How Instacart Prices Compare to Competitors
The appeal of on-demand grocery shopping is evident – who among us wouldn’t want a personal shopper to find exactly what we want at our favorite local stores and deliver it right to our door? That question, of course, is followed by another important question: Is it affordable?
In this article we’ll examine Instacart fees, how the company charges for groceries, the Instacart Express membership, and how Instacart prices compare to other competitors such as Amazon Prime Now, Shipt, and others.
A Brief Overview of Instacart
Instacart is an online grocery delivery service that pairs you with a personal shopper and delivery person (often the same person). Using the Instacart app or Instacart.com, you select food items, add them to your cart, and pay right in the app.
The app allows you to select preferences for what shoppers should do in the event an item is out of stock, and also provide special instructions for what you prefer when it comes to your fresh food and produce.
The food is then paid for by the shopper, and can either be dropped at the front of the store for pickup (this is available at some stores, depending on the market), or delivered right to your door.
Instacart has partnered with many of your favorite stores including Whole Foods, Costco, Kroger, and Publix. (Two other popular stores in the Instacart family have limitations: Walmart is only for Instacart users in Canada, and the company’s partnership with Target is ending due to Target acquiring another grocery delivery company.)
Most major markets guarantee that your food will be at your door in a two-hour delivery window, though that varies by city and state.
Instacart was founded in 2012 by Apoorva Mehta, a former Amazon employee who says he had 20 failed startup ideas before Instacart took off. He wanted to take the Amazon business model of quickly delivering books and home goods to people’s homes and apply it to local groceries. His idea took off, and Amazon paid him back by launching their own rival grocery delivery service and partnership with Whole Foods – more on that shortly.
How Instacart Makes Money
When Instacart was first started in San Francisco, the service worked pretty crudely: People would order through an app, then shoppers would just go to a store like a normal customer, buy the food, bag it, and deliver it. There were no partnerships with stores. Employees were just normal shoppers, doing an errand for someone.
The company made its money by adding a markup to all the store prices for each individual item. Customers were paying a premium for everything they bought, with the company pocketing the money, and then paying the delivery drivers hourly, with a tip option also eventually being added.
As the company expanded to New York City, Chicago, Boston and other major markets, they eventually began partnering with grocery stores and were then able to offer prices for exactly the same as you would pay in the grocery store. What had been a luxury app for people who hated grocery stores quickly became a decently cost-effective way to save time with shopping.
To make up for the lost revenue that came from eliminating product markups, the company instituted Instacart delivery fees and service fees. At one point service fees were optional, though customers and drivers were both upset because many people believed the optional 10 percent service fee was a tip for the driver, but was actually a fee that went directly to the company.
After an outcry, the company revised its pricing to its current model.
Understanding Service Fees, Delivery Fees, and Tips
Instacart’s current model charges a service fee, a delivery fee, and a tip for every order. The delivery fee, which had been $5.99, was recently reduced to a flat $3.99 for every order over $35.
The service fee, which had been an optional 10 percent of every order, was reduced to 5 percent and made mandatory, and then a default tip was introduced that is always 5 percent of your order total. So the company and the Instacart shoppers now split a 10 percent fee right down the middle.
Barring a special membership (more on that momentarily), those fees are fixed, unless you are in a rush. The delivery cost can go up based on your market and which delivery options you choose.
Most markets guarantee same-day delivery for your Instacart order and large cities usually offer guaranteed two-hour delivery, but if you need a quick delivery time, some markets allow you to pay a rush fee of $9.99 for guaranteed one-hour delivery.
Of course, you can also avoid delivery fees with grocery pickup, though not every store allows you to do that. (Some businesses don’t want to have bagged groceries pile up at the front of the store, and insist that Instacart drivers carry away the food and deliver it immediately.)
The Instacart Express Membership
One way to avoid at least some of the fees associated with Instacart is to get an Instacart Express membership, which offers unlimited free delivery for members.
The $99 annual membership fee gets you free two-hour delivery in most markets for orders over $35, and they are currently offering a free two-week trial for anyone who wants to try it out.
Be warned, however, after the two-week trial is over the company automatically charges you the entire $99 for the annual fee. So try it out, but make sure to cancel before the trial is over if you don’t want to be charged.
The $99 annual fee is a reduction from the previous Express membership, which used to run $149 annually. They also recently introduced a $9.99 a month membership for people who prefer to pay monthly for the membership.
Instacart Prices Compared to Competitors
Instacart boasts a $3.99 flat delivery fee for orders over $35, with free delivery for people who pay for their $99 annual Express membership. But how does that compare to other companies in the space?
Amazon Prime Now is the grocery delivery service offered by Amazon to its Prime customers. In most markets they guarantee two-hour home delivery for items, and have a partnership with Whole Foods, much like Instacart. An Amazon Prime membership currently costs $129 annually, but that also gets you all the benefits of a Prime membership – including free two-day shipping on most Amazon orders – as well as the food delivery service from Prime Now.
A new-ish competitor in the space is is Shipt. Shipt has recently been acquired by Target and will have exclusive home delivery rights for the massive chain. Shipt has an annual membership fee of $99 a year or $14 monthly. With that membership, all orders of $35 or more have no delivery fee, with orders below $35 costing a flat $7 delivery fee.
Peapod is another home delivery grocery service, though they charge a fee for every order, which is on a sliding scale based on how much food you buy. For $100 or more in groceries, the fee is $6.97. Between $75 and $100, the fee is $7.95, and for orders between $60 and $75, the delivery fee is $9.95. Peapod is also experimenting with memberships that allow you to save on fees by only ordering mid-week, during times that traditionally have lower demand.
Food Delivered From Your Local Grocery Store
Instacart can be a great option for people who want groceries and are happy to pay for home delivery. Understanding the pricing model and the fees associated with the service can help you put a price on the service and calculate if it’s worth your time to pay a delivery fee, or an annual membership that saves on those fees.
Some people do love grocery shopping. But for those who are limited on time and don’t take joy in heading to the store to find food, Instacart can be a time efficient way to get food to your home.
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