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App Economy

Extended Whole Foods Partnership Bodes Well For Instacart

The companies announced on Thursday that they would continue their deeply integrated partnership.

Extended Whole Foods Partnership Bodes Well For Instacart
[Photo: courtesy of While Foods]

Among the cart of services lining up to deliver your groceries—Uber, Postmates, Amazon, Google—Instacart is distinct in that it integrates deeply with some partners’ operations. While a Postmates driver might stop at a grocery store, purchase an item, and deliver it, since signing on to a partnership with Whole Foods in September 2014, Instacart has hired employees who it trains specifically to shop in 80 Whole Foods stores and, in some cases, even has a dedicated checkout line in those stores.

Instacart tripled in size throughout 2015, but when the startup reportedly laid off 12 full-time recruiters in December, it seemed that its frenzied growth had slowed.

On Thursday, in a move that bodes well for Instacart’s strategy, Whole Foods and Instacart announced that they would continue their partnership, expanding the number of Whole Foods Market stores with dedicated Instacart shoppers by up to 50% nationwide by the end of 2016, including in its new "365" stores. Though it has been previously reported that the companies signed a five-year deal and that Whole Foods made an investment in the startup, neither company commented on the specifics of their partnership.

Whole Foods co-CEO Walter Robb spoke highly of Instacart’s dedicated shoppers: "There are different parts of [delivery]," he told Fast Company, pointing out that in addition to people who actually deliver the products, the people who find it in the store need to "spend the time to make sure they understand those choices and [Whole Foods] standards, to understand how to pick properly."

Instacart CEO Apoorva Mehta added that working closely with Whole Foods as a partner has paid off in other ways. "There are new items that are introduced all the time," he says. "How do we make sure that we’re surfacing them on Instacart? How are we making sure that customers are being encouraged to try them out?"

Since hiring dedicated shoppers, Instacart’s business model has shifted from one in which it marks up prices to one in which it charges a fee to partners, which also include Petco and Fairway. Whole Foods has said it sells more than $1 million per week through the Instacart app.

Robb told Fast Company that the basket size of Whole Foods customers who shop on Instacart is "substantially larger" than the basket size of customers shopping inside of a Whole Foods store. Instacart recently announced partnerships with the Food Network and Allrecipes, as well as a couponing service, in an effort to increase the number of items that shoppers buy through the app at once. Mehta said Instacart planned to also launch recommendations based on what customers already have in their carts.

In addition to Instacart, Whole Foods has partnered with Google's grocery delivery service, Google Express. Whole Foods declined to comment about whether the partnership with Google would continue in the wake of the new deal with Instacart.

Update: A Whole Foods provided the following comment: "We have a number of other delivery options that vary by location so we can best serve our shoppers in each community. We will continue to work with several partners to provide the convenience of delivery and offer solutions for shoppers’ busy lives."

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