Grocery delivery services like Instacart are allowing retailers to offer convenience to shoppers, but the true costs can far outweigh the benefits.

If you're in the grocery business, you better watch out.

With profits up 500% and a workforce more than doubling, the company has turned a once-struggling industry upside-down. The safety of in-store shopping is no longer a concern, thanks to vaccine rollouts and precautionary measures taken by retailers, but there is little doubt delivery service is a convenience that’s here to stay.

Calculating the True Cost of Convenience in Relying on Third Party Delivery

While grocers adapt to this new normal, a closer inspection reveals the most convenient option is not always the best. Grocers relying on Instacart, Shipt, and other third parties to provide convenience to shoppers lose in more ways than one.

Lost revenue due to ever-increasing fees

Fees are the most obvious loss for supermarkets already used to operating on razor-thin profit margins. In 2019, Kroger was paying a 6% fulfillment fee, which resulted in a $3 operating loss for every $100 order. While the giant chain is able to absorb these losses, smaller brick-and-mortar retailers cannot. A few short years later, many supermarkets today are paying a higher commission, in excess of 10% per order—and who’s to say these fees won’t continue to rise? “We don’t think we make money from an Instacart order,” the CEO of Skogen’s Foodliner told the Wall Street Journal.

Swiftly offers retailers a connected digital platform which bridges online, pickup, delivery and in store shopping experiences for their customers, allowing retailers to stay in control. Consumers love flexibility, so bridging the gap between online and in-store experiences will be the key to increasing retailer revenue going forward.

Lost transaction history and understanding of the shopper

Data is everything for supermarkets seeking greater personalization and long-term relationships with customers. Knowing what shoppers have purchased or placed on a shopping list helps grocers build customer profiles, create campaigns, drive larger basket sizes, and prompt more frequent trips to the store by offering more value. Dependency on Instacart causes customer contact information, product preferences, and other user-generated data to become proprietary information of Instacart, rather than belonging to the grocer itself.

By contrast, Swiftly’s platform keeps all data collected with the retailer, who can then use this information to deepen connections with shoppers—offering customers more value, more inspiration, access to in-app shopping lists, and more ways to buy.

Lost revenue streams and retargeting opportunities

Brands and grocers understand that getting products into a digital cart serves a huge advantage, as this information is now saved on the platform for future reference and retargeting opportunities. And with ad revenue shifting away from traditional print, TV channels, and third-party cookies going away, brand dollars are now being spent at retail in order to gain access to first party customer purchase data, along with the ability to deliver brand messages and promotional offers closer to the point of purchase. But by allowing Instacart to be the middleman, grocers lose their ability to leverage relationships with CPG partners and monetize retail media opportunities.

Swiftly enables retailers to launch their own retail media network quickly and easily. Investing in a retail media network allows retailers to meet their CPG partners objectives (to grow sales), while also generating substantial incremental revenue for retailers.

Lost consumer confidence

Consumers are starting to realize that hidden costs are baked into services like Instacart, which causes erosion of trust—not just for Instacart, but for any store doing business through the platform. NBC News recently built a basket of 60 household staples and found surprising discrepancies across grocery delivery providers. Walmart—which used its own delivery service—had the most affordable basket, totaling $101.51. Harris Teeter ordered through Instacart was the most expensive option—at more than double the cost ($205.76)! If shoppers had selected Shipt for delivery, they would have saved $51.60. When shopping at Giant on Instacart, the basket cost $189.59, compared to $141.53 shopping from Giant Delivers direct.

Swiftly’s platform provides price transparency along with store level inventory and local pricing. Customers can trust the shopping experience, which builds loyalty and repeat purchase. By offering these options, retailers show they care about price-conscious shoppers.

Lost customer experience and loyalty

When shoppers launch their shopping experience on Instacart, they are taken away from the retailer's app and often see a list of competing supermarkets. Shoppers purchasing through Instacart use the Instacart interface—resulting in a loss of brand exposure and control for retailers. All too often, Instacart gets credit for positive experiences, while retailers often take the blame for problems like out-of-stock inventory or late delivery. Any bump in advertising by affiliating with Instacart is negated by the fickleness of its users, as a Barclays’ report found 43% of Instacart customers were willing to switch retailers if their preferred grocer wasn’t listed in the Instacart Marketplace.

Swiftly’s one platform and one experience keeps the retailer in control of the relationship with their customers. Customers shop inside a trusted experience with the retailer, not Instacart and are not encouraged to jump to another retailer to fulfill their needs.

Start Building the Customer Experience Today

Third party delivery services started out as being a helpful stop gap measure for grocers who didn’t have the resources to scale up and meet customer demand quickly. Swiftly’s platform allows retailers to take back control.

A 2019 Barclays report titled “Dissecting the Instacart Addiction'' cites Toys R Us as a cautionary tale for all retailers who have become over-reliant on third-party delivery. In handing over its e-commerce business to Amazon, “Toys R Us failed to develop the expertise it needed to win in e-commerce.” By the time Toys R Us ended its agreement with Amazon, it was too far behind in the digital race and had to file for bankruptcy.
Grocery has a problem that needs to be addressed.  The pandemic opened a door for Instacart that filled an immediate need for grocers, but now has significant implications on long-term growth for the industry. In essence, Instacart stole the grocers' customers in order to build their business. Now they are focused on taking valuable digital advertising revenue that really belongs to the retailers.  While Instacart is positioning themselves as a benefit to the grocery industry, they are far from a good partner. The Grocery industry needs to take steps today to own their customers, processes, and revenue.

Contact Swiftly to learn how you can build your own retail platform & retail media network, with analytics and closed-loop reporting built in.

Now you can leverage your own customer relationships and data to own the shopping experience, creating loyalty and lasting value.

One Platform. One Experience.

Our platform connects retailers and brands to more customers ​where is matters most - in-app and in-store to drive sales.

Contact us to learn more.

Next > Part 2: Delivery Apps Are Positioned to Take Over Retail