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How Instacart’s Markups Impact Your Grocery Chain

The COVID-19 Pandemic changed the world for brick-and-mortar retailers. One of these changes was the rise of Instacart, a well-known grocery delivery service. The company added 300 thousand new drivers during the Coronavirus pandemic. 

Instacart is handy for consumers, but has insane markups. While a convenience fee is understandable, these markups can have a negative impact on your business. To find out more about these markups and their impact, we’ve got some insights to help you understand. 

How much does Instacart markup prices?

Whether you shop at Costco, Walmart or Loblaws, grocery markups average at about 12%. These markups are a natural part of Instacart’s business model.

These markups do not account for the convenience fees and tips customers pay for delivery. Instead, these grocery markups come from price differences between products. 

 

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For example, one test compared salt and pepper wings from Sunrise Farms. Instacart was $2.10 higher than the marketplace it came from. When you add these increases up across an entire grocery order, costs between Instacart and the store vary by hundreds. 

In addition, customers who use Instacart almost never see promotional items. So if you own a grocery store, that’s a sale missed that could heavily increase your profits. 

How does this markup impact your store?

So now that you know about Instacart’s business model, you might wonder about the potential impacts. After all, including a new sales channel sounds like a good idea, as customers who use Instacart might not come to your store normally. However, there are a few unseen costs we will go through below:

It leaves consumers feeling “ripped off”

While store owners don’t dictate Instacart’s pricing, you must answer for your affiliation. When customers see high markups, they come back with receipts. They might request the in-store rate on certain markups. 

Managers will typically direct these people to Instacart. However, Instacart often places the blame on stores setting the prices. The back-and-forth can heavily impact your customer loyalty. 

Customers are less likely to impulse shop

When customers order from Instacart, they don’t walk around and browse. When you walk around a store, there’s always something you forget. 

Impulse buying can also increase your odds of a sale, as 95% of customers make in-store impulse purchases. If a customer never enters, there’s no chance of this happening.

Customers won’t connect with your brand 

Many stores, like Ikea, make in-store (or online) browsing an experience. Some stores have legendary experiences that make customers eager to return. If customers use Instacart, those experiences don’t happen.

When you use a delivery service, Instacart is the brand you use. Here, customers won’t connect with your brand quite as easily. 

Some might accuse you of taking advantage of people with disabilities or injuries

Instacart is a staple of households who have people with disabilities or long-term injuries. Because of upcharge complaints, some people think Instacart takes advantage of these groups. When you use these services, those perceptions extend to you. 

Those with disabilities have little choice but to deal with these upcharges. At the time of writing this, Instacart has no unique solution for these scenarios. 

How can store owners help consumers spend responsibly

Now that you know some negatives, there are ways you can combat this. Below are some additional tips you can take to help your consumers spend responsibly:

Offer your unique online fulfillment method 

You don’t have to stick with Instacart’s markups. Instead, you could decide to offer your own fulfillment method. Of course, to meet your customer’s needs, this means you’ll need an eCommerce front. Check out our fulfillment tools to see how you can easily integrate this into your business. 

Inform people of better pricing when buying from you directly 

Educating your consumers about markups can change the perception. Inform your consumers that the markups can heavily increase their bills. You can do this through social media announcements, blog posts, or paid advertising. 

Increase customer loyalty with personalized experiences

Ready to give your grocery shoppers what they want?

Stor.ai is a white-label grocery e-commerce platform for grocery chains and supermarkets. Stor.ai equips grocery retailers with all they need to create, and own, a holistic, end-to-end eCommerce offering.

If you'd like to see it in action, then schedule a demo with us today.