POS Companies Should Pay Attention to Instacart. But They Won’t.

20 Sep

Instacart was one of Silicon Valley’s catalysts for the on-demand delivery model. It sought to deliver groceries directly where customers wanted them, and they raised nearly $300M at a $2B valuation to do it.

Now, of course, investors are demanding profitability with growth, so much of the on-demand market is in decline. Investor dollars are down, and the startups clinging on are looking for positive unit economics.

Instacart has likewise started focusing on profitability. Apoorva Mehta, their CEO, talked with TechCrunch about how they will reach profitability in 2017. His secret is to focus on a revenue stream that Instacart simply neglected – but we evangelize constantly.

Instacart’s three revenue sources are as follows:

  1. Partnerships with grocery stores to drive them additional traffic
  2. Charging the customer for deliveries
  3. Data advertisements for consumer packaged goods (CPG) suppliers

Instacart has finally stumbled upon the CPG bankroll. Money for market intelligence. Money for advertisements. Money for everything. Because CPG companies have 5-10x the profit margin that retailers do.

At discovering the magnitude of money available – which is currently in the tens of billions – Instacart realizes they could totally change their business model. The money from CPGs could, “decrease costs to the end customer, maybe make it free.”


Let me repeat that. Apoorva is acknowledging that there’s so. much. money. from CPGs that he could make his billion-dollar empire a loss leader to acquire data which he then monetizes. Like Facebook spends billions on a free consumer platform for ad data. Like Google. Like Zenefits. Give the product away for free and monetize the data.

It’s almost as if POS could make the core product free and earn more money in other ways…

Nope, can’t think of any billion-dollar companies doing that.