What Shopper Loyalty to Instacart Could Mean for Grocery E-Commerce
WGB editor-in-chief Jennifer Strailey recently connected our CEO Orlee Tal to get her take on the state of shopper loyalty in grocery e-commerce and to learn what retailers can do amid soaring digital demand to ensure their brands stay top of mind.Stor.ai wants to see a return to intimacy between grocers and shoppers in the e-commerce space. As a retail digital commerce solutions provider, the company urges grocers to, “Own your brand, data and end-to-end customer relationship.”
Instacart, the largest on-demand grocery delivery service in the country, partners with nearly 600 national, regional and local retailers, to offer delivery and pickup services from more than 55,000 stores to over 85% of U.S. households. But what the stats don’t reveal, says Stor.ai, is the number of grocers hemorrhaging customer loyalty from their banners to the Instacart brand.
Orlee mentions in the article, “Shopper loyalty has been shifting to Instacart for years. In a survey carried out by Barclays Research and AlixPartners way before the pandemic in 2019, Instacart customers were asked what action they would take if their preferred retailer were no longer available on the Instacart platform. Forty-three percent responded that they would just switch to a different retailer. These results clearly indicate the lack of shopper loyalty to grocers on the Instacart platform.”
But it’s more than just loyalty; it’s also about the retailers building their own technological and logistical sophistication. For example, Instacart is investing heavily in building its infrastructure to support e-commerce: although they continue to deny it, they are now taking the next step and planning to open their own MFCs (microfulfillment centers). Whether they go direct is yet to be seen.
Instacart, which just raised an additional $265 million, has been in the news recently because the company is looking into establishing its infrastructure of fulfillment centers. Instacart continues to deny it’s interested in opening its own MFCs, a recent article in The Financial Times and a report by CNN confirms that Instacart is exploring technology to open MFCs.
The big question is: What do they intend to do with these MFCs? Opening their own MFCs and going direct or offering microfulfillment as a service in small-format stores, like Sephora and 7-Eleven, for example. In the latter case, Instacart will need to convince its retailers to outsource. It still needs to be seen if retailers will find it cost-effective to outsource their MFC fulfillment rather than building their own.
Grocers realize that the decision they made to use Instacart’s service before COVID when only 3% of grocery sales were online is not sustainable anymore, especially now that figure is 10-15% and projected to grow to 20-25% for most. Combine that with the fact customers can purchase from several different grocers and retailers from their single Instacart account and you have the loss of ownership of the customer by the grocer who had them sign up for Instacart in the first place.