Whatâs Going On Here?Is it a bird? Is it a plane? Nope: itâs Instacartâs valuation, which the grocery delivery app revealed earlier this week has doubled twice since the pandemic began. What Does This Mean?In a time when everyoneâs trying to avoid the local store as much as possible, Instacartâs found a lucrative niche in grocery delivery: the company has increased orders sixfold, added hundreds of thousands of new workers, and raised almost $1 billion from investors since last March.
In fact, a new financing round this week valued the private company at $39 billion â up from $18 billion last November, itself up from $8 billion before the pandemic. That officially makes Instacart the second-biggest private US startup, just behind Elon Muskâs SpaceX. No surprises, then, that itâs reportedly preparing to hit the stock market sooner rather than later (tweet this). Why Should I Care?Zooming in: Is Instacart flawed?
On the face of it, Instacartâs impressive valuation makes sense when you consider that the US grocery industry is worth as much as $1.3 trillion. But that market slims down real fast when youâre at the bottom of the food chain: Instacart picks up groceries for delivery after the retailer has stocked the shelves and after itâs paid by shoppers. In other words, after the retailerâs made its already notoriously low profit. That leaves Instacart with a market worth just $45 billion, and makes it difficult â if not downright unlikely â that itâll earn enough profit to justify its valuation.
Zooming out: ⌠is Instacart really flawed?
Instacart is facing fierce competition on all sides too â whether from delivery apps like Uber, online grocery players like Walmart and Amazon, and, of course, grocery retailers themselves. The latter in particular mightâve been galvanized by the pandemic to start investing more in their own ecommerce systems â and if they get them right, those customers might be able to ditch the app altogether⌠| 