Would you pay someone to do your grocery shopping for you? Payday Loans Net, explores the system of Instacart in the US. Discover the pros and cons, and where you can find a similar system in the UK.
In this article you will learn:
- What is Instacart?
- How does Instacart make money?
- How much do Instacart workers make?
- Is there a similar concept in the UK?
- What are the alternatives to Instacart in the UK?
- Lastly, is the UK grocery shopping market different to the USA?
How Has Instacart Affected the Shopping Industry?
Many innovations and disruptive industries have started in the United States. Some have successfully transferred to the UK; others are here but are struggling. Some are culturally unsuited or can’t see a big enough market here to thrive. Examples include AirBnB which has disrupted the hotel market. Uber is attacking the taxi and minicab private hire trade. Can Instacart take on our big supermarkets with their home delivery offerings? Read on and make your mind up.
Instacart is a startup company based in San Francisco, California. It is an on-demand service that uses workers to shop for groceries for customers and then, deliver them. Instacart has 135 partnerships with grocery retailers in the US, including well-known chains such as Whole Foods, Costco and Supervalu. To get an idea about how Instacart operates, take a look at their website. The website shows you what you can shop for, and gives details of how it recruits workers. Should you want to look at Instacart in a Seattle magazine, you can search for articles on the website with zip code 98101.
How does Instacart make money?
As with many Silicon Valley startups, it is difficult to work out how Instacart makes money. Investors gamble that the latest high-tech startup is going to be the next Google or Facebook. In 2016, Instacart gained $3.5 billion from investments. However, the net profit after taxes, head office, marketing and other costs will tell us whether Instacart is profitable.
Instacart gains revenue share from retailers that it promotes to customers. Instacart also receives a delivery fee from its customers, yet it is hard to see how much Instacart can gain from these revenue streams. Profit margins in grocery retail are already slim, so retailers cannot afford to pay much.
Instacart have identified and implemented another revenue stream. They present customers with coupons from manufacturers to encourage them to buy alternative brands. If a customer uses the coupon to buy one company’s product over a competitor’s, that company will pay an amount to Instacart. When a shopper searches the Instacart app for a particular product category, a coupon for a particular product related to the search pops up to encourage a click to select it for purchase.
Tesco Clubcard Points
UK supermarkets have implemented similar schemes for years. Tesco were first off the mark with their Clubcard coupons. Before the internet and sophisticated tills permitted retailers to present coupons to their customers, Tesco mailed a booklet of printed coupons to their Clubcard customers each month. Manufacturers paid Tesco for data obtained on shopper’s purchasing and also paid to have their promotional coupons sent to customers in the Clubcard mailouts
This type of marketing is highly valued as it is closely targeted to a customer’s previous shopping habits.
How much do Instacart workers earn?
There are two types of worker at Instacart:
- In-store part-time shoppers who collate the customer orders.
- Full-time self-employed drivers can collate orders, and they also deliver the goods.
Reports vary on the amount of money earned, but it seems the part-time order collators or shoppers earn between $9-15 per hour, plus a sum of 40 cents per item picked. The delivery drivers are self-employed and receive $7 per order delivered. They can also earn the 40 cents per item picked if they collate the order too. The drivers receive no employee benefits or wage guarantees but probably, rely on tips from customers to contribute to their income. We hope they don’t need to take out a payday UK to supplement their income.
Instacart introduced a service charge of 10% added to the shopping bill at the checkout. A very small proportion of this may reach order pickers. Most is retained, presumably to pay towards the part-time shopper wages and overheads. Reports indicate that the full-tine drivers who deliver the orders are losing out from a reduction in tips since the company introduced a compulsory service charge.
Drivers report average hourly earnings dropping from $15-20 per hour to a level of $10-14. Drivers must pay for their own fuel, road tolls and other expenses as self-employed contractors. Therefore, drivers are probably earning well below any minimum wage in the states where they work.
Personal Grocery Shopper in the UK
Personal shopper services do not operate on a large scale in the UK grocery market. Major high-end retailers in the UK, especially in London, employ personal shoppers to look after potentially high spending customers. Their task is to encourage the customer to spend as much as possible in the store. They do this by ascertaining the customer’s likes and style, then encourage the customer to select items the personal shopper proposes.
Morrisons and Ocado
Amazon have partnered with Morrisons, the UK’s 4th biggest supermarket chain, to offer their Amazon Prime customers a food delivery service in selected areas of the country. This is not the type of service Instacart operates in the US. Amazon does not physically shop for customers in different partner stores. It uses Morrisons as it’s exclusive supplier of groceries and fresh foods on a wholesale basis. For existing Amazon Prime customers (for which there is an annual membership fee payable) it enables them to combine Morrisons food, household and toiletries offerings with the many other products available from Amazon.
Ocado is a dedicated food delivery service in the UK. Initially set up to handle deliveries on behalf of Waitrose, it has since diversified and added it’s own product ranges to the Waitrose product ranges.
Waitrose also set up its own in-house delivery service, effectively in competition with Ocado. Ocado has expanded by joining up with Morrisons to offer a dedicated delivery service for Morrisons – which is gradually being rolled out nationally. Despite Ocado being highly regarded for having a very efficient highly automated operation, it has not expanded as expected. While Ocado had planned to expand abroad by the end of 2015, it took them until 2017 to strike their first international deal.
Probably, the nearest comparison to Instacart in the UK is to be found in the restaurant and takeaway delivery market. Similar gig-economy companies have started up. They offer delivery services from restaurants and takeaways using dedicated smartphone apps and websites. Deliveries are carried out by self-employed contractors – namely using their own vehicles, motorcycles or bicycles. As with their US counterparts, they do not benefit from minimum wage legislation or other employment benefits or protections.
Online food delivery in the UK
The reason this type of delivery service has taken off with restaurant and takeaway food but not with groceries in the UK is simple. Profit margins in the highly competitive UK grocery market probably do not allow for the costs involved in offering such a service. No grocery shopper is going to be thrilled at having a 10% service charge added to their bill for the service. Profit margins in the restaurant and takeaway food sector are considerably higher allowing for the delivery services to receive a fee for each delivery order.
Companies such as Deliveroo and UberEats (an offshoot of the Uber cab hailing app operation) compete in the so-called “gig-economy”. These working people do not have the normal benefits and protections and benefits of employment in the UK. They have zero hours and self-employed status. Consequently, they have no income guarantee and have to meet their own expenses.
There is increasing concern from the media, politicians and trade unions about the gig economy in the UK. There is pressure to give workers proper employment rights. This could put severe pressure on some organisations which currently rely on keeping costs artificially low to keep trading.
The major supermarket groups offer online grocery shopping and delivery services throughout most of the UK. Tesco, Sainsbury’s Asda, Morrisons and Iceland all offer home delivery services along with Ocado and Amazon Prime in selected areas. UK consumers are very cost conscious when it comes to grocery shopping as witnessed by the double-digit growth of discounters Aldi and Lidl in recent years.
Money conscious online shoppers can now use online research and the portal mySupermarket to compare grocery prices. Customers can easily change supermarkets to obtain the best deal on delivery charges as well as product range and prices. Supermarkets offer annual delivery passes to avoid per delivery charges. Tesco have recently increased their annual pass from £60 to £72. These passes operate in a similar way to the Amazon Prime annual fee – they reduce some one-off charges but encourage consumers to stick with the same retailer.
In conclusion, when you look to save money on your supermarket deliveries, you must look at more than thedelivery charge. Some people take advantage of free delivery options, but find, that in fact, they end up paying more overall for their groceries. Sometimes when using an alternative supermarket with a higher delivery charge is cheaper.
Online comparison sites recommend that you switch supermarkets on a regular basis. You will receive more special offers and money-off coupons. The website mySupermarket offers easy comparisons for your shopping list from the different supermarkets. The website takes the shopping and delivery into account.
Grocery shopping in the UK vs USA
Competition is intense in the UK groceries market. Shoppers are very price aware due to recent years of austerity and stagnant wages. Because of this, shoppers have been looking to save money on their weekly household budget. They have stopped going local grocery stores and begun going to discount retailers such as Aldi and Lidl.
The whole attitude towards tipping in the UK is different to that in the US. In many parts of the US, workers are underpaid. Customers usually tip, as they realise workers rely on tips to make a basic living. Even customers in fast food outlets such as McDonald’s, routinely tip their counter and table staff. Since Instacart is tip reliant, the chances of the model taking off in the UK is virtually nil.
America often provides us with entertainment and inspiration, in this instance not only from Hollywood. Payday loans net, your preferred choice for payday Loans direct lenders, asks: If time is precious to you, would you pay someone to shop for you?