Instacart’s Management Team Has No Grocery Experience

While the executive background is not 100% predictive, it is damn instructive in my experience. OK, last Instacart post this week I promise.

Witness the Instacart management team:

• Mark Schaaf (CTO) - Ads: Google, AdMob

• David Hahn (CPO) - Ads: LinkedIn

• Nilam Ganenthiran (President) - CPG Consulting: AT Kearney

• Apoorva Mehta (Founder, CEO) - Amazon Fulfillment (OK you got me there - but only 2 years)

• Asha Sharma (COO) - Ads: Facebook

• Seth Dallaire (CRO) - Advertising: Amazon Ads

Does this look like a typical grocery business to you? Me neither. What they are building is one of the largest advertising and consumer data businesses online.

I mean, their "Head of Revenue" has 20 years experience in ad agency sales. What do you think he thinks about all day? Spoiled milk? Nope. Bigger ad agency budgets. I couldn't find a single day of actual grocery experience on their management team. Supply chain either.

Dave Crellin argued that “They don't need to think about spoiled milk because someone else does that for them. They are ultimately a capability middle-man and platform. That physical fulfilment capability is remarkably average and unquestionably can be improved if retailers look to build and scale their own operations, and then Instacart become someone else looking to get a margin out of an already-thin (if indeed positive at all) slice of pie and not offering much operationally or service-wise to justify that.”

When Amazon was founded, you know who they were studying? Walmart. Instacart is studying a different group - Amazon Advertising, Facebook and Google. What if every CPG brand puts more budget into Instacart because they have better consumer intent, targeting, and data than even Facebook and Google? Legacy is destiny.

Lee Horowitz added that “Grocers are not happy that Instacart controls the customer data. You will See a shift of them move their ecommerce and fulfillment in-house. Grocers want to increase their loyalty programs. Can’t do It without customer data.” Yes they will shift - they must. However, I don't predict most will leave. Why? It doesn't make sense. That's leaving money on the table. Most brands not named Nike do not have the luxury of not being on Amazon. So the strategy is “both.”

Peter Erni got to the crux of this - data. “The money in Instacart is all about shopper intent. No one knows what customers want more than Instacart. Another plus is that they have the ever elusive younger generations using the platform. Advertisers will pay up for the college aged crowd.”

Instacart is about immediate gratification, the Uber generation. Price-first consumers may be on another platform. Doesn't this play more into Instacart's hands though? The most valuable households. Where will a CPG brand spend more, a platform where they can access every grocery and pharmacy consumer in America that buys groceries or just Amazon shoppers? Who do you think will have better household, consumer purchase history, data science models on purchasing behavior and habits than Instacart?

Consumers aren't abandoning Instacart, and retention has been extremely high in surveys I've seen. Even if Instacart ends up with 30% of online grocery, that is a significant force in the market. They are trending much higher than this. And while prices are high now, it doesn't mean they couldn't come down - after all, their margin is much higher than a typical grocer. And yes they have feature work to do on replacements, etc. - their competition does as well - and they are investing more in digital than any other player. I'm still bullish and right now consumers are voting with their feet.

Retailers have less power than you think in situations like this because they become dependent on the revenue and customers. Instacart consumers are more loyal to the carrot. I could buy a lot of things not on Amazon, but I don't. Same with Grubhub. The online player with the most scale gets outsized rewards, such that the more scale, the less Instacart is dependent on a single player for goods. The Internet is a story of selection and convenience, and Instacart trumps everyone here now.