Instacart taps vendors to offset costs

Instacart is partnering with vendors to offset delivery costs. The grocery delivery startup is now getting some of the largest suppliers of consumer goods to make promotional offers, including discounts on purchases and free shipping.

General Mills, Nestle, PepsiCo and Unilever are among the first group of brands advertising with Instacart and offering discounts to shoppers. The program has been in place for roughly six months, according to Bloomberg Business, and now accounts for 15 percent of Instacart's revenue.

For example, shoppers who spend $10 on Red Bull are promised free shipping or a discount on a particular branded item. "It's like (Google) AdWords for groceries," Instacart CEO Apoorva Mehta said.

Supermarket operators are adding delivery options through third-party suppliers and Instacart is increasingly the delivery company of choice. Yesterday, it added Giant Food stores in Washington, D.C. to its roster. Instacart now operates in 18 metropolitan areas, and D.C. is one of its largest markets.

The delivery model is considered unsustainable in terms of costs today. Instacart is profitable in just four of these markets and 60 percent of its orders lose money, according to Bloomberg. The company is looking to reduce costs by cutting staff and increasing delivery fees, something shoppers typically balk at.

Retailers, and especially supermarkets with their razor-thin margins, are increasingly looking to vendors to offset these costs. Not only is Instacart monetizing CPG placement, but Whole Foods recently signed a multiyear deal with Instacart, expanding the markets in which the service is offered, and plans to invest in the company.

For more:
-See this Instacart press release
-See this BloombergBusiness story

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