacart shoppers to bypass standard checkout lines.)
In locations where parking is a problem, deliveries can be split between a shopper, who buys the merchandise, and a driver, who shows up curbside. Instacart also sets its own prices, which may not be the same as the store's.
All this, says Mehta, adds up to a lean business model earlier Web delivery services couldn't match. "How do you create this amazing experience when you don’t control anything in the background?" asks Mehta. "We have solved that and got it to scale."