Instacart raises $200M and prepares to go up against Amazon Now to deliver Whole Foods products

By Elizabeth Crawford

- Last updated on GMT

Instacart raises $200M and prepares to go up against Amazon Now to deliver Whole Foods products

Related tags Whole foods market Amazon

An infusion of $2OO million from a series E fundraise could help long-time Whole Foods Market delivery service Instacart hold its own against the retailer’s new owner Amazon’s decision last week to test two-hour delivery of the grocer’s products through its Prime Now service in four cities.

The investment, led by Coatue Management and including support from Glade Brook Capital Partners as well as other existing investors will enable Instacart to improve the convenience and price of its online ordering and grocery delivery service at a time when competition is heating up, the company’s founder and CEO Apoorva Mehta says in a post on the company’s blog.

“There is a fever pitch of excitement in our industry and we are truly grateful to be able to lead the charge in transforming the grocery ecommerce landscape,”​ Mehta said.

He further explained, “in the next few years, we will be working hard to innovate for our customers by offering them more convenience and better selection at competitive prices. Recognizing our shoppers need better tools and processes to be able to offer great customer service, we will be investing in building robust shopper support teams and software. And, of course, we will continue to grow our sales for our retailers and CPG partners by strengthening our partnership and innovating together.”

These partnerships including deals with seven out of the top eight retailers in North America for a total of 200 grocery partners, including 160 new metropolitan areas this year, Mehta said, adding, “Instacart is now available to 70 million households across US and Canada.”

Going up against Amazon

The announcement about the investment and Mehta’s optimism come days after Amazon announced that it would test delivery of Whole Foods products in four cities in the US – Austin, Cincinnati, Dallas and Virginia Beach – through its Prime Now service at a fraction of the cost that Instacart charges.

Customers of the $99 a year Amazon Prime in the pilot cities will get two-hour delivery for $4.99 and a one-hour option will cost $7.99 on an order of $35 or more. This is compared to Instacart’s $11.99 fee for one-hour delivery or $9.99 for two-hour delivery or more, with the potential that prices can go up during busy times. Instacart also offers a $149 annual membership for free two-hour deliveries on orders of $35 or more.

Instacart, which has five-year contract with Whole Foods to be its exclusive delivery service, also is at a disadvantage because as the owner of Whole Foods, Amazon has more in-store marketing in its test cities and will have full control over the shopping and delivery service for quality management.

Andrew Park, senior director of CX Strategy at InMoment notes Amazon’s full control over the end-to-end customer experience “gives them a big leg up over other delivery providers that often experience a disconnect between their services and the source stores.”

He added, “Brick-and-mortar grocery brands have attempted to launch their own delivery programs, but Prime’s proven ability to execute consistently could be the tipping point to the adoption of online grocery.”

Dan Wilkinson, CCO of 1WorldSync, agrees but adds that the ability to deliver products quickly “will also require significant adjustment for its logistics operations.”

To this end, Amazon’s store in Austin has allotted significant back room storage space for Prime delivery orders as well as dedicated checkout lanes for couriers and coolers and shelves for prepared orders.

Amazon Now is just the start

This arrangement likely is just a starting point as Scott Webb, president of Avionos, suggests that Amazon likely will “employ their test and learn philosophy to see how this new addition of services impacts their customers and how they can continue to refine and improve the process.”

Future improvements could come in the form of adding Alexa-enabled appliances and Amazon Key, notes Greg Ng, VP of digital engagement at PointSource.

He adds, “The addition of AI into the analyzation of food usage patterns can mean huge things along the supply chain. In theory, fewer products go bad sitting unpurchased in the store shelves or uneaten in your fridge.”

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