Instacart Inc.’s chief executive said the company foresees more runway for growth in grocery delivery, saying the Covid-19 pandemic has fueled lasting changes in the way consumers buy food.
The boom in business that pandemic-driven lockdown orders drove for Instacart and other food-delivery companies has slowed recently as many consumers shop in person again. Uncertainty around the pandemic’s trajectory has been challenging for delivery companies and other businesses to navigate.
Even so, some consumers aren’t going back, Chief Executive Officer
Fidji Simo
said Tuesday at The Wall Street Journal’s Tech Live conference. Online grocery sales currently make up about 10% of grocery sales, and San Francisco-based Instacart expects that number to reach 30% over the next several years, she said. Research firm
Cowen Inc.
anticipates online grocery sales will reach 20% of total grocery sales by 2025, up from 5% in 2019.
“It has changed consumer habits forever,” Ms. Simo said of the pandemic.
Covid-19 upended how and where consumers bought their food, and a year and a half into the pandemic, grocery suppliers, restaurants and food makers continue to struggle with shifting consumption. Grocery delivery remains expensive to run because of labor and transportation costs.
Transaction value on Instacart has grown four times since the beginning of 2020, said Ms. Simo, who joined the company earlier this year after spending a decade at
Facebook Inc.
The grocery-delivery company, which has a valuation of about $39 billion, has said it expects to pursue an initial public offering. Ms. Simo declined to comment Tuesday on the potential timing.
Instacart has appealed to supermarkets by offering a quick way to provide grocery-delivery services without spending time or money building their own system. Some supermarkets have said they aren’t making money through Instacart because they pay a commission on each order, and others worry that they are sharing valuable data on what customers buy. The industry is becoming more competitive, with
DoorDash Inc.
and other companies seeking to grab consumer spending.
To better compete, Instacart began offering 30-minute delivery and is building fulfillment centers for retailers that aim to help fill orders faster. The company said Tuesday that it would acquire a maker of automated shopping carts, which bypass checkout lines and offer suggestions on products to buy, for $350 million after buying a catering software maker in October. Instacart is building a range of services so it can help retailers compete better against
Amazon.com Inc.,
Ms. Simo said.
“Grocers bring a lot to the table in terms of selection [and] brand loyalty that Amazon hasn’t fully cracked yet,” she said.
Instacart has been expanding beyond grocery delivery and is now delivering nonfood items such as alcohol and prescriptions. The company is also making a bigger push into digital advertising, hiring other veterans from Facebook and developing platforms for video and other services. That move brings Instacart into closer competition with big supermarket operators like
Walmart Inc.
and
Kroger Co.
that are building their own digital advertising platforms.
Ms. Simo said Instacart’s advertising business is growing by triple digits year-over-year and would help keep delivery costs down for both retailers and customers.
Write to Jaewon Kang at [email protected]
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