Is Instacart in Trouble?
Recent news from Business Insider on Instacart is not encouraging.
Apparently nervous about the company’s valuation coming out of the pandemic, former Instacart CEO Apoorva Mehta reached out to both Doordash and Uber’s CEO about a merger.
Both sets of talks failed and Mehta pulled out of them. At one point he restarted talks a few weeks later, even dragging in the incoming CEO, Fidji Simo. Talk about a recipe for disaster.
It looks bad for outgoing CEO Apoorva Mehta, who appears to have mismanaged this process terribly. For Instacart’s Board, whose own credibility is now on the line, why didn’t they hire an investment banker and run a proper process? Or file a confidential IPO, like RentTheRunway recently did to give themselves time to shop the business around and improve its fundamentals at the same time?
To add insult to injury, this failed merger attempt, which shook up the delivery space (read Doordash and Uber), led to a half-hearted attempt to partner with upcoming competitor Gopuff. Sadly, Gopuff had already picked its dance partner – Uber.
Instacart seems to be suffering from the worst form of short-term strategic thinking, namely that comparable sales coming out of COVID are bad, growth is slowing, and so it needs to do something dramatic to pump up valuations going into its IPO.
Rather than thinking about the long-term fundamentals of the business, the discussion seems to be dominated by the needs of investors - never a good sign.
Furthermore, the incoming CEO seems to think that a Facebook-like app and advertising program is going to win this market, instead of executing on the fundamentals of a great grocery experience.
Which brings me to my final point. Instacart is sadly mistaken if it thinks it can accelerate its growth without also innovating on its core consumer proposition. After all, advertising only works if the actual grocery experience is one consumers want to come back to. And with reports that Walmart has already cornered more than 25% of the US grocery eCommerce market, I think there is serious cause for concern.
