I’m fascinated that services like Instacart can command multi-billion dollar valuations. Sure, the sharing economy is in full swing, and making your pitch ‘the Uber of grocery deliveries’ is nice, but I’m intrigued how they are going to make much profit long term. Revenues might have increased 10X over the past year, but I’d love to know how much (if any) is profit.
SinceÂ most of their revenue comes from price markups, it makes you wonderÂ what advantage they’ll have once competitors start the inevitable pricing wars that will bring those margins close to zero. Having the additional fundingÂ certainly gives them plenty of breathing room though, and with only 50 full time staff (as of May 2014) their overheads are relatively low (everything else is contract shoppers, and they have no inventory – since that’s in the stores themselves).
Positioning themselves as partners to retailers, as opposed to competitors, is a smart move (and clearly differentiates them from the Amazon offerings).
It’s a nice time to be a consumer.
UPDATE 16 Jan 2014: As Om notes, looks like Instacart are changing their business model.