> But the problem is they get traction by operating at a loss, so when they try to run profitably they inevitably fail as people bawk at the prices.
Well, in a competitive environment like Uber vs Lyft, both companies subsidize the service to the benefit of the customers (and employees) in an attempt to maximize market share.
There is a lot to gain by becoming the market leader in a service like ride sharing or grocery shopping. The market is very big and it's a basic need that most people have.
If anything, I think there is too much expectation by investors that a success in a non-ridesharing market will generate earlier-stage financials that look like Uber's.
With Instacart, the value add is such a no brainer. Imagine if everyone had to go to a shop, park, and walk around picking out mail that had been addressed to them. It would be hugely inefficient. This is why the postal service delivers mail to everyone's home.
The service is considered so essential to the functioning of society that it's viewed as a legitimate state-run monopoly and aggressively subsidized.
Most people spend significantly more time grocery shopping than they do picking up letters and parcels. This is a significant amount of leisure time wasted.
Instacart can also easily swoop in and source certain high-margin goods on its own, or offer price comparison or even auction-style services where merchants bid on the virtual cart and it is fulfilled by the merchant offering the lowest price.
All these are obvious next steps for Instacart, which wisely sees Grocery stores as a relic of the past ready to be replaced by something better.
Grocers are market makers who specialize in understanding demand patterns. This is what makes a grocer successful, but grocers must spend lots of money simply to help alleviate the drudgery of being at the store shopping for one's self. One place near where I live features an elaborate player piano, hot bar, oyster bar, and wine bar!
Most customers don't buy the oysters or a glass of wine, but having those side-acts makes being at the store pushing a cart through aisles feel less like demeaning, robotic drudgery.
Instacart has found a better way. You take out the app, easily search for products, see recently/frequently purchased products, set up a delivery time, and you're done. It all arrives as if by magic.
Maybe someday the shopping will be done by actual robots and the delivery by drone. But even in that world, the market-maker wisdom of local grocers will be just as relevant as it is today, and the high quality shopping experience of the Instacart app will be at least as useful.