As new Uber-for-X companies continue to join the on-demand economy, it seems impossible to stand out. But Instacart has done just that. The on-demand grocery delivery platform has raised nearly $300 million in funding at a valuation of over $2 billion--all in just three years.
As the CEO and founder of Applico, the world’s first Platform Innovation company and a mobile app development firm, I speak daily with platform operators. I recently sat down with Apoorva Mehta, Instacart's CEO and founder to discuss why the company built a dedicated mobile app to assist its in-store grocery shoppers.
Platforms understand that their producers (shoppers in the case of Instacart) are important because they are the ones who create value--without these shoppers Instacart would have nothing to sell to consumers, the same way Uber wouldn't have anything to sell without its drivers. But it’s the extent to which Instacart has worked to perfect its dedicated shopper mobile app that has really allowed its business to grow.
"Our software--and the capabilities we build in to our shopper app--is designed to best help shoppers through every step of the shopping process, so we can optimize accuracy and efficiency," Mehta says.
He isn't just guessing here, nor is his team. "I go shopping weekly to experience it for myself," Mehta says. "And our engineering team regularly spends time in the stores with shoppers to go through the process and verify how the app will be the most effective."
What's perhaps most unbelievable about Instacart's growth is that just three years ago, the company had only one shopper: Mehta.
"When I started Instacart, I began writing code for the first version of the app and, when it was ready, placed the first order. Then, I went to the grocery store, picked up my groceries and delivered them to myself," he recalls. "So, technically, we started with one shopper in the summer of 2012 and have about 7,000 across the nation today."
To improve its shoppers' efficiency, Instacart has implemented several innovative features in its shopper app. One such feature is aisle navigation, which allows shoppers to know exactly where specific items are located within a store. Another feature is a system that allows shoppers to adjust quickly when a specific product isn't available.
"We’ve integrated replacement options into the app--from naming actual products to designating characteristics that would best match the original request. The shoppers can access over 4 million catalog items in real time and add custom replacement items," Mehta explains.
The app also enables this smart shopping with features like in-app chatting that allow shoppers to communicate easily with customers. This way, a customer will know right away if there are any changes or issues and can respond if necessary.
The app even has a few advanced features that let shoppers ensure they're picking the right products. "We’ve integrated barcode scanning technology into the app so that [the shoppers] can immediately verify that the item picked is the exact item requested," Mehta says.
Instacart's emphasis on customer satisfaction is ultimately what led to its decision to onboard all of its in-store shoppers as part-time employees. "By doing this, we can now provide training, supervision and oversight.”
And according to Mehta, building the app hasn't been easy. "There’s no one doing what we're doing--the challenges that we are solving for, and the scale at which we're doing so, have never been done before. As a result, we've had to invent the technology from scratch," he says.
Mehta credits the app's improvement to the team's speed and flexibility. "Our team is really nimble in trying new things and adjusting the way we are currently operating," he says.
Now, Instacart's looking past the app and into the store to further optimize its shoppers' efficiency. It’s currently working on pairing its shopper app with in-store technologies. The company even has its own staging and operating areas in some stores, complete with storage, refrigeration, and printers, as well as a checkout line just for Instacart shoppers.
"These stores were not originally designed with our services in mind, but we've been able to work with retailers to retrofit them to meet our needs," Mehta says.
3 scaling lessons for entrepreneurs:
1. Customer lifetime value isn’t everything. In a two-side marketplace, you must consider producer lifetime value as well. The old adage "The customer's always right" is certainly true, but it doesn't tell the whole story. Producers can be just as important as consumers. Instacart succeeds because it keeps its customers (consumers) happy and makes life easy for its shoppers (producers). Instacart even incorporated a third party into its marketplace: grocery stores benefit by getting more business. In that regard, Instacart succeeds even where Uber does not (just ask the taxi industry).
2. Go back to the basics. As an executive, it's easy to get lost in all the company's operations and forget about the core transactions that make your platform work. Instacart's CEO doesn't let this stop him from using the app and going out to shop. He was even shopper number one--an experience that gave him a lot of insight into what mattered to shoppers, consumers and stores as the business continued to grow.
3. Never be satisfied. With all of Instacart's success and the groundbreaking innovations on the shopper app, it would've been easy for them to be satisfied. But they never stopped improving, and they're continuing to look for ways to streamline the shopping process, both by improving the app and organizing partnerships with retailers. Remember mobile app success isn’t guaranteed, it must be earned! To help, here are a few essential tools for building apps.
Instacart has certainly made a name for itself in the on-demand economy, and though it'll be difficult to catch up to giants Airbnb and Uber, the company is pushing its cart down the right aisle.