Instacart’s playbook is expanding. Since its conception in 2012, the industry giant has quickly overtaken the on-demand grocery category, solidifying its place as the largest on-demand grocery delivery service in the country and the leading online grocery platform in North America.
Instacart partners with more than 600 national, regional, and local retailers; delivers from over 45,000 stores across more than 5,500 cities in North America; and is available to more than 85% of U.S. households and 70% of Canadian households. As the company works with a growing roster of brick and mortar retailers to cover their pickup and delivery operations, Instacart’s narrative continues to position itself as an accelerator of retailer growth—filling carts, boosting sales, and supporting expansion. In reality, the brand is becoming a competitor to these grocers, threatening customer loyalty and now, threatening their ad sales businesses.
Though Instacart continues to deny it, multiple sources have reported that the business is building its own fulfillment centers to remove the role of retail grocers from its operations altogether, and putting together a plan to take on Google and Facebook as it tries to build a $1B ads business.
Breaking down the Instacart ads business model
By now, you’re well-aware of the big players in the digital ads space: Google, Facebook, Amazon, and Walmart, with familiar names like Walgreens and CVS Pharmacy getting on board more recently. But despite not being a retailer itself, Instacart's ad business generated hundreds of millions in sales in 2020 alone. The still-growing business’ revenue is projected to top $1B in 2022.
What sets Instacart apart from seemingly similar third-party delivery platforms like DoorDash is its focus on high-value advertising. In 2020, the company's annual revenue jumped to $1.5 billion, of which ads accounted for about 20%—or roughly $300 million. As the company gears up for its IPO, it continues to put the ads business at center stage, bolstering its near $40B evaluation and incentivizing more investments.
With the ad business functioning as a key part of Instacart’s investor pitch, their play is clear. The global digital ads market stood at an estimated $378B in 2020. By 2024, it’s forecasted to reach $646B. Instacart is competing with the likes of Amazon to gobble up the market until there’s nothing left for grabs. Though it may be intimidating, you need to do the same. The key for your retailer? Something Instacart, at least with its current model, can’t do: own the customer journey—and the associated ad space—from end-to-end.
Analyzing the current Instacart user flow
If you’ve never used Instacart yourself, it looks something like this: you log into your Instacart account, select the retailer you’d like to purchase from, and start filling your shopping cart. You checkout through Instacart, receive your order confirmation, and maybe receive a call from your personal shopper that they’re out of crunchy peanut butter—will creamy do? The shopper rings your doorbell, you hand them a cash tip if you’re so inclined, and put your groceries on the counter. For same-day delivery, the whole operation—from placing your order to placing the items in your fridge—occurs within a five-hour window.
For a customer, it’s great. For a retailer, it’s less than ideal. The customer journey is filled with siloed interactions that happen exclusively on the Instacart platform, not your own, and as soon as a customer logs into Instacart, there’s a chance your sale is lost altogether, with the perpetual risk that they select a different grocer’s logo on the login screen. Whether there’s a special promotion for a different store, a competitor's logo placed higher up than yours, or your customer simply decides to try a new grocer, the result is the same: their loyalty shifts, and your revenue suffers.
Throughout the customer journey on Instacart’s platform are digital ads on mobile, on desktop, and in-browser. Also present are banner ads for CPG partners, in-app coupon promotions for your customers’ favorite items, suggestions based on order history, and intelligent pop-ups based on what’s in the cart already—and what they may be missing. Instacart features discounted delivery offerings, customer reward programs, loyalty points in return for large purchases, and the list goes on. These are lost digital advertising and revenue opportunities you’re inadvertently outsourcing to Instacart along with your delivery services. And over the last few years, the numbers have increasingly proved the sacrifice is not worth the benefits.
As the digital ad market grows at unprecedented speeds, holding onto your customer journey and the associated online real-estate is your best bet for sustainable success. Any company telling you otherwise is likely trying to trick you out of securing your fair share. The retailer with the biggest piece of the pie may win, but the retailer with no piece will lose. Putting yourself into the game is the most important step for survival. It’s not about taking up more space than Instacart or Amazon, but it is about taking up some space. Even if you don’t end up in first place, you’ll still reap substantial benefits—and so will your bottom line.
Taking control to connect your customer journey
If you haven’t already heard, retail media is being redefined. Old-fashioned in-store advertising techniques have evolved into robust digital engagement hubs offering advertisers a comprehensive, connected platform for a wide range of content types—and a high return. If you want an example of the interactive digital ad content capabilities available to you, head over to Amazon or Instacart.
By building up your own digital retail media network and unlocking ad space that extends throughout the entire, connected customer journey—from mobile browsing to in-store shopping to check-out aisle transactions and back home again—you’ll be able to engage with your customers on multiple devices, at every possible touchpoint, and customize the experience to their personal preferences and behavior patterns. The result? Personalized shopping journeys that generate 40% more trips to the store and more than 10% increases in same-store sales, and a digital ad space of your own that no other competitors, big or small, can tap into.
With sophisticated technology enabling easy, automated, and accurate data reporting for your brand partners—and with incremental sales boosting their returns—CPG partners will allocate more and more of their ad spend your way, and you’ll both revel in the rewards. It’s not risky, it’s proven. It’s a model that Instacart is building a billion-dollar ad business on top of, and one that you can leverage to do the same on a scale that works for your store. Don’t forget: Instacart only does delivery—you can do everything, from end-to-end.
To learn more about adopting a Swiftly-powered digital retail media network and build your own digital ad business, get in touch today.