Insight Pre-IPO Deep Dive: Leverage CE Transact US Dashboards to Track Instacart Performance
Instacart is a complex business, serving as both a grocery technology platform and a consumer grocery shopping app. Through Consumer Edge’s unique ability to tag both a main brand like Aldi and a distribution brand like Instacart, we are able to help investors better understand the fundamentals of the Instacart Marketplace consumer business, continuing to track the company’s performance post-IPO. The data shows that although Instacart has shown strong performance on acquiring new customers and keeping retention levels consistent in recent years, it lags competitors on several key metrics. The company faces threats from a macroeconomic environment driving a shift back to in-store purchasing as well as competitors beginning to build relationships with its partners.
In this deep dive, we’ll address the Instacart IPO with Transact US data. Consumer Edge data is highly predictive of Instacart Gross Transaction Value (GTV), with a 99.9% correlation. Since credit card data picks up the total amount a consumer pays on their credit card, it is an excellent representation of GTV, as both include taxes, tips, and fees.
Instacart Correlation vs. Reported
Instacart’s explosive growth during the COVID-19 pandemic as consumers were asked to shelter in place has moderated substantially in the most recent year and a half. While the winter months are seasonally popular times for Grocery Delivery services as consumers avoid going out in the cold and snow, these periods were also ripe for early adoption and have shown y/y growth for Grocery Delivery underperforming overall Grocery. In these months, Instacart has underperformed the subindustry.
However, the typically less popular summer months have provided more opportunities for new adoption and Instacart growth was above both the subindustry and industry for much of that period in 2022. This dynamic changed in 2023 when y/y spend growth for Offline Grocery began to outperform Online Grocery and Grocery Delivery. This is likely a side effect of rising inflation, which may be causing consumers to cut delivery costs in an effort to keep their grocery bills in check.
Ahead of Instacart IPO: CART vs. Industry and Subindustry
Not all of Instacart’s competitors focus on grocery delivery, with many delivering from restaurants as well. Still, Instacart has maintained a high 25-30% market share over the past few years. This share has been decreasing during 2023, with y/y low-single digit declines in every month. The corresponding share increases are coming from restaurant delivery platforms DoorDash and Uber Eats, which have been making inroads into convenience CPG purchases that represent one of Instacart’s use cases.
Competitive Share
Although Instacart’s S-1 focuses on orders above or below $75, CE data breaks out spend per order into more granular tucket buckets. In general, Instacart AOV across ranges is comparable to competitors who focus on grocery, and much higher than convenience-focused Postmates and Gopuff.
Instacart Average Order Value vs. Competitors
Despite being an established player in the market, Instacart manages to continue building new customer relationships. Although these trends are stronger in the winter due to customer seasonality, in 2023 so far Instacart’s new customer acquisition has been about 30% of what it was in January 2021, a strong showing behind only newcomer Gopuff (which is rapidly expanding into new markets) and for most months of 2023 well ahead of direct competitor Fresh Direct.
While Instacart can capture new customers, however, it is not as good at retaining them. As the company mentions in the S-1, the industry has trained customers to expect lucrative sign-on promotions that many customers take advantage of and then never return to the service to pay full price. In 1Q23, Instacart was only able to bring back 26.5% of new shoppers in the following month. Shipt was much stronger at 38.7% (and handicapped by the fact that our data can’t attribute Shipt Target orders), as was Fresh Direct at 36.1% and even Gopuff at 28.2%.
Although the dropoff after the first shopping trip is steep, Instacart has done a good job retaining its most recent customer cohorts beyond that. Customers who first ordered from Instacart in 1Q23 and 2Q23 are showing very similar retention patterns to those who first shopped in 2022. If this trend holds in later months, the company will be able to expect a 12-13% repeat purchase rate 12 months after the first order in 2023.
Instacart Customer Cohorts
New Recurring Customers
Percentage Repeat Purchasers by First Shop Date
For the Instacart IPO, their S-1 refers to a diversifying customer base. Indeed, the company over time has been capturing more and more shoppers in younger demographics. This may be a result of expanding use cases into alcohol and convenience. For Instacart, the demographics represent a lower number of orders per customer and average order value (AOV) than older consumers. In these growing age groups, Instacart lags competitor Fresh Direct when it comes to both orders per shopper and AOV, even though Instacart commands a higher AOV for older age groups. Across age groups, Instacart lags both Fresh Direct and Shipt when it comes to orders per shopper. It is slightly ahead of Shipt when it comes to AOV, although the margin is small enough that it may be entirely due to fee differences between the two companies.
Instacart skews towards higher income customers, and has shown surprisingly little change in the share of customers by income group as inflation has made buying food more expensive. As was true for age cohorts, Instacart lags Fresh Direct and Shipt when it comes to frequency of transactions per customer. Unlike for age cohorts, however, Instacart’s AOV is close to that of both Fresh Direct and Shipt across most income cohorts.
Demographics: Customer Transactions by Age
Demographics: Average Order Value by Age
Demographics: Share of Spend by Income
Demographics: Customer Transactions by Income
Demographics: Average Order Value by Income
Within its partners, Instacart’s share of total spend varies dramatically. In 2Q23, Instacart made up as high as 6% of spend at Publix, but was only over 1% for its top 8 partners. And this share has been shrinking as Offline Grocery has grown. Versus the prior year, share of spend was down for eleven of Instacart’s top 12 partners (by share of spend), and flat for the twelfth. The largest decline was at low-cost Aldi, where Instacart share of spend declined by a delta of -2.6%, supporting the hypothesis that the most price-sensitive shoppers have veered away from Instacart and its fees as groceries have become more expensive.
Competition may be a factor as well. While Instacart’s share of spend for its top partners has been shrinking, DoorDash has increased share of spend at grocers like Aldi, SFM, and Bevmo.
Instacart Partner Share
Change in Partner Spend: Instacart vs. DoorDash
Although Instacart has turned itself into a household name for grocery delivery, in many ways it has ridden a subindustry wave and isn’t able to match competitor performance on several key metrics. For Instacart to succeed and keep competitive threats at bay, it will need to find ways to better distinguish itself in the marketplace and become a catalyst for online grocery shopping instead of a beneficiary of a larger consumer wave.
Consumer Edge is the leading provider of alternative data for consumer spending behavior, and the only provider of global revenue signals. Our data offers insights into not only the Instacart IPO but other hundreds of other tickers and symbols. If you’d like to benefit from using Transact US or other products for other pre-IPO analyses as well as restaurants, retail, and other industry data year-round to track trends and dynamics like these, reach out to insights@staging.consumer-edge.com.
