Instacart Finds Grocery Success Beyond Whole Foods

Sr. Director, Client Insights and Account Management

Online grocery sales in the U.S. soared 50% to $12.5 billion last year as consumers at long last shift their everyday shopping to ecommerce.  One of the primary drivers of this growth has been Instacart and its army of do-it-for-you shoppers which have made online grocery shopping accessible to almost everyone by way of partnerships with hundreds of supermarket brands across the country.

Instacart has been successful despite being surprisingly low-tech.  The company acts as an intermediary between grocery stores and shoppers, managing orders and fulfillment by way of an Uber-like network of human hands navigating store aisles, filling shopping carts and delivering groceries to homes.  It’s clear the service is resonating with consumers as its availability grows across the country.  Over the past three years Instacart’s share of online grocery sales has jumped from 6.6% in 2016 to 14.5% in 2019, ranking it behind only Walmart and Amazon in the category.

Much of Instacart’s growth has been fueled by its partnership with Whole Foods.  In 2016, for example, Whole Foods accounted for 42% of Instacart’s orders.  Partnering with a Whole Foods allowed Instacart to appeal to an affluent, vocal and time-strapped consumer base to disrupt the generations old way consumers shop for groceries.  For Whole Foods, which lacked both a web presence and a home delivery infrastructure, Instacart’s arrival must have been a godsend. 

As a rival to Amazon’s own grocery ambitions, Instacart was squarely in Amazon’s sights when the ecommerce giant acquired Whole Foods for $13 billion in 2017.  After the merger, Whole Food’s Instacart partnership was destined to end and over the past couple of years it has been slowly winding down.  While Whole Foods remained Instacart’s top grocery partner last year, accounting for 16% of orders, it’s share dropped to just 7.1% this year before orders ceased over the summer.

Despite losing its biggest grocery partner, Instacart has not only survived but has flourished.  Over the past three years, sales made through Instacart have grown an average of 108% per year (double that of both Amazon and online grocery in general) as the service expands and as consumers shift more of their grocery spending to digital.

Instacart has sustained its sales momentum, in part, by successfully diversifying its merchant mix beyond Whole Foods by way of new partnerships and the expansion of existing ones.  So far this year Instacart’s top seven merchants account for half of its orders, compared to just two merchants contributing an equal share in 2016. 

Top among these merchants is now Publix with 13.9% year-to-date.  Kroger, the nation’s largest supermarket chain, accounts for 6.4% of Instacart orders as it separately seeks to build greater consumer adoption of its drive-up, click and collect service.  Sprouts and Aldi, despite being relative newcomers to Instacart, together now generate over 10% of Instacart’s orders.  And Costco has seen its own ecommerce fortunes rise alongside Instacart’s as its order share has remained relatively consistent throughout these years of expansion.

Beyond organic expansion, Instacart has also succeeded in getting customers to expand the number of items they purchase and the frequency with which they place orders.  This year, 44% of Instacart orders have included more than 15 items, compared to just 38% in 2016.  Purchase frequency has risen 22% over the past year and Instacart shoppers now place an average of 4.3 orders per quarter, or about one every three weeks.

While Instacart may not appeal to everyone considering ordering their groceries online, it’s clear the service has resonated among a growing number of consumers eager to save time and purchase their groceries from a local grocer they know and trust.  Rather than wilt under increased competition from Walmart and Amazon and the loss of Whole Foods, Instacart has aggressively expanded and appears well positioned to maintain its leadership as consumers embrace online grocery shopping in ever-increasing numbers.

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