Online shopping giant Amazon.com said Friday that it's buying Whole Foods Market for $13.7 billion.
Instacart plans to maintain its relationship with shareholder and business partner Whole Foods despite the upscale grocery chain’s pending merger with Amazon.com.
Instacart, which offers an app to deliver groceries from a nearby store, has cast itself as a competitor to Amazon. It has persuaded grocers, including Whole Foods, to partner by warning them of the day Amazon would declare war on traditional grocery shopping.
Now that the long-awaited day has come, the San Francisco start-up — which has $500 million in the bank — is already seeing once-skittish grocers clamoring to strike a deal as soon as possible.
“From the beginning, we’ve been committed to helping grocers compete online,” Instacart said in a statement. “That’s more important than ever given Amazon just declared war on every supermarket and corner store in America. We already work with over 160 retailers across the country and look forward to partnering with many more.”
The company declined an interview request, but a source not authorized to comment on the relationship between Instacart and Whole Foods shed light on deal terms.
Whole Foods acquired a tiny ownership stake last year in privately held Instacart. The companies also reached a five-year agreement whereby Instacart contractors and employees could quickly check out and get on their way to making deliveries.
Whole Foods now accounts for about 10% of Instacart sales.
Importing Whole Foods' catalog turned out to be a complex endeavor because its inventory varies by region. But developing the software has been a boon for Instacart because it streamlined the process of integrating smaller chains.
Instacart has doubled service area to 69 regions across the U.S. in the last six months and plans to be able to serve about 60% of U.S. homes by the end of the year.
Instacart doesn’t disclose usage figures, but says subscribers, who don’t have to pay one-time delivery fees, account for half of their orders. Subscribers place orders about four times a month.
Consumers have been skeptical about entrusting others with picking produce. Grocers, meanwhile, fear they'll lose out on impulse and seasonal purchases. Instacart is working through such issues by tweaking its user interface and adding more recommendations.
The company says the biggest challenge to its growth today is a lack of awareness of its service — especially in the middle of the country. It's hoping Amazon's $13.7-billion deal Friday might be an eye-opener.