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Amazon And Instacart, Facing The Heat, Want To Rule Your Kitchen

The consumer giant and the innovative upstart are fighting to win the fastest-growing e-commerce market.

Amazon And Instacart, Facing The Heat, Want To Rule Your Kitchen
[Illustration: MUTI]

As much as e-commerce has impacted consumer shopping, the last frontier is arguably the largest: the $638 billion market for groceries and “convenience” goods. This is the stuff that’s hardest to deliver cheaply, quickly, and to people’s satisfaction.

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Not surprisingly, Amazon very much wants to succeed in usurping traditional grocers and big-box stores, and it has launched a number of services to enter this market. AmazonFresh offers supermarket staples, including perishables and goods from local merchants, in New York, Los Angeles, and Seattle, while Prime Now sells a mix of grocery staples and popular Amazon goods for two-hour delivery to Prime members. Its rival, Instacart, was founded by a former Amazon employee, and rather than build its own infrastructure from scratch, it works with established stores such as Costco, Kroger, and Whole Foods to let people in 16 metropolitan areas—mostly millennials, office workers, and senior citizens—order the products they want via web or app from stores they trust without the hassle of thick crowds and getting everything home (often without a car).

Instacart has grown quickly (it launched only in 2012), generating more than $100 million in 2014 revenue, and has wooed investors to the tune of a $2 billion valuation precisely because it has positioned itself as a partner to the grocery powers that be. Instacart is the stores’ digital friend who gives them a way to avoid losing customers to restaurant takeout, meal-in-a-box services, and Amazon. Whole Foods has reported an uptick in sales thanks to its relationship with Instacart, and it has said Instacart orders have surpassed $1 million a week. Because the startup’s partners have already built trust with consumers, Instacart can focus on speed and reliability rather than getting people used to the idea of ordering salmon or smoked turkey online, which is one of Amazon’s challenges.

Amazon’s vision, at least as presently understood, is both more ambitious and more life-changing than Instacart’s. Last March, Amazon introduced Dash, a series of Internet-connected buttons that consumers would place around their home to reorder items such as detergent with a single finger tap. In June, the company made its Echo voice-controlled speaker widely available to shoppers. If there’s no Dash button around, just tell Echo what you need to buy and it happens automatically. At the same time Amazon offered Echo for sale to a mass audience, it made a $100 million investment in building out other services that would work with Echo. Instacart, by contrast, appears to be betting merely on users embracing the simplicity of app-based ordering from a growing network of real-world merchants.

Neither company has ironed out all of the issues that could derail its aspirations for the future of shopping. In a test in New York City this summer, both services suffered from inconsistencies. For every delightful experience of having delivery guys sprint up five flights of stairs to hand over an order in just under 30 minutes, there was a poor or confusing status update, partially filled order, or customer service that was more perfunctory than magical.

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Once consumers get a taste of this future, though, there’s no going back. Amazon has grander plans, along with the scale and patience to outlast virtually any current or future competitor. But realizing this vision will take a lot of work, including altering warehouses to store fresh food and establishing fleets of trucks (or drones, as it promised nearly two years ago) to deliver goods. Instacart, by contrast, has the funding and the lightweight infrastructure to expand and build a brand both in the U.S. and around the world much faster than Amazon. In the short term, it seems that Instacart will continue to attract young urbanites while Amazon, as usual, plays the long game. Either company could get the logistics right to achieve startling speed and consistency. The big winner will be the company that can do it with a warm smile.

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About the author

Austin Carr writes about design and technology for Fast Company magazine.

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