Impact of the Amazon-Whole Foods Deal on Instacart | Hacker News Reader

Impact of the Amazon-Whole Foods Deal on Instacart

forbes.com

101 pointswhocansay75 comments

We've had mixed experiences with Instacart. At first we loved it. They literally have ONE job to do: make me not have to go to the grocery store.

But then we've had a couple of instances where they didn't pick the right food, or I rejected their replacement and they still sent it anyway, and I've had to go to the grocery store to fix the error, which defeats the entire purpose of Instacart.

At the same time, you feel like such an entitled ahole for complaining (even if you're not mad) that you asked for strawberry preserves and got raspberry preserves instead (or you ask for boneless chicken since it's easier to cut, but you get chicken with bones). I mean even typing it, I can't believe what a spoiled brat I sound like. But at the same time, this is the entire purpose of their service. If they can't get grocery shopping right, I just won't use them.

The other thing is, Instacart is aggressive about advertising its Express product but it's nearly impossible in all their copy writing to see what the actual price is. I had signed up for the trial but never actually found out what the price was (and it was "annual" which was even more scary), so I just never went ahead with it.

I actually have a crazy conspiracy theory that the reason they swap certain items is because there is a secondary means of profit where Instacart makes money through companies paying them to “suggest” certain products. I’ve had multiple occasions now where they’ve said they couldn’t find an item that I knew was in stock, and in mass quantities. I’ve had common brands of milk swapped out for expensive shit like Atlanta Cream Top (which ended up being tasty). I have no hard proof, but I suspect.

I've had the same experience. I'd select the cheapest possible chicken breast from Whole Foods and they replace it with air chilled, free range chicken breast. The difference in cost was quite significant per pound.

I don’t think so because every time they do this, (often), I let them know and they refund that more expensive price, so I’m not sure it would be economical

It's classic corporate bully tactics. Most people will let themselves be steamrolled and the corporation knows it. If one person (you) complains they will gladly refund because they know twenty others will not be able, know how, or care enough to pick the fight.

It's the same strategy as "unexplained" charges appearing at random on people's phone and cable bills. Concede one battle, win twenty others. Massive fraud being perpetrated every day gets a pass because:

1) each individual fraudulent act is so small the cost of fighting it is greater than the insult perceived by most victims

2) arbitration clauses

3) monopoly

4) corruption (kickbacks &c)

5) delegation of customer service to automated answering systems; it's easier to bilk your fellow man when he's invisible to you

Don't ever kid yourself, these policies are intentional and calculated, with malice aforethought. You can be certain spreadsheets and charts were created, examined and became the basis of an affirmative executive decision.

Please contact our support team in these cases, we absolutely aren't deliberately choosing more expensive items in order to profit -- see my comment elsewhere on this article, but we primarily look at your previous preferences and the preferences of other customers.

If you chose the cheapest possible option, it does seem inevitable that any replacement would be more expensive :-)

And, sorry that we were frustrating to you.

(engineer @ Instacart)

If this is really happening frequently, could it the pickers going for items they already know where to find?

Yeah as somebody who was a personal shopper before the internet getting requested items can be really tricky there is no guarantee they won't run out of something there is no Ralfs API to plug into to give real-time inventory information.

> there is no Ralfs API to plug into to give real-time inventory information

Which is why "send people to grocery stores" is going to lose out to more vertically integrated models.

  there is no Ralfs [sic] API to plug into to give real-time inventory information

[citation needed] :) there are many ways to "vertically integrate" with retailers (and yes, some do in fact offer a real-time API of what is in store, and our availability information for those is fantastic)

If they’re doing that they should stop because it’s a slam-dunk fraud class action. That’s true even without any promotion agreement and even if the customer consents to the higher priced item.

> it’s a slam-dunk fraud class action.

Ah, if only it was that simple. Companies just don't let you sue any more. (Including, I hasten to add, almost every single one of those darling HN graduates.)

https://www.instacart.com/terms

CTRL-F, "Arbitration"

> Mandatory Arbitration: If we’re unable to work out a solution amicably, both you and Instacart agree to resolve any disputes arising out of your use of the Services or these Terms through binding arbitration or small claims court.

> CLASS ACTION WAIVER: TO THE EXTENT PERMISSIBLE BY LAW, ALL CLAIMS MUST BE BROUGHT IN THE PARTIES' INDIVIDUAL CAPACITY, AND NOT AS A PLAINTIFF OR CLASS MEMBER IN ANY PURPORTED CLASS, COLLECTIVE ACTION, OR NON-PAGA REPRESENTATIVE PROCEEDING (COLLECTIVELY “CLASS ACTION WAIVER”). THE ARBITRATOR MAY NOT CONSOLIDATE MORE THAN ONE PERSON'S CLAIMS OR ENGAGE IN ANY CLASS ARBITRATION. YOU AGREE THAT, BY ENTERING INTO THESE TERMS, YOU AND INSTACART ARE EACH WAIVING THE RIGHT TO A TRIAL BY JURY OR TO PARTICIPATE IN A CLASS ACTION.

Hah, of course. I meant whatever, there is a lot of bad class action litigation. I figured it was worth pointing out here because it would seem like the customer agreeing to the higher priced item would immunize you, but it wouldn’t.

But that was kind of my point: Delivering anything short of a bobcat[0] instead of a bag of potatoes doesn't matter. Instacart's own terms of service put the onus on running you through the arbitration gauntlet. Well, or small claims, but only one person at a time so they can just drip-dry the entire problem away.

Sure, people will eventually stop using the service if the problem gets bad enough but as long as they keep the salami sliced[1] fairly thin, they'll get away with it for a long time with no outside check.

0 - https://www.xkcd.com/325/

1 - http://scams.wikispaces.com/Salami+Slicing

This clause is not legal or enforceable. You can sue anyone you agreed not to, contrary to corporate legal attempts to intimidate.

On what do you base this claim? As far as I know, you can't, as per the Federal Arbitration Act. And after Concepcion you can even be forced to go to arbitration on an individual basis rather than as a class.

You can file. It will never make it past the first motion.

YES! We have seen this too. We joked about it too. “How come they picked eggs that are twice as expensive?”

I’m the engineer that wrote all the initial replacement algorithms and I currently work on the Instacart fulfillment system. We never have designed or even considered a system that would attempt to profit off not found items, that’s insanely anti-customer and unethical. We do suggest items on the storefront, pre-purchase, but our substitution recommendation system is entirely driven based on any specific requests from you (that order or previously) and a collaborative model driven by prior replacements.

We are also working on better ways to collect preferences from folks; I’m not sure when any of that would be going live.

> We never have designed or even considered a system that would attempt to profit off not found items

But now that you’ve been told, it’s too good of an idea to let it pass innit?

Delete this post

Care to explain why? Don't be a corporate cat trying to shut down anything where people from a company are honestly trying to correct a misconception.

This post doesn't delve any more details than what the user is expecting from Instacart.

Nothing like being a corporate cat. More to the point that OP is on record talking about how unethical a certain practice may be, which may be something IC does in the future. It was mostly just to protect OP

I’m not sure what this means. The OP was frustrated with something they thought we were doing, and I (as the engineer who wrote the actual code and knows what we do and do not talk about) wanted to set the record straight.

Maybe you should consider adjusting your recommendation engine to default to keeping the price as close to possible as the original item. The majority of your customers are going to have this as their highest priority. Basing it off prior replacements (which were most likely not optimal the first time), sounds like the engine might be perpetuating mistakes.

We do use (as inputs) problems folks report with replacements (which include “too expensive” as an option), so theoretically this is covered, but I do think that we will be looking at the initial ranking and boosting as it seems this is a consistent problem. As I noted elsewhere, we will be looking at better collecting preferences from customers as “the majority of customers” approaches don’t always work for very personal items like groceries (eg some folks would prefer to have it organic regardless of cost!)

Right but if I’m shopping at Whole Foods, all the red grapes are organic. So are the eggs, whether they’re $4 or $9 a dozen.

Yep, makes sense -- take my comment as "how things stand now" not "everything is hunky-dory" -- we will definitely be looking at this.

Well from the article:

> Adopting an asset-light model, Mehta first built an app that let customers shop from established retailers--charging a delivery fee and, at least initially, a slight markup. Instacart kept a cut for itself and paid the shopper.

> Four years later those partnerships make up a significant percentage of revenue. More than 80% of orders are placed with partners, up from less than 20% three years ago.

Do they give you the other product at the original price (which UK supermarket deliveries do), or do they bump up the price after you've placed the order?

Realistically, most people buy the cheapest thing that suits their needs. If that item is out of stock, a replacement is either more expensive or does not suit their needs, e.g. not organic when the original item was.

How is it entitled to be cross about a company failing at their sole purpose for existance? They can’t do what they’re supposed to do.

My wife has had issues with Fred Meyer’s (Kroger) ClickList service on a couple occasions, she stopped using it because they would give us milk with super close expiration dates or bad produce - which is really unfortunate because all 95% of the time there was no issues with our order, but that 5% was enough that paying $5 per order and still needing to go back to fix issues was more hassle than it was worth. Real shame too, because she regularly spends an hour or more a week shopping for our family of 3 - the time saved was invaluable.

I completely agree. If you use Instacart for cooking, even one substitution could make you have to go to the store again. And I find that a lot of Instacart shoppers have very little intuition/common sense about what are sensible substitutions.

I tried out Express because I would gladly pay the subscription fee if it worked. I ordered from Target a couple of times and the second time about a quarter of my order was substituted. And I go to Target enough to believe that most of these items were there. The shopper just didn't know where to look. In fact, I could see in real time that this shopper wasn't qualified. I wish there was a button that would've allowed me to abort and get a new shopper.

I can't imagine having to deal with this if I were preparing a recipe.

Worse thing I've seen was an Instacart shopper at the Safeway on Market just slamming the groceries down out of her basket onto the self-checkout counter. Like fragile stuff, eggs, produce, etc. She was angry about something and taking it out on the buyers food. I felt like I was watching one of those babysitter abuse hidden camera videos. I use Instacart pretty regularly so this scared me a little.

Demanding to get what you paid them to get isn't entitled. They are cheating you, and you shouldn't stand for it.

Don't feel bad, and don't let them make you feel bad. They are the ones that are screwing you here. Especially when they specifically go against your instructions.

Reps from the company have posted here saying that you absolutely should be telling their customer service about this, and others have said that you can get refunds from them for the mistakes.

That's not being an ahole at all. They need to get this stuff right. Food allergies and intolerances are very common.

I follow a very strict diet to manage Crohn's disease. If ask for strawberry jam, not only is raspberry jam not acceptable, but other brands of strawberry jam are probably also not acceptable.

>Mehta launched the service in 2012 and applied to Y Combinator, the prestigious Silicon Valley accelerator that hatched giants like Airbnb and Dropbox. He was rejected because the application deadline had passed. Undeterred, Mehta used Instacart to deliver a six-pack of IPAs to a Y Combinator partner. Within 30 minutes, he was asked to come in for an interview and the next day was accepted into the program. Shortly after, he closed a seed investment round.

A classic example of having faith in yourself and your product.

Wait, do people start companies from the ground up without faith in themselves and/or their products?

In most cases yes, people just starting do not have faith in themselves and their product. They have faith in their future selves and their future product.

If instacart had not even had an MVP ready, the more likely response would have been to wait for next year.

> If instacart had not even had an MVP ready, the more likely response would have been to wait for next year.

Correct.

I was that YC partner. The beer was very good. 21st Amendment Stout.

tl;dr They are "stronger than ever" because all the other grocery chains are shitting their pants at the Amazon - Whole Foods deal and calling Instacart to shore up their ecommerce operations.

This does not in any way, shape or form suggest that Instacart actually has a strong long term position or that their solution will help these grocers prevail against a direct assault from Amazon. Their largely manual, layered-over-retail fulfillment model has inefficiencies that cause higher costs and stocking issues vs. the high-efficiency warehouse approach that Amazon has perfected.

  Their largely manual, layered-over-retail fulfillment model has inefficiencies that cause higher costs and stocking issues vs. the high-efficiency warehouse approach that Amazon has perfected.

[citation needed] you mean the "perfected" approach they are shutting down in 9 states? (https://www.recode.net/2017/11/3/16601488/amazon-fresh-cance...)

noting this as an engineer on the team that does order fulfillment @ instacart and who actually knows our model...

Citation? Ok, you asked for it...

"Instacart is infuriatingly bad. Replacing your main entree meat item with nothing, no call/notification, negates all convenience it offers"

"My 1st @Instacart experience will be my last. 26 of my 49 items have been replaced but mostly refunded so I still have to go to the store."

"i once had them tell a store had no cheese. completely out of cheese. no cheese was available to replace. i was naturally pretty cheesed off"

"@instacart Why should I continue to use you all if every time I order, a huge % of items are out of stock and replaced? Update your database"

"Same happened to me! 14 items, and 8 ended up being replaced. I'm going to give them another chance, hopefully it was just a bad shopper."

...and more.[1] Clearly the lack of integration with realtime inventory systems is a weak point. But perhaps you could clarify how the model is supposed to work.

[1] https://techcrunch.com/2017/10/01/instacart-needs-to-deeply-...

I was noting our model in comparison to Amazon, which has it's own set of inefficiencies -- capital for warehouses far outside of city boundaries, the dedicated labor force/trucks, spoilage and selection issues, etc.

In no way am I noting that our model is perfect or without inefficiencies, just that the idea that "Amazon has the perfect and most efficient grocery delivery system" and "to attempt to use local retail grocery stores as a collective warehouse is not profitable" is just a fallacy.

I didn't say either of those things. Those are fake quotes.

It is odd that you characterize warehouse real estate, labor and delivery fleet costs as "inefficiencies" in comparison to retail stores. Precisely the opposite is true. Retail stores have vastly higher costs per square foot, higher headcount, and are not at all optimized for delivery vehicle operations.

I did not say Amazon has a perfect grocery solution in place today. They just closed the Whole Foods deal a couple months ago. What I am observing is that all these grocers calling up Instacart in a panic is not at all reflective of a strong long-term position. Instacart's unintegrated, layered-over-retail model carries all the overhead of retail and then some. Amazon is building a fully integrated supply chain, warehousing, delivery and retail system and so has a lot more operational efficiencies it can bring to bear.

Those are not "fake quotes" -- they are directly in the parent I was replying to...

I am not sure you can matter-of-fact state that "Precisely the opposite is true"; this is in fact, not true.

I am not going to respond further as it's not entirely clear where you are getting any of your information ("layered-over-retail model carries all the overhead of retail and then some" as an example of a totally unsubstantiated and untrue statement).

I have access to both Amazon Prime Now and Instacart in my market. Prime Now has access to a high-quality local grocery chain, and Instacart has basically everything else including Whole Foods. That local chain is much better in terms of selection and quality than anything Instacart has, especially Whole Foods, which I find to be overpriced for pretty indifferent quality.

Despite that, the service quality from Instacart is so much better than Prime Now that I prefer to use them unless there's something I absolutely cannot get except from that local chain. I'm crossing my fingers hoping that the outcome of Amazon's acquisition is that Instacart loses Whole Foods and the local chain moves over to Instacart, because then I will never order groceries from Prime Now ever again.

By service quality I mean all of these: good judgment in selecting items like produce and meat (although the meat quality from Whole Foods is very inferior), ability to add items before the order is shopped (you can't do that even if you place an order for the _next day_ with Prime Now), ability to cancel or otherwise alter an order (I had to cancel a Prime Now delivery in an emergency, and it required calling customer service), interactivity in selecting substitutions, good judgment in selecting substitutions, and accuracy and granularity of order status page.

I'm not saying I haven't had the occasional bad experience with Instacart on any of those, but they're good enough that I'd trust them to get me the groceries I need before a party I forgot to shop for. Prime Now I wouldn't trust unless I knew I had a good fallback if they mess up.

Prime Now and Amazon Fresh seem very different to me. I use Prime Now as a faster version of Amazon.com--if I do something stupid like move apartments and forget to buy a shower curtain until after the shops are closed, I can put in a Prime Now order for first thing in the morning. My wife uses Prime Now as a slower and more cost-effective version of goPuff sometimes.

Amazon Fresh, in contrast, is my primary source of groceries. Unlike Instacart, prices are consistently reasonable, the website actually knows what's in inventory so I don't have to make backup plans for everything I'm trying to get, and when I buy frozen foods, I get handy chunks of dry ice that I can use to make homemade smoke machines. Amazon Fresh is the first service I've ever used--and this includes previous incarnations of Amazon Fresh--that makes me seriously wonder whether I will ever make a trip to the grocery store again.

Can you clarify what you mean by "prices are consistently reasonable"? We do try to publish precisely what business model we are operating with pretty prominently on our storefront (e.g., if we have price parity with the store, or have a markup).

(engineer @ Instacart)

It's been a couple years since I've used Instacart, but I remember Costco deliveries being consistently expensive enough that I was better off going to the store myself unless I was literally crippled (which I was at the time).

since then, we've formally partnered with Costco and have adopted their online pricing model (still more expensive than the store, but not by very much): http://www.sfgate.com/business/article/Costco-debuts-new-gro...

Fresh isn't available in my area, and my understanding is that they've recently been withdrawing from some regions, not expanding. The subscription fee is also not attractive for something I expect to use maybe once or twice a month.

Do you only buy groceries once or twice a month, or are you expecting that you wouldn't use Fresh as your primary grocery store?

I had the same expectation for years, but I'm really pleasantly surprised by Fresh these days--and I was outspokenly critical of it at first. I was a regular Costco shopper previously, so I don't mind paying a membership charge if I'm going to actually use it.

I'm glad you are having a positive experience -- it's really heartening to see feedback like this.

(engineer @ Instacart)

This is a press release by InstaCart assuring their investors and employees everything is fine. We know it's not fine when PR like this comes out

it’s “Instacart,” not “InstaCart” and [citation needed]

(disclaimer: engineer @ Instacart)

My experience with Instacart for Whole Foods delivery has been pretty bad overall. Too many items were consistently being marked as not available / not found by the shopper. Once, up to a third of my cart or almost 10 items. When you assembly your list and click "buy", you expect to get what you ordered, not for a third of your order to be missing come dinner time. I'm afraid Instacart won't ever be able to deliver a great experience as long as they have shoppers walking the aisles instead of direct back-of-store integrations and real time inventory.

The substitutions offered are also frequently terrible, and always without fail for more expensive items. Sometimes ridiculously so. And I'm pretty sure the shopper sometimes just doesn't want to buy some of the stuff I've ordered, like watermelons or water, that I know is available in the store.

Overall, I've found FreshDirect to offer a much more reliable service with good pricing and selection as well. They seem more professional in all regards. I also look forward to seeing what Amazon / Whole Foods come up with together, but I don't think the Instacart shopper model is something I'm interested in using again, it just seems like a fundamentally inefficient model.

Yes in the UK Tesco suffers from this (not as badly as a 3rd of items), because they pick out of their local supermarkets for the most part.

Ocado on the other hand uses huge centralised warehouses which have much more stock. They can also estimate substitutions ahead of time (much better stock management) based on delivery time and inform you to pick something else rather than some random choice when it's too late.

The difference in substitution levels is night and day. I feel instacarts model is really wrong on the logistics side.

> Instacart has more than 500,000 customers and approximately $2 billion in revenue, according to Forbes estimates. (The company, which counts the full price of customer orders as revenue, declined to comment.)

What significance does the caveat of counting (recognizing) full price of customer orders as revenue have? Is it different from traditional retail business?

It's GMV (Gross merchandise volume or GMV is a term used in online retailing to indicate a total sales dollar value for merchandise sold through a particular marketplace over a certain time frame. - wikipedia) not revenue (fulfilling the order through their service). Companies use it to inflate the topline (revenue) figures.

> Companies use it to inflate the topline (revenue) figures.

So, correct me if I am wrong, this implies Instacart is inflating the topline figures?

It is typical to include cost of goods a company onsells at a markup in their revenue figures. It's just worth noting in this case as they are effectively just a delivery service so it might be unclear.

I re-read the article. It says -

So the implication is that they are not selling stuff at markups now.

> It's just worth noting in this case as they are effectively just a delivery service so it might be unclear.

In that case, wouldn't revenue be the "delivery service fee" instead and not the value of what was delivered?

Looking at the article their revenue streams seem to be: delivery fees, Instacart Express Membership fees, partnerships with stores and advertisement fees. In which case using GMV seems odd.

So, the original question stands.

Yes - In my view revenue (and probably most accountants would also say this) is the delivery fee only. If you think about it, most marketplaces have this same issue. This isn't unique to Instacart, Enron did the same thing...(our accounting prof used them as an example). It's just not useful for analysis of the company.

Edit: Most marketplaces can charge you the "full price" to keep the transaction on the platform; however, they are only paid a small portion of that transaction as revenue -- e.g. Fiverr/Upwork/etc. don't keep the full amount the service provider charges their client, only a (hopefully) small fee.

https://a16z.com/2015/08/21/16-metrics/ #6 Gross Merchandise Value (GMV) vs. Revenue "In marketplace businesses, these are frequently used interchangeably. But GMV does not equal revenue!" The rest of A16Z's explanation is worth reading.

Moses won't come down the mountain with stone tablets telling you what Instacart's "real" topline revenue is. You as a potential investor have to decide what you care about and how you want to compare it to other companies. Imagine Whole Foods sells an apple for $.70 that it bought for $.60 and paid a shipping company $.05 to ship it to them, and Instacart delivers that apple, with the customer paying them $.75. Whole Foods will count that as $.70 of topline revenue; the shipping company will count it as $.05 of topline revenue. You can see Instacart as being like Whole Foods, for $.75 of topline revenue. Or you can see that as Instacart being like the shipper, for $.05 of topline revenue. Neither of these is the objective truth; you have to judge which is more reflective of Instacart's future potential, whether their business is more like a seller or a shipper.

Instacart began delivering in my area recently, and my first order was yesterday. All went well and I'm pleased. It took me back to a time when I ruminated start-up ideas. Standing in line at a deli, feeling guilty for making the deli person have to saw through a very tough salami, I imagined it was a perfect opportunity for robotics. Now I see it was simpler than that, just give customers a different way not to wait in line, and remove guilt by creating an opportunity to give the delivery person a tip. Why don't we tip deli people anyway? It's awfully physical labor they do, when the slicers are manually powered, and we as customers have to stand there and watch them. Sometimes it seems humiliating. I rarely feel as thankful as when I thank the deli person who hands me my order of cold cuts. But I still think the job should be roboticized.

Costco claim “free drlivery” online, but the prices are 20% higher than in my local Costco store.

I've gotten pretty good delivery service from Safeway in Seattle. What does Instacart provide over them?

I like instacart but its frontend needs a lot of work. Until amazon fresh exists where I live it is nice to have around.

We actually take a lot of pride in our front end (most recently, to make as accessible as possible). Can you be more specific?

(Engineer @ Instacart)

please?

There's some scrollbar jank on the homepage; the rendering of the page drops to just above 50fps rather than the buttery smooth 60 scrolling all the way down.

It's not going to lose you customers but it's the first thing I tested for.

The add to cart button seems to work inconsistently. The images and the page loads also pretty inconsistently (I am in Tucson if that helps).

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