Thursday, December 2, 2021

Instacart CEO: we are “fighting Amazon”

In her three months as CEO of Instacart, Fiji Simo has made her mark on the grocery delivery startup, determined to prove the company is more than just a pandemic and that its business model is robust enough to withstand public scrutiny. markets.

The public offering of the company, which is worth about $ 39 billion on the private market, “will happen at some point,” Simo said in an interview with Bloomberg. For now, Instacart is focusing on “building a company that will stand the test of time.”

This is a daunting task for a San Francisco-based startup nearly 10 years old that was one of the pioneers of grocery delivery and is now facing growing competition from Amazon, Uber and DoorDash. Instacart invests heavily in retail products and generates other revenue streams such as advertising to support its core business.

To help achieve its goals in preparation for its public offering, Instacart is adding to its board of directors Meredith Kopit Levien, president and CEO of The New York Times Co., and Lily Sarafan, co-founder and executive chairman of Home Care Assistance, a network of older people. The additions will expand Instacart’s board to nine members, five of whom were appointed this year. Simo said Instacart hopes to leverage Kopit Levien’s expertise in updating The New York Times’ subscription model and Sarafan’s expertise in building marketplaces and introducing technology into another industry that is slowly innovating: elderly care.

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Simo, a Facebook veteran, will also face unique challenges in the post-pandemic world. Instacart, looking to launch large-scale advertising activities, relies on a higher-margin revenue stream to keep prices from rising in the market. However, recent supply chain disruptions make it harder for Simo to balance, with advertisers slashing ad budgets and consumers seeing more items out of stock.

While prices for the app haven’t risen significantly, Instacart is singling out more deals from brands to offset the rise in food prices, Simo said. But that leverage comes with the trade-off of overflowing the app with promotions. In the long term, Simo said the company is developing more products to lower prices and that is “definitely something we are watching.”

Instacart’s future depends on online store growth, which Simo believes could grow up to 30% over the next five to ten years, up from about 10% now. According to Simo, “the biggest obstacle” will be prices. While supply chain disruptions can be fleeting, they highlight Instacart’s need to remain flexible. “Cost will be the biggest driving force.”

Simo declined to give a specific timeline, but said his priority before going to market would be to expand Instacart’s e-commerce products, from online software to in-store technology he sells in supermarkets.

“I see Instacart as the platform that food retailers are going to turn to in their fight against Amazon,” she said. But before it can establish itself as a supermarket savior, Instacart must convince grocery partners that it has no plans to become a competitor.

In its first 90 days, Simo has already bought two companies to prove it: foodservice software company FoodStorm and smart self-service carts startup Caper AI, its largest acquisition at $ 350 million. The deals also show how Instacart plans to differentiate itself from Uber and DoorDash. “These platforms are really focused on aggregating demand and, over time, owning inventory. This is not our strategy at all, ”said Simo.

Instead, Instacart is focusing on the battle to acquire more customers by increasing the number of members on its Instacart Express subscription, which delivers higher customer retention rates.

Investors are keeping a close eye on how Instacart differs from Uber and DoorDash, which have their own membership services, said Tom White, an analyst at DA Davidson. “If there are ways to create more recurring streams of income, rather than shorten the transaction, investors are more likely to reward that.”

Nation World News Desk
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