San Francisco-based retail delivery service Instacart launched in Connecticut on May 18, with initial plans to serve some 300,000 residents and provide about 100 jobs.
Partnering with such retail giants as Whole Foods Market, Costco, BJ’s, Petco, PriceRite and Fairway Market, Instacart offers same-day deliveries in as little as one hour or allows users to schedule a delivery time of their choice. The company’s delivery coverage area includes Bridgeport, Stamford, Norwalk, Westport, Fairfield, Shelton, Trumbull, Wilton, Darien, Greenwich and, in Westchester County, Port Chester.
“We work closely with our retail partners to help understand where they see a demand for our service,” said Nick Friedrich, Instacart general manager. “We also undertake a variety of analyses on a particular region, how densely populated it is and if it would be open to the kind of service we offer.”
Instacart also tracks how many prospective customers enter their ZIP codes on its website to find nearby locations to measure demand, he said.
To use Instacart, customers go to Instacart.com or open the Instacart mobile app on their iPhone or Android device, select their city or store, add items to a virtual cart, then choose a delivery window — within one hour, within two hours, or up to seven days in advance — and check out.
Orders must be at least $35, with free delivery on the first order; after that the cost is $3.99 for two-hour delivery and $5.99 for one-hour delivery. Customers can also opt for an Instacart Express membership, which offers free delivery on two-hour and scheduled grocery deliveries for $149 a year after a free two-week trial.
Friedrich said that Instacart also has relationships with “hundreds of small groceries” nationwide, but information on such Fairfield County-based outlets was not immediately available.
The company usually integrates with stores’ existing e-commerce and delivery mechanisms; Whole Foods and like retailers compensate Instacart for the deliveries and traffic it generates. Should an ordered item not be available or the delivered product be damaged or spoiled, Instacart takes responsibility for finding a suitable replacement or refunding the purchase price.
Customers can list acceptable replacements when placing their orders and are contacted via text or email if the shopper has questions while in the store.
The new expansion includes openings in some 45 markets, including the Chicago, Dallas, Houston, Baltimore and Indianapolis areas. It is being powered by the company’s $400 million Series D round of funding at a valuation of $3.4 billion. Instacart plans to make its service available to 80 percent of U.S. households by 2018; Friedrich said it currently is available to about 30 percent.
Last year, the company authorized the sale of new equity that allowed Whole Foods to buy shares in Instacart in conjunction with an expanded partnership, with the total equity authorization reportedly totaling about $36 million.
Grocery delivery services such as Instacart have had something of a rocky go of it to date. In early May, a Wells Fargo report on online delivery services said the grocery category represents just 1 to 2 percent of total grocery spending, indicating that most consumers are still reluctant to shop for such items online.
The most notable flop in the area was Webvan, which raised $800 million and went public during the dot-com boom of the 2000s before eventually going bankrupt in 2001, ultimately being folded into Amazon.com. With that in mind, earlier this month Instacart co-founder Max Mullen said the company has no plans to go public.
Amazon’s online grocery service Amazon Fresh has been compared unfavorably to Instacart in some quarters, with The Motley Fool recently maintaining that the San Franciscan firm is “quickly surpassing Amazon Fresh as the most important online grocery service.”
Instacart’s most similar competitor, Shipt, based in Birmingham, Alabama, said it delivers groceries to 40 markets across the country, charging an annual $99 membership fee. It does not offer delivery in the Connecticut and New York region.
Friedrich said that Instacart, which expects to be in up to 100 markets by year’s end, distinguishes itself from its competitors by the speed of its deliveries — although Shipt also promises delivery within one hour — and its ongoing efforts to build customer relationships.
“We’re all about engaging with our shoppers to build a great experience for our customers,” he said. “I would argue that the others don’t do what we do at the same level.”