Look Out, Amazon Fresh: Instacart Announces Grocery Delivery Expansion

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Popular grocery delivery service Instacart announced that it’s expanding into more neighborhoods around Philadelphia as well as adding additional store options for customers and same-day delivery. Instacart is now available in the San Francisco Bay Area, Chicago, Boston, and Washington, D.C., and is offering grocery delivery within one hour.

Instacart offers groceries for delivery from popular chain stores like Whole Foods Market (NASDAQ:WFM) and Costco (NASDAQ:COST), as well as local grocers. The service was launched in Philadelphia just a month ago and only offered shopping from Whole Foods at that time, but it has now expanded to include local grocery stores Super Fresh and BJ’s Wholesale Club. For bulk stores like Costco and BJ’s, Instacart pays for its own membership fee so that their customers don’t have to, enabling Instacart customers to shop at one of the big bulk stores without having to pay for a yearly membership.

The Philadelphia Business Journal spoke to Bill Babeaux, the city launcher for Instacart, about the new options available to Philadelphia residents. Babeaux said that many customers in Philadelphia and the surrounding suburbs had expressed interest in a low-cost bulk option through the service. The company is even considering expanding to offering produce from local farmers markets in the summer.

Babeaux told the publication that the company’s biggest customers interested in bulk items are office managers and families living in the suburbs. “We’ve seen it in other markets once we add large bulk options,” he said of the interest from office-based customers. “It’s easier for managers because they don’t have to schedule days in advance like you do with other services.”

Babeaux added: “We had done a lot of great business in Center City, but we did notice that out in the Main Line suburbs there was a lot of demand. It’s always a hassle to get to the grocery store. We get a lot of business from families. Even if they have a car, they’d rather spend more time with their kids at home than loading up into the van and then going to Whole Foods.”

The big question is of course whether these smaller grocery delivery startups, like Instacart and Peapod, among others, can compete with heavyweights like Amazon’s (NASDAQ:AMZN) Amazon Fresh and Wal-Mart’s (NYSE:WMT) Wal-Mart To Go. So far it looks like Instacart has a pretty competitive model when compared with other grocery delivery options, which explains how the company has managed to grow so quickly.

An Instacart membership costs just $99 a year, after which any grocery delivery more than $35 is free. Deliveries can often be made in under two hours. An Amazon Prime Fresh membership costs $299 per year and is currently only available in Seattle, the Bay Area, and Los Angeles. Amazon Prime membership comes with additional benefits through Amazon, but if groceries are all a customer is looking for, the choice is obvious. Research from RetailNet Group has also shown that groceries purchased through Amazon Fresh are more expensive than those from Instacart.

Grocery delivery may still seem to have a high-end connotation to many people who assume they just can’t afford a luxury. Instacart’s small yearly fee and affordable groceries from a variety of stores are doing a better job to change that and make grocery delivery more available to the masses than Amazon’s service.

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