CEO Simo says both Instacart, online grocery poised for growth

Competition is good, and Instacart is thriving as the grocery delivery market grows, Instacart CEO and Chair Fidji Simo said Tuesday at the Goldman Sachs Communacopia & Technology Conference. 

Simo said the delivery and tech company maintains the leading share of the online grocery marketplace and more than 70% share among digital-first grocery players. The company has delivered two quarters of double-digit growth and continues to expand its EBITDA, she said. 

“And what that does is that it gives us the ability to win that in our future. And what I look for in our future is … accelerating online grocery adoption,” she said.

Simo noted that online grocery sales make up a mere 13% of the $1 trillion grocery market, “which is really lagging other categories of commerce.”

“And I see that our job as a category leader is to really accelerate that,” she said. 

That potential for growth has Simo less worried about competition entering the field from players like DoorDash and others. “There’s this notion out there that the loss of exclusivity is a big headwind, but the reality that the majority of our GTV (gross transaction volume) is already non-exclusive, and yet we’re still thriving.”

The company’s integration with retailers is driving Instacart’s growth in a way that is not the case for its competitors, she said. 

Simo said that although it might sound counterintuitive, the depth of integration with growth is a better predictor of success than exclusivity in the market. 

“Depth of integration is really where it’s at. It also explains why competitors, despite having attracted some retailers on their marketplace, haven’t made more of a dent because their integration with retailers is very shallow,” she said. “Retailers have put their inventory on competitive platforms, but that’s it. They haven’t integrated with SNAP. These platforms are not powering their enterprise. Businesses are not integrated with their loyalty system. The list goes on.”

The lack of integration has driven growth of small baskets for competitors, and they are converting a small percentage of small-basket users to large-basket users, she said.  

Converting these small-basket users takes a massive scale, a lot of user data, and retailer integration “and that’s why they haven’t been able to crack it,” she said.

The data helps Instacart to better understand inventory patterns, giving it an edge over competitors. Instacart’s real-time data of what’s on the shelf has become so sophisticated that retailers have begun asking the delivery company for info about what is on the shelves in real time “because they might know what’s in the background, but they often don’t know what’s on the shelf…” she said. 

Three-quarters of Instacart’s GTV comes from stores that share planogram information, enabling the company to more efficiently direct shoppers to any location in the store to find a particular product. It also has enabled Instacart to do replacements on 80 million items a quarter with 95% satisfaction, Simo said. 

The company also continues to grow its relationships with advertisers and has set a goal of making ad sales 4% to 5% of GTV. 

“The way to get there is first by looking at the core business, or advertising on Instacart and continuing to release these measurement capabilities to prove to brands that we are the best platform to spend our money,” she said. “But the other thing is that we also want to diversify towards the smaller brands currently that are growing much faster than the big ones.” 

Instacart announced a new partnership with online grocer Thrive Market this week, wherein Thrive will enable advertisers to run personalized, targeted ads.

“We recently announced that we had 6,000 brands on the platform,” she said. “That's a big part of why Thrive decided to pick us as a partner because they have a ton of emerging brands on Thrive Market, and we can be the best partner to actually get these brands to become advertisers.

Instacart’s integration with loyalty programs has also given the company an advantage on price, she added. “We have done all of these integrations, and they’ve resulted in $4.75 of savings per order for customers,” she said. “If you’re a new entrant in this market, and you don’t have 12 years of this deep integration, you’re just going to be more expensive, and therefore, customers are not going to want to buy from you.”

Simo also touted the company’s partnership with Uber Eats in May that added hundreds of thousands of restaurants to the app. 

She said the partnership has exceeded expectations and is mutually beneficial. “In fact, we’re seeing that we are driving adoption of restaurants among our user base much faster than the restaurant delivery platforms were able to drive adoption of grocery inside the user base, and so we’re really excited about that,” she said. 

Simo reiterated that Instacart, which went public on the NASDAQ in September of 2023, is still in an early stage as a company, noting that its growth next year will be critical to the company’s success. 

Scaling up their Caper Cart operations with grocers like Kroger, Schnuck Markets, Wakefern, and others, along with Instacart’s efforts to deploy with more retailers will not only define the company’s future but also the future of grocery retail, she said. 

“We also are seeing traction with Caper internationally. We launched with Aldi in Austria, and so it's really something that I'm spending a lot of my time on, because I actually really think it can define the future of what grocery retail can look like,” she said.