Instacart, the grocery delivery startup that works with grocers like Whole Foods and Publix, has years of experience trying to prove out its model in dense, urban areas. Its latest partnership will be another litmus test on whether it can make it work long-term in the suburbs, too.
The San Francisco-based startup has inked a deal to deliver groceries on behalf of Wegmans, the family-run east coast grocery chain that has just 92 stores but $8.4 billion in annual sales and an outsized cult following.
The partnership will start in the Washington, D.C., suburbs of northern Virginia and Maryland and expand to other markets including the Boston area in the near future. Within a few months, the partnership will cover a few dozen of Wegmans' stores, an Instacart exec said.
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"Wegmans is known to be one of the highest-quality grocers and, as such, they typically do everything in house," said Nilam Ganenthiran, Instacart's chief business officer. "So we are very grateful and proud."
While a deal like this can boost Instacart's sales and credibility, it also puts pressure on the five-year-old company to perform in less densely populated markets that are harder to turn profitable. A big reason why Instacart raised $400 million this year was to spend it on customer acquisition and worker guarantees during the first six months or so in a new market when the company is not turning a profit.
Wegmans customers can order through a special page on its own site or through the Instacart app. Deliveries on orders of more than $35 come with a $5.99 delivery fee; deliveries under that amount are presumably charged more. Wegmans is also charging more per product through the delivery service than it does in stores.
This new deal, plus a recent expansion of a partnership with the $34 billion grocer Publix, appear to indicate that controversies involving worker pay at Instacart are not slowing down the business. That's critical, since Amazon continues to push hard in the space and a competitor, Shipt, just raised $40 million in venture capital.
Instacart is in about 65 markets today and is on pace to expand to more than 100 markets by the end of the year, Ganenthiran said.
—By Jason Del Rey, Recode.net.
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