With delivery startups like Gopuff and Gorillas flooding the market, Instacart is rolling out 30-minute delivery to compete in the ultra-fast grocery space.
Dubbed Priority Delivery, the new option will be available starting today from more than 300 stores. The initial rollout will include Ralphs, Safeway, Sprouts Farmers Market, and Stater Bros. stores in more than 15 US cities such as Chicago, Los Angeles, Miami, San Diego, San Francisco, and Seattle.
"What we're doing here is bringing that express lane online," Daniel Danker, vice president of product at Instacart, told Insider in a phone interview. Danker came to Instacart in March from delivery operator Uber Eats.
Speedy delivery started last year with 7-Eleven
Danker said 30-minute delivery has been in the works since Instacart began fast convenience delivery with 7-Eleven in August 2020. The companies announced an expansion of their partnership earlier this week.
Ultra-fast grocery delivery was a natural next step as 95% of Instacart shoppers in 2020 choose the shortest delivery time window – under two hours – when making small orders, Danker said. Convenience orders have also gone up 350% since August.
"This is a real indication that speed matters to folks," he said.
Instacart, the dominant US grocery delivery provider in the US, said it will expand ultra-fast delivery to more cities in the coming months.
In addition to 30-minute delivery, Priority Delivery also includes 45-minute and 60-minute delivery windows. The fastest available delivery windows will be indicated by a new lightning bolt icon within the app.
"You should expect that there'll be a small incremental fee for Priority Delivery. We're trying out different prices," he said.
And Danker said shoppers will be notified if orders are too complex or too large to meet the 30-minute window.
Ultra-fast delivery players are flooding the market
Priority Delivery debuts as Instacart faces new challengers in the $100 billion e-commerce grocery space.
DoorDash, the No. 1 restaurant delivery company in the US, has been expanding its grocery and convenience store partnerships with retailers such as Walmart, CVS, Walgreens, and 7-Eleven.
Uber is rapidly expanding its grocery delivery business, and recently announced a partnership with Gopuff. The startup, which first launched as a hookah delivery service, operates in about 650 US cities. Its micro fulfillment centers carry items like snacks, baby food, cleaning products, and over-the-counter medications. Delivery times in most locations are between 20 and 40 minutes.
Startups JOKR and Fridge No More promise delivery in 15 minutes. European startup Gorillas, which is entering the US on May 30, promises delivery within 10 minutes.
Danker said Instacart's Priority Delivery differentiates itself by not asking consumers to sacrifice selection for speed.
Fast delivery competitors like Gorillas and Gopuff typically offer less than 3,000 products. Instacart shoppers, on the other hand, will get to choose from 40,000 or more grocery items, Danker said.
"Our customers come to Instacart because they're looking for full-service grocery. No compromises," he said.
Does the Instacart playbook include automated warehouses?
Supermarket analyst Phil Lempert said the real winning strategy is grocery pickup or delivery through fulfillment centers.
If grocery brands like Kroger can open dark or ghost warehouses in dense communities where a brick and mortar store is not feasible, he said that is a good strategy for expanding "your customer base." These dark or ghost warehouses are used exclusively for delivery fulfillment.
According to various media reports, Instacart is looking more closely at fulfillment centers.
Earlier this year, the Financial Times said Instacart was exploring the use of robot-driven warehouses to help support delivery and pickup services for its merchants.
Last week, HNGRY , a publication covering the food delivery logistics and services, said Instacart is partnering with Florida grocer Publix to test micro fulfillment centers. The dark warehouses would be powered by logistics startup Fabric, according to internal memos viewed by HNGRY Trends.
When asked about its alleged plans to test automated warehouses, Instacart would not confirm the partnerships with Publix and Fabric. Fabric is one of three logistics startups tapped by Walmart to test micro-fulfillment.
A company spokesperson said that its business model "is predicated on being a chief ally to our retail partners."
"We're not a retailer and our business is only successful when we're driving value for our partners," the spokesperson told Insider. "Our goal has always been to lift up grocers and give retailers of all sizes an edge in an increasingly competitive industry."
Fueled by the pandemic, Instacart in 2020 added more than 200 new retailers and more than 15,000 new store locations to its marketplace. The San Francisco-based company now delivers from more than 45,000 grocery stores and retailers in North America. And its latest round of funding more than doubled its valuation to $39 billion.
