The InstaCart Saga: Surviving the Retail Battle 🛒

July 20, 2023
Business

Imagine your closest buddy teaming up with your biggest enemy. How would you feel? 💔

That's exactly what happened when Amazon, the massive e-commerce giant, surprised everyone by acquiring Whole Foods in 2017. It's like Amazon buying Big Bazaar and deciding to take on D-Mart. Whoa! 🥊

But guess who got the biggest shock? A little company called Instacart.

Now, think of Instacart as America's Dunzo (but without owning the groceries). They relied heavily on Whole Foods for a whopping 43% of their orders! Boom! 💥 Then, out of the blue, the CEO of Whole Foods called up Instacart's CEO, Apurva Mehta, and said they were breaking up. Why? Amazon had Prime delivery so they don't need Instacart. Ouch! Losing 43% of your orders just like that? It's a tough blow to handle, right? Let's find out what Instacart did next.

🚨Wake-up Call

The leadership team woke up the next morning to a frenzy of 200+ text messages. Investors were tense, bombarding the team with variations of the same question: "What does this mean for our precious investment?" 💸

Amidst the chaos, enters Mike Moritz from Sequoia—a demanding investor with a knack for getting things done. In Instacart's early days, they were burning through $11 million every four weeks and losing $15 on each delivery. Their cash reserves would run dry within a year.

That's when Mike dropped the truth bomb on the team: "We'll be out of business if we don't take action." The team rolled up their sleeves and got down to business, turning their $15 loss per delivery into a $3 profit. The Amazon crisis struck just when they thought they were back on track.

Mike didn't just sit back and watch the show. He rolled up his sleeves even further and wrote the Instacart press release himself. 📝 He brainstormed with the leadership, navigating through potential scenarios like a seasoned captain.

 

☎️ When Crisis Opens New Doors

Amazon's acquisition of Whole Foods had an unexpected side effect. The stock prices of all major grocery chains took a nosedive. Suddenly, every grocery chain desperately needed a lifeline. If they could deliver the groceries, it would bring an additional lift. And guess who they turned to for managing their deliveries? You got it—Instacart. 

As Apurva Mehta puts it, "Every major grocery retailer in the country was blowing up our phone lines."

Talk about turning adversity into an opportunity! It was time for war. And so, the pushback began. Costco (America's DMart) stepped up its game, announcing an even deeper partnership with Instacart.

Now, you can get Costco goodies delivered right from their website. 🎉

But wait, there's more! 

After four long years of negotiations, the grocery giant Kroger finally sealed the deal with Instacart for deliveries from its subsidiary, Ralphs. Smaller chains hopped on the Instacart bandwagon, raising the partner count to 165. 🎉

🤝From Underdog to Top Dog 

Some of the most interesting ideas come from the most unexpected places. Instacart had just launched in Chicago when a local grocer walked up for a friendly chat. Little did they know that this conversation would take a surprising turn. The grocer casually asked Apurva Mehta how much it would cost to be featured on Instacart. Who would've thought partnerships could become a profit centre? 😲

Fast forward four years, and those accidental profit centers have become a lifeline for Instacart. Over 80% of their orders now come from partners, a massive leap from the modest 20% just three years ago. 📈

But that's not all! 

Instacart has discovered a new revenue stream—advertising. Consumer-packaged-goods companies are falling over themselves to have their coupons and free samples showcased in front of Instacart's growing customer base.

Today, Instacart is valued at a cool $12 billion and faces new challenges in the current market slowdown. But hey, challenges are nothing new for these guys, and I can't wait to see what they come up with next. 

💡Lessons from the Instacart Chronicles 

1️⃣ Don't underestimate demanding partners/leaders. They may push you to your limits, but they'll have your back in times of crisis.

2️⃣ Execution is everything. If you can outshine your competition and deliver on point, you'll stand out in even the most crowded market.

3️⃣ Look for opportunities in the darkest of moments. When you find something that works, double down on it and go all-in!

P.S. In the face of adversity, remember: it's not about waiting for the storm to pass; it's about learning to dance in the rain (or selling umbrellas online). ☔️

Credits to Apurva Mehta and Ravi Gupta whose tweets and writings inspired this story.

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