Amazon is gunning for Instacart’s grocery delivery business. Here’s why
The Save Mart Companies has launched two-hour grocery delivery in California’s Central Valley in partnership with Amazon.
It is initially offering the service at stores under its Save Mart banner in Lathrop and Ceres, California, and has plans to make it available at additional locations in the region.
This is one of those small stories that have big implications, according to Brittain Ladd, a supply chain consultant and former Amazon exec.
He notes that Amazon also provides delivery service to Bristol Farms, a 14 store grocery chain in California, as well as to pharmacy chain Bartell Drugs and pet products seller All The Best, both of which serve the Seattle area.
In a LinkedIn post, Ladd said: “What makes this announcement so interesting is that SaveMart also uses Instacart to make deliveries. The announcement also clearly indicates that Amazon is testing delivery for other retailers. Translation: it has every intention of going after Instacart’s grocery delivery business.”
He added: “I’m not surprised by the announcement as I have stated in prior posts that I believe one of the easiest ways for Amazon to grow their grocery business, is by fulfilling and/or delivering online grocery orders for other retailers at a fraction of the cost retailers are paying Instacart and other delivery providers.”
“By itself, the announcement seems harmless to Instacart. However, when combined with the fact that DoorDash is accelerating its growth in online grocery delivery, and Instacart’s value plummeted from $39 billion to $13 billion in less than one year, Instacart is under tremendous pressure.”
“Note: The lower Instacart’s valuation becomes, the more likely it becomes an acquisition target.”
Instacart has options, Ladd believes. For example, it could buy a company to complement the acquisition of Rosie, Mercatus Technologies or stor.ai.
It can give grocers access to the platforms for minimal costs, and also access to its other technology.
Ladd commented: “An interesting option for Instacart consider is investing in a partnership with Super Duper, led by CEO Avi Lifshitz. Super Duper is arguably the most transformative grocery retailer in the world due to its in-store robotics and tech-empowered consumer model.”
A partnership with Attabotics to open automated micro-fulfilment centres to fulfil online and curbside pickup orders should also be explored. There is tremendous potential for this model for grocery and other retailers, Ladd argued.
He continued: “I encourage Instacart to assess an acquisition of Grubhub. A combined Instacart Grubhub offers consumers some very exciting possibilities.”
“I encourage Instacart to go big into advertising and I’m sure they’re planning on doing so.”
He concluded: “Finally, I’ve always believed that the company can be bigger than dunnhumby and 84.51˚combined when it comes to leveraging shopper data to provide analysis to the CPG industry and grocery retail customers. The opportunity is massive. Good luck, Instacart.”
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