Instacart’s shaky forecast raises questions for the future of grocery delivery
Instacart’s shaky forecast raises questions for the future of grocery delivery
We’ve talked a lot on this program about how the grocery industry underwent a pretty big shift in 2020, when many shoppers started ordering their food online, to be delivered right to their doorstep.
Grocery delivery giant Instacart was in a perfect position to capitalize on the pandemic moment, and it did. But fast forward to Wednesday and that company’s outlook is not so great.
Instacart has forecast a slowdown in growth in the coming quarter. The company’s sales quadrupled in the first year of the pandemic, for obvious reasons. And while many shoppers returned to grocery stores in person, online ordering has held its own in the last five years.
“There has been growth consistently across the period, but it has come in fits and starts,” said Neil Saunders, managing director at GlobalData. And he said, in theory, there is still plenty of headroom for grocery delivery.
Grocery is still one of the lower penetrated categories within retail for online purchasing. But realizing that growth could be hard, said Saunders, not least because grocery stores are some consumers’ happy place.
“Because people like to sometimes touch and see the things that they’re buying. But also if they’re buying something for a meal in an evening they often like to see what’s available. They want the inspiration of buying in-store,” said Saunders.
Grocers like Kroger and Walmart are building out their own delivery services. So Bobby Gibbs, a retail consultant at Oliver Wyman, said it’s a crowded market.
“You’re seeing more competition as a lot of the ride share services have moved more into grocery fulfillment,” said Gibbs.
Then, there’s inflation, which is once again changing which products we buy, said Sucharita Kodali, a retail analyst at Forrester.
“ One of the biggest signals of inflation these days is eggs. Eggs and actually steak too. And those are two categories which are fairly inelastic in demand,” said Kodali.
Meaning, people will buy their steak and eggs anyway, but when they do, “There’s sticker shock, and I think that necessarily has an adverse impact on adding other items to your cart,” said Kodali.
Instacart did report consumers are spending a bit less per order, on average. And Kodali said all this speaks to something broader. Something we’ve been hearing about in survey after survey lately?
“Just general consumer malaise,” said Kodali.
Kodali said pulling back on services like grocery delivery could be a theme in the year to come.
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