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Amazon's $13.7 billion purchase of Whole Foods in August 2017
has been a double-edged sword for Instacart, throwing the Whole
Foods relationship into doubt while driving rival grocers such
as Kroger <KR.N>, Aldi and Costco <COST.O> into Instacart's
arms.
"Amazon's intent from day one ... was to integrate Whole Foods
with its own grocery-delivery efforts such as Amazon Fresh and
Prime Now," Tom Forte, an analyst with D.A. Davidson said.
Instacart Chief Executive Officer Apoorva Mehta said on Thursday
that about 350 of its 1,415 part-time delivery employees at 76
Whole Foods locations would be laid off once the divorce begins
in February 2019.
Whole Foods started testing in-house delivery at a Cincinnati
store in February. Whole Foods "pickers" prepare the orders and
hand them off to Amazon Flex drivers for delivery. Whole Foods
did not give Cincinnati shoppers the option to have Instacart
provide those services, as it did in other markets.
At the same time, Amazon pushed the pedal on delivery speeds -
adding one- and two-hour grocery delivery options that compete
with Instacart and other third-party providers.
Instacart bagged the Whole Foods delivery deal in 2014,
elevating its brand with influential young consumers who want
everything from groceries to sofas delivered to their doorsteps.
In 2016, the companies deepened their relationship, forging an
exclusive, five-year agreement to deliver perishables.
It is still not clear what, if any, penalties Amazon incurred
for ending the partnership early. Amazon did not immediately
respond to requests for comment.
Edward Jones analyst Brian Yarbrough said Instacart will find it
difficult to recover from the separation as the delivery space
becomes more crowded and competitive.
Instacart, which has raised $1.9 billion since its founding in
2012, is diversifying its customer and revenue base as grocers
like Kroger and Walmart Inc <WMT.N> expand in-house order
"picking" and experiment with a variety of delivery services.
Instacart added about 100 retail partners this year and has
built a service that uses shopper data to target consumers with
coupons and promotions from packaged-goods brands such as Nestle
<NESN.S>, General Mills <GIS.N>, Coca-Cola <KO.N>.
(Reporting by Uday Sampath, Vibhuti Sharma and Nivedita Balu in
Bengaluru and Heather Somerville in San Francisco, additional
reporting by Lisa Baertlein in Los Angeles; editing by Arun
Koyyur and Sandra Maler)
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