Grocery delivery has been gaining popularity over the past few years, but recently, the online services have seen exponential growth due to the coronavirus pandemic. With small businesses closed and stay-at-home orders in place, people opted to get their groceries delivered right to their doors. The surge in grocery delivery services has continued even as restrictions ease.
According to a RBC Capital Markets study from March, the percentage of consumers who bought groceries online jumped over 20% from last year. The main online grocery delivery service seeing significant demand is Instacart (PRIVATE:INSTACART). The RBC study shows that Instacart drew the highest customer demand in its history with 300,000 new shoppers.
A report from the investment bank Cowen found that Instacart has surpassed Target and Kroger in popularity for online grocery delivery. That means the San Francisco-based company, which started in 2012, is right behind Walmart and Amazon, and gaining fast. Earlier this month, Instacart raised another $200 million, at a valuation of $17 billion, up from a $2 billion valuation in 2015.
Traditional grocery retailers have employed their own delivery services and curbside pickup options to try and keep up, but can they compete?
Instacart prepared for the pandemic era
In the third week of May, Instacart’s share of the online grocery market spiked to 55%, up from 30% in February, according to RBC. With high customer demand, the service’s order volume has gone up as much as 500% year-over-year.
In response to growing demand, Instacart added new ordering options in April to unlock more delivery windows. Instacart allows customers to choose from thousands of products and makes groceries available for delivery within two hours. The company recently introduced “fast & flexible” and “order ahead” options, allowing Instacart to control the delivery window assignments.
Customers appear to be satisfied with Instacart’s new options. Its Apple App Store ratings count has surged a staggering 220% YTD.
To help manage its growth from the pandemic, Instacart listed 166 new jobs by the end of March, up from 136 at the beginning of the year. As the service continues to gain popularity, Instacart is strengthening hiring efforts, now with 175 job postings.
Instacart has been aiming to employ more shoppers to meet customer deman. 32% of the company's job postings are for shopper positions, a record high.
Thinknum’s data shows that Instacart’s hiring efforts have been successful, with employee headcount on LinkedIn growing from 5.1k in the beginning of March to 7.8k this month.
Whole Foods doesn't stack up, but the holiday season looks promising
Instacart’s growth during the pandemic months was not shared among its competitors like Whole Foods Market. Whole Foods' Apple App Store ratings count has only increased by 4% since July.
This could change. In an effort to adapt to the changing market, Amazon recently launched one-hour grocery pickup at all US Whole Foods locations in addition to its delivery offerings. The company also announced a new feature to allow online grocery shoppers to plan ahead and reserve delivery time slots for the holiday season.
Regional chains heat up
As we previously reported, the pandemic-era grocery boom — originally fueled by panic-buying and stock-piling non-perishables — has slowed for corporations like Walmart, but regional chains are still seeing growth. App Store ratings for the Northeastern membership-only warehouse chain BJ's Wholesale Club have increased by 89% since April. Southeastern grocer Publix's App Store ratings have exploded over 1000%.
“Our digital business is crucial to our existing and new members and is stronger than ever,” BJ’s President and CEO Lee Delaney said in a conference call on Q2 earnings. “We grew digitally enabled sales by more than 300% and made dramatic progress, rolling out new digital services.” He mentioned plans to “move aggressively” to add infrastructure in its stores to accommodate its growing e-commerce business.
The catch? Publix and BJ's delivery operations are fueled by Instacart.
Instacart’s strong rebound in job listings and headcount growth show an opportunity for online grocery delivery services if restrictions from the pandemic continue. Although restrictions have begun to ease in recent months, many people have not returned to their pre-pandemic routines. Consumers who have been relying on online grocery delivery services may not go back to in-person grocery shopping.
Instacart’s sustained growth through the pandemic proves that the demand for online grocery delivery services remains, even as the country reopens. By partnering with a variety of regional chains, Instacart could become the Amazon of grocery delivery. Other grocers will need to adapt, join, or die.
About the Data:
Thinknum tracks companies using the information they post online, jobs, social and web traffic, product sales, and app ratings, and creates data sets that measure factors like hiring, revenue, and foot traffic. Data sets may not be fully comprehensive (they only account for what is available on the web), but they can be used to gauge performance factors like staffing and sales.