Walmart will offer grocery delivery in more than 100 metro areas amid pressure from Amazon, Target and Instacart

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The company already offers grocery pickup at 1,200 of its stores.

Walmart already doubled down on its grocery pickup service. Now it’s doing the same for grocery delivery.

The big question: Can it succeed at both?

The giant brick-and-mortar retailer just announced that it is expanding its online grocery delivery service from six U.S. metro areas today to more than 100 in total by the end of the year, which should make it available to more than 40 percent of the U.S. population.

The announcement comes amid an onslaught of competition in the grocery delivery space, highlighted by Amazon’s rollout of Prime Now delivery, Target’s $ 550 million acquisition of delivery startup Shipt and Instacart’s streak of signing on big grocery partners.

But it is a bit surprising considering that Walmart has already invested a lot of time and money into its grocery pickup business, which is available at 1,200 stores and allows customers to pick up their online orders without exiting their cars. The company will add the service at another 1,000 stores by the end of this year.

The grocery pickup service doesn’t cost anything extra for shoppers. And that value proposition makes sense because the average Walmart customer has less disposable income than those of Amazon or Target.

But the grocery delivery service? It comes with a $ 9.95 delivery fee. So I asked a Walmart spokesperson who the intended customer is: Walmart’s existing customer or a different customer base the company aspires to reach?

It’s a bit of both, she said, but the rest of her answer made it sound like the latter.

“Online Grocery Deliver will make Walmart more accessible to some customers where it wasn’t before (customers who didn’t want to drive out of the city center to a suburban Walmart, customers who physically can’t get to a Walmart, or customers who only have their groceries delivered these days!).”

Today, Walmart uses partner companies Uber and Deliv to handle deliveries in its six current markets. The company says it will add more partners as it expands, which raises the possibility of a tie-up with Instacart, which recently announced a delivery relationship with Walmart subsidiary Sam’s Club.

On one hand, the idea of Instacart partnering with the enemy of all of its regional grocery chains sounds farfetched. On the other hand, it’s 2018 and Amazon owns Whole Foods — which means anything is possible in the grocery space.

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Walmart offers same-day delivery from Sam’s Club through Instacart

To combat Amazon's two-hour PrimeNow Whole Foods deliveries, Walmart is adding a similar feature for its members-only warehouse chain, Sam's Club. Through a partnership with Instacart, customers can order food and other goods from the bulk outlet and…
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Instacart says it mistakenly withheld tips from some of its workers

It also overcharged some customers.

Instacart’s tumultuous relationship with the workforce that picks and delivers groceries to the company’s customers just took another hit.

The $ 4 billion grocery-delivery startup admitted in a blog post on Friday that it had mistakenly withheld tips from some of its workforce, and failed to waive service fees in some instances when its customers requested to.

Instacart blamed the errors on a technical “bug, related to product updates made at the end of 2017,” co-founder and CEO Apoorva Mehta said in the post.

“We sincerely apologize for this and we are committed to doing better going forward,” he said.

The company said it would pay out the tips to affected workers, refund customers who had waived a service fee that was still charged and provide both constituencies with itemized lists of the affected orders. The company said the glitch “impacted less than 1 percent of Instacart orders during this time period.”

I’ve asked Mehta for an explanation of how they discovered the bug, as well as the total value of withheld tips and wrongly charged service fees. I’ll update this post if I hear back.

The news comes about a year after Instacart workers were in an uproar over changes that made it much harder for them to receive tips. The company implemented a service fee in late 2016 that it said it would disburse to its workforce in an attempt to even out pay between its lowest and highest earners.

It initially removed the tipping option as part of this change, before relenting and adding it back. But when it did, it made the tipping feature much harder to find. It has since made it more prominent and has made changes to how it describes the service fee after settling a class-action lawsuit for more than $ 4 million.

But over the last few months, workers occasionally complained of missing tips on internet forums where Instacart workers congregate. Some also spoke of Instacart customers who said they waived the “service fee” — which Instacart allows — only to find that they it had still been charged to their order. It turns out this was the case.

Instacart, founded in 2012, has increasingly become the No. 1 ally of grocery store chains in their battle with retail giants like Walmart and Amazon. Following Amazon’s purchase of Whole Foods, the startup signed new delivery pacts with giant grocery holding companies Albertsons and Kroger and expanded deals with Costco and CVS.

Whole Foods was an investor in Instacart and its largest customer.

Instacart employs a mix of full-time and contract workers who pick grocery orders off the shelves inside the stores of partnering grocers and deliver those goods to customer doors. But frequent changes to this workforce’s pay structure has sown distrust among swaths of Instacart workers.

Today’s revelation may not help.

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Apple Pay Promo Offers Free Delivery With Instacart

For the last few months, Apple has been offering regular promotions to entice customers to use Apple Pay within various apps.

This week, Apple has teamed up with Instacart to offer free delivery on groceries purchased in the Instacart app using Apple Pay through February 28.

To get the deal, customers will need to spend at least $35 per order, and taxes and service fees still apply. Free delivery is also contingent on availability, as Instacart has something called “Busy Pricing” which is an added fee during the busiest parts of the day.

Free delivery from Instacart for orders over $35 normally requires a membership to Instacart Express, a service that costs $14.99 per month or $149 per year. Apple’s free delivery offers an opportunity for potential Instacart customers to test Instacart Express.

Without Instacart Express, normal Instacart orders cost $5.99 in delivery fees.

Apple’s new promotional email also highlights several grocery stores that offer Apple Pay, including Raley’s, Giant Eagle, Sprouts,
Stop & Shop, Whole Foods, and Wegmans.

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Latest Apple Pay & Instacart tie-up offers free delivery through Feb. 28

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Apple has once again partnered with Instacart to promote Apple Pay, enabling free delivery for people who order groceries through Instacart’s iPhone and iPad app.
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Instacart has raised another $200M at a $4.2B valuation

 Despite plenty of uncertainty swirling around Instacart and its complex relationship with Whole Foods — now owned by Amazon — investors still seem to not be too worried, and are pouring a fresh big round of financing into the startup that values it at $ 4.2 billion. Instacart said it raised $ 200 million in a new funding round this morning led by Coatue Management, as well… Read More
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Instacart CMO Cheryl Law is no longer at the company

 Instacart CMO Cheryl Law is no longer at the company, Techcrunch has learned. Instacart confirmed the departure. We were tipped off about her departure a bit before the whole Amazon making a $ 13.7B bid for Whole Foods thing went down. Law joined Instacart at the beginning of the year and was previously the CMO of Prosper. Instacart’s challenges can change on a nearly daily basis… Read More
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Here’s what Amazon’s acquisition of Whole Foods means for Instacart

A potentially big impact, but also a silver lining.

Amazon’s nearly $ 14 billion deal for Whole Foods will have huge ramifications for the biggest players in the grocery business.

But it also impacts one of the most highly valued startups in the space: Instacart.

Instacart, valued at more than $ 3 billion, delivers groceries to customer doors in around 65 U.S. markets; it sources its groceries off the shelves of 160 partner grocers.

Whole Foods is one of its earliest partners and perhaps its sexiest one. Instacart also works with other big chains like Publix, Costco and, most recently, Wegmans, too.

Here’s what the deal means for Instacart:

It’s hard to imagine a scenario in which Amazon wants to keep Instacart as a Whole Foods delivery partner long term, especially since Amazon is investing big in its own one-hour delivery services like Prime Now, and Instacart presumably doesn’t share valuable customer data with Whole Foods.

But Instacart and Whole Foods signed a five-year delivery contract in early 2016, Recode first reported, meaning they are in just Year 2 of the deal. At the time, sources said that the deal had some exclusivity around the delivery of perishables, which perhaps means there’s an opening for Amazon to take over delivery of packaged goods and prepared foods.

Either way, it seems likely that it will take some time for Amazon to unwind this deal — or perhaps they can pay up big to break it. But even if it surprisingly goes the full five years, the chances of a renewal seem extremely unlikely.

If Amazon does find a way to end the deal — or carve out the non-perishables business for itself — Instacart’s revenue will take a hit. The question is how big.

Instacart declined to comment, but multiple reports said Whole Foods makes up less than 10 percent of Instacart’s business. The big question is whether that number includes delivery and service fees on each Whole Foods order in addition to the commission Instacart earns directly from Whole Foods. Again, Instacart declined to comment. This is an important question because those fees combined may account for more revenue on an order than the commission paid by Whole Foods.

There’s also an indirect impact to take into account: Some Instacart customers pay an annual membership of between $ 99 and $ 149 for unlimited deliveries. With Whole Foods being one of Instacart’s biggest partners, it seems safe to assume that a material chunk of those subscriptions are used on Whole Foods deliveries. That’s a risk.

As Recode first reported last year, Whole Foods has made an investment in Instacart, though it’s believed to be a small one and does not involve a board seat. Still, if Amazon’s deal for Whole Foods closes, that could mean Amazon ends up being a shareholder of Instacart.

Even so, the bigger picture here is that Amazon sees value in Whole Foods’ real estate, which means Amazon is more likely interested in exploiting all of its locations to deliver all kinds of items more quickly to its customers. It’s not only about grocery.

The silver lining for Instacart is that you could make the case that this acquisition is validation of its model and the important role it plays in providing an innovative service to traditional grocers that aren’t at the forefront of technology.

The acquisition is an enormous signal that Amazon is dead serious about the grocery business, so Instacart will continue to position itself as a grocer’s No. 1 ally.

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