Instacart are thinking very well about their business operations well but I still am apprehensive on their unit economics.
The numbers given are $5.99 for a single delivery fee or $149 for an annual subscription. In Atlanta they're making $6.96 per order and in Chicago they're making $4.29.
Let's say a shopper makes $15/hr and can pick 5 orders per hour with an average basket size of $100. The delivery driver also makes $15/hr and can deliver all 5 orders with the basket size of $100.
Total labor cost is $30, or $6 per delivery and total revenue is 5*$5.99 or $29.95 for a slightly negative gross profit.
So then is it reasonable to pick and checkout more than 5 orders per hour or 1 every 12 minutes in a random, non-optimized grocery store layout in the US? Is it reasonable that a grocery store would pay out 6% off topline revenue to Instacart when grocery industry profits are already in the single digits? Could it be the average order revenue is substantially higher than $5.99 if annual subscribers use their service fewer than once every two weeks? Or is their cost basis truly lower than fully burdened employee costs of $15/hr?
It just seems like the economics are pretty sensitive to operational metrics so it'd be great to get an official view into the business.
The numbers given are $5.99 for a single delivery fee or $149 for an annual subscription. In Atlanta they're making $6.96 per order and in Chicago they're making $4.29.
Let's say a shopper makes $15/hr and can pick 5 orders per hour with an average basket size of $100. The delivery driver also makes $15/hr and can deliver all 5 orders with the basket size of $100.
Total labor cost is $30, or $6 per delivery and total revenue is 5*$5.99 or $29.95 for a slightly negative gross profit.
So then is it reasonable to pick and checkout more than 5 orders per hour or 1 every 12 minutes in a random, non-optimized grocery store layout in the US? Is it reasonable that a grocery store would pay out 6% off topline revenue to Instacart when grocery industry profits are already in the single digits? Could it be the average order revenue is substantially higher than $5.99 if annual subscribers use their service fewer than once every two weeks? Or is their cost basis truly lower than fully burdened employee costs of $15/hr?
It just seems like the economics are pretty sensitive to operational metrics so it'd be great to get an official view into the business.