Report: Instacart finally turning a profit due to COVID-19 prompted demand

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Instacart is finally turning a profit due to increased demand driven by the coronavirus pandemic, reports The Information. On Monday, the site stated the grocery delivery service anticipates earning $10 million in April, which would be the first profitable month in its history. Moreover, the publication notes the San Francisco-based startup could retain some of its near-term growth once the health crisis passes.

Instacart’s Services are in High Demand

After the United States and Canada began issuing self-quarantine orders, Instacart experienced a massive surge in orders. Concerned about contracting COVID-19, consumers have taken to online grocery delivery in mass. Due to this increased need, the company hired 300,000 new shoppers last month and announced plans to hire 250,000 more last week to meet demand.

According to The Information, Instacart processed $700 million in grocery purchases per week in the first half of April, a 450 percent uptick from December.

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As a result of its increased traffic, the firm reportedly anticipates bringing in $10 million in income this month. Notably, the eight-year-old firm had not earned a profit until the coronavirus pandemic altered the buying patterns of American and Canadian consumers. The firm, which received a $7.8 billion valuation in 2018, lost $300 million last year.

Although Instacart has emerged as a leader in the grocery delivery sector, the firm operates under tight profit margins. The company generates revenue from claiming a percentage of customer orders, selling in-app advertisements, and premium membership subscription fees. As such, the firm has faced the same long-term viability questions that have dogged other gig economy startups.

Furthermore, the service has had to ramp up its spending considerably to handle its influx of new business. The company brought on 13,800 shopper and customer support representatives in March and added additional staffers to on-board its deluge of new logistics contractors. The firm has also rented more server space to keep its app functional and purchased personal protective equipment for its workers.

Nevertheless, Instacart’s coronavirus prompted surge in business is unlikely to recede once the viral outbreak ends.

Opportunity and Data

The Information notes Instacart’s share of the grocery delivery market increased from 50 to 70 percent in the last several weeks. But during that same timeframe, Amazon’s market share fell from 20 to 11.5 percent even though the e-commerce giant brought on 100,000 new logistics workers in March. In fact, the Big Tech firm stopped accepting new Amazon Fresh and Whole Foods customers because of overwhelming COVID-19 related strain on its delivery infrastructure.

On the other hand, Instacart is still taking on new members, and 50 percent of its orders are delivered same or next day.

In addition, the startup has gathered a wealth of consumer data after the coronavirus pandemic changed North American purchasing habits. Even if the firm experiences a high rate of turn over once the health crisis ends, it will have an easier time winning back older consumers than acquiring new ones. Plus, shoppers might not return to their old ways once COVID-19 is a memory.

PYMNTS conducted a survey that found 53.6 percent of respondents will not resume their traditional grocery buying habits until they have access to a coronavirus vaccine. Similarly, a Dalhousie’s Agri-Food Analytics Lab study discovered 22 percent of Canadian consumers plan to buy groceries online once the pandemic ends. In 2019, only four percent of Great White Northerners regularly used services like Instacart.

Also, FirstMark Capital partner Amish Jani told Digital Commerce 360 the uptick in online shopping would “persist going forward.”

Given its ease-of-use and availability, Instacart could become as ubiquitous a brand as Amazon or Netflix in the post-COVID-19 landscape.

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