When the pandemic started, grocery delivery was a convenience mostly reserved for a lucky few in larger cities, where the service could be easily profitable. But then, like a bullet from a gun, everyone was offering grocery delivery everywhere. And, not surprisingly, Instacart was leading the way. In just one year, it raised over $700 million in new capital due to booming business, growing it to a valuation of $39 billion, as well as adding an additional 250 retailers in the U.S. and Canada, bringing Instacart delivery to more than 600 businesses.
Now, as competition is moving into the grocery delivery market, Instacart has yet another idea to disrupt the grocery shopping experience: It’s going to speed up grocery picking and delivery with the help of small automated warehouses spread across the country. Instacart, like so many others this year, is getting into fulfillment warehouses in a big way.
Instacart orders up fresh new tech
Instacart currently has a formidable army of almost a half million gig workers who are picking items daily for customers across the country, but they’re doing it within grocery store settings that were, frankly, built to keep customers in the store longer. This isn’t a very efficient business model for a company whose success depends on fast, accurate deliveries. So, in a bid to speed the whole process up, Instacart has partnered with technology company Fabric, which offers robotic warehouse automation, to create faster, more accurate picks from grocery inventory.
Although Instacart is being stingy with the details, the general idea is to build warehouse facilities in or near partner grocery stores, with a holding capacity of anywhere from 10,000 to 50,000 items. Humans would pick the more dodgy items, like produce, meat, and eggs, while warehouse robots would grab more uniform goods, like cereal boxes and canned goods. Instacart shoppers would bypass the sometimes time-consuming process of going through the regular grocery checkout process and instead pack groceries and leave directly from the warehouse.
Fabric’s next-generation warehouse automation tools will make it possible to do more deliveries without adding more staff, improving Instacart’s margins and bottom line, as well as its accuracy.
"Everything about our micro-fulfillment solution has been built for speed, efficiency, and elasticity to meet today’s on-demand requirements," explained Elram Goren, Fabric CEO and founder, in a press release. "Our software-led robotics and modular solution gives grocery retailers the flexibility to build the fulfillment solution that best fits the needs of their business."
This is just one more step in Instacart’s preparation for its eventual public offering. The warehouses will help reduce some of its more troublesome friction points, like shoppers competing with in-store customers for items, which can lead to items running out mid-order if stock is low.
The Millionacres bottom line
It would seem that, by its own admission, Instacart is going to be building a lot of warehouses in the longer run. Although for now, it’s not willing to commit on the number of centers, where they’ll be located, or how much will be spent on them, it’s a reasonable bet that they’ll appear in areas with high population density, where grocery delivery has become all the rage. After all, it makes zero sense to spend the money to build a giant warehouse in the middle of Alaska where only a few dozen orders go out each week to the neighborhood moose.
Industrial and eCommerce fulfillment real estate is absolutely the hot thing this year, but remember that buying into it may mean significant wait times for the base structures to be completed. Delays in shipping, busy ports, materials shortages due to COVID-related manufacturer slowdowns, overfull warehouses, and many other factors are keeping construction projects feeling like they’re permanently running behind.
However, if Instacart is able to get the same kind of bump in permanent adoption that other eCommerce companies have seen from the pandemic, having dedicated warehouses for grocery delivery just makes sense. As an Instacart user myself, I can attest that one of the most annoying things about it is dealing with substitutions because some in-the-flesh human dared to take the last loaf of my favorite brand of bread out from under my picker.