Curious to find out- Is Instacart profitable? We got you!
Instacart gave a sigh of relief to customers during the pandemic when they were locked inside their homes and needed groceries to sustain themselves.
Funnily, the need was not one-sided; Instacart needed the demand surge as much as customers needed their groceries. Both parties successfully saved each other.
But the Pandemic is an old story now. The real question is how is Instacart performing now, when the pandemic is finally over. Keep on reading to find out!
|1 July 2012
|San Francisco, California
|Fidji Simo (CEO), Apoorva Mehta (co-founder)
Instacart Over the Years
Instacart is a grocery delivery and pick-up company that was founded by Apoorva Mehta, an ex-employee of Amazon, in 2012.
The company began as an app for which Mr. Mehta raised $2.7 billion in funding from Silicon Valley investors, including Andreessen Horowitz, Sequoia Capital, and Kleiner Perkins.
Instacart subsequently got into two more funding rounds of $2.3 million and $8.5 million, respectively, which helped the company grow its presence in 20 cities. Following this, Instacart signed deals with giants like PepsiCo and Amazon, and all this happened within just two years of launch.
But things turned upside down for Instacart when Amazon acquired Whole Foods in 2017 for $13.7 billion. This is because, at that time, Whole Foods was responsible for 10% of all Instacart sales.
But then the Pandemic happened, and Instacart started seeing a surge in orders by 18% from 2021. As a result, the company made $428 million in profit in 2022 compared to the loss of $73 million the year before.
Post this, the company has made significant changes to keep the positive momentum going and has even listed itself on the Stock Market.
Instacart’s IPO Launch
As consumers increasingly turned to grocery delivery apps during the pandemic, Instacart soared in popularity.
The company achieved a 935% year-over-year (YoY) growth rate in 2Q20, as a result of which it announced the launching of its IPO.
As of 2024, Instacart has been listed on the stock exchange, and the company has a market cap of 6.285B. Also, the majority ownership of Instacart is with Sequoia and hedge fund D1 Capital Partners today.
How Does Instacart Make Money?
Initially, Instacart relied majorly on delivery fees for earnings. However, post the pandemic, the company has shifted its focus from a low-profit margin from delivery services to a high-profit margin from online advertising.
This change has helped the company immensely, helping it earn $740 million from ads and make 30% of the overall revenue of $2.5 billion of Instacart last year.
Instacart started working on its ad business in 2019, allowing different brands to place ads within the Instacart app.
However, that’s not it. Instacart is also heavily dependent on its network of partnerships with brands like Kroger, Costco, etc. In fact, the service now works with 1,400 retailers covering 80,000 store locations.
Is Instacart Profitable?
The annual financial results of Instacart are yet to be released for the year ending 2022-2023. But in 2022, Instacart made annual profits of $428 million, reversing a decline of $71 million in 2021, which clearly shows that Instacare is a profitable company.
The company made $2.5 billion in revenue in 2022, showing a 38% increase as compared to the previous year, and had 13.7 million active users at the same time.
Even if we talk about Instacart’s financial performance in 2023, then in the third quarter of 2023, it recorded revenue of $764 million, showing 14% year-over-year increase. This shows that Instacart is keeping the positive momentum going.
Instacart Annual Revenue 2013 to 2022
Instacart Annual Users 2017 to 2022
What is the Future of Instacart?
Although Instacart has been able to turn the tables around by making profits, things are not all that pretty.
Instacart is relying heavily on ads now, and while its ad business increased by 24% in the first half of 2023, the delivery orders for the same time frame have essentially remained flat.
Also, Instacart’s core, that is, its delivery service, is actually a very low margin business than advertising. So, Instacart’s profitability is heavily dependent on advertisement now.
This could potentially be a problem, especially if, in the future, brands become pickier about platforms they want to use to run their advertisements.
Instacart might find it difficult to remain in the same glorious position because of rising competition. Here’s a list of companies from which Instacart faces competition:
Third party delivery platforms
- Ubers Eats
- Fresh Direct
Existing online grocery and brick & mortar retailers:
- Whole Foods/Amazon
Direct to consumer (D2C) food delivery:
- Blue Apron
Instacart almost got sold, but the pandemic supercharged the company’s growth and, ironically, provided a ray of hope. The demand was so high that Instamart’s sales quadrupled from 2019 to 2020.
However, the company has acknowledged that the boon is unlikely to repeat itself, and to keep the momentum going, the company has to keep pushing itself.
Currently, it is dependent on advertising revenue more than its core delivery service. How far this will take the company, only time will tell.
We hope in this guide, you have got the answer to the question: Is Instacart profitable?
What is the average spend of Instacart users?
Instacart express users spend $5,000 per year on average.
Who is the CEO of Instacart in 2024?
Fidji Simo is the CEO of Instacart as of 2024. She joined the company in 2021 and, in 2023, was appointed as the member of the chair as well.
How many products are listed on Instacart?
More than 500 million products are listed on Instacart.