InstaCart’s IPO and the Fight for Grocery Delivery Dominance
Grocery delivery and pick-up service Instacart’s IPO is one of the most highly anticipated for 2022. After reportedly postponing its public markets debut last year to accelerate some of its services for grocery retailers, the San Francisco-based company’s valuation has doubled twice since the pandemic and reached $39 billion in its last financing round in 2021.
Instacart’s skyrocketing valuation underscores the opportunities in the online grocery shopping and delivery business – which has similarly boomed since the onset of the coronavirus. And that growth is expected to continue. According to “The Evolution of the Grocery Customer,” a report by grocery e-commerce specialist Mercatus and research firm Incisiv, online grocery will swell to 21.5% of total U.S. grocery sales by 2025, more than doubling its current share of the overall grocery market. By 2025, online grocery’s dollar share stands to climb to $250.26 billion of the estimated $1.16 trillion overall grocery market.
Understandably, there is no shortage of competitors looking to dominate such a massive market. Here are a few publicly traded companies duking it out for market share.
Digital food ordering and food delivery service provider DoorDash, Inc. (Tii:DASH) is leveraging its platform to include grocery deliveries. Last month the company introduced ultra-fast grocery deliveries in 10-15 minutes. DoorDash is testing the service at a DashMart location in New York City before rolling it out in other areas. The company introduced DashMart in 2020 as a virtual, one-stop-shop store for customers in need of a variety of essential items on-demand. The e-delivery service is also expanding via acquisition with the buyout of Wolt Enterprises, a Finnish food and merchandise delivery platform DoorDash acquired for 7 billion euro.
Online ridesharing platform Uber Technologies, Inc. (Tii:UBER) expanded its on-demand and scheduled grocery delivery service last summer to customers in over 400 cities and towns across the U.S. as part of a 1,200-store partnership with the Albertsons Companies, Inc. (Tii:ACI). Albertsons Companies, including banners Albertsons, Safeway, Jewel-Osco, ACME, Tom Thumb, Randalls and more, joined regional leaders like Southeastern Grocers and New York’s Red Apple Group on the Uber platform. Uber, which already offers grocery delivery in certain Latin American markets, announced rapid grocery partnerships in France, Sydney, and Melbourne, Australia. Additionally, Uber is testing out a similar service in Taiwan.
Not to be outdone, Walmart Inc. (Tii:WMT), the world’s largest company by revenue, introduced Walmart+ in 2020. The membership program offers unlimited free delivery from stores, among other perks, for $98 a year or $12.95 a month. The retail giant also offers a try-before-you-buy 15-day free trial. The move makes sense for a retailer that has invested heavily in technology and marketing to boost e-commerce sales to compete with its younger, digital-first rivals. Positive news for the Bentonville, AR-based company: Walmart U.S. eCommerce sales grew 8% for its third quarter ended Oct. 31, 2021.
Since acquiring Whole Foods for $13.7 billion more than four years ago, e-commerce giant Amazon.com Inc. (Tii:AMZN) has been testing the grocery delivery waters. What started as a beta rollout of Amazon Fresh Pickup, a drive-in-type grocery store for Amazon Prime subscribers, has grown to include full-size grocery stores offering same-day delivery and pick-up. Since that launch, Amazon has opened nearly two dozen such locations. The e-commerce platform is reportedly set to significantly ramp up investments in the grocery-delivery market to compete directly with the likes of InstaCart.
As one of the world’s largest food retailers, it’s unsurprising that The Kroger Co. (Tii:KR) would also commit to the grocery delivery business. In fact, Rodney McMullen, Kroger’s chairman and CEO, announced goals to double both digital sales and its profitability rate by the end of 2023, claiming Kroger Delivery will help the company reach that target. To that end, Kroger has dramatically expanded its delivery capabilities by increasing its number of fulfillment centers in the Northeast, California and Florida. Developed by leveraging technology by Ocado Group, a UK-based technology company, the fulfillment centers combine artificial intelligence, advanced robotics and automation, and creative solutions to create more seamless and efficient fulfillment, picking and delivery capabilities.
While the pandemic may have dramatically accelerated the demand for grocery delivery, it was always there. Technological advancements have made it possible for companies to provide these services at scale and do so profitably. And that guarantees the industry will be thriving long after the pandemic is no more than a bad memory.