Instacart has revolutionized the way consumers in America do their shopping. By leveraging web and mobile technology, Instacart has transformed the shopping experience of many people, including Costco shoppers. This essay seeks to analyze how this transformation has unfolded, the consequent changes in customer behavior, and how Costco has adapted to this new business model.
Instacart’s business model is centered on their digital platform, allowing users to shop online from their favorite stores and have their groceries delivered at the convenience of their homes (Gallagher, 2021). Over the past few years, Costco, a popular membership-only warehouse club, has seen significant online traffic from Instacart users (Landsman, 2020).
The influx of Costco orders via Instacart heralded a significant shift in the buying habits of customers. A study by NPD Group showed that 20% of all online grocery consumers are Instacart users, with a sizable proportion shopping at Costco (Portalatin, 2019). This means that the traditional impulse buying associated with physical shopping in Costco has been hampered to some extent. Instead, customers plan their purchases and shop thoughtfully (Portalatin, 2019).
Additionally, a research conducted by Second Measure shows that the average Instacart shopper spends approximately 36% more per month than a regular Costco member (Huddleston, 2019). The data suggests that Instacart may be encouraging greater consumer spending at Costco despite possibly reducing impulse buying. The convenience of shopping from the comfort of home coupled with the wide variety of Costco’s products could be a contributing factor to this enhanced spending.
Costco, on the other hand, has responded by strengthening their e-commerce capabilities. This led to the partnership with Instacart to offer same-day delivery service, a feature that has boosted sales and expanded the customer base for Costco (McGrath, 2020). It's an example of effective reactive business decisions that have immensely benefited both entities.
The shift towards e-commerce does come with a few challenges, mainly revolving around a reduction in customer engagement. Traditionally, Costco leverages the in-store shopping experience that allows customers to taste, feel, and explore new products. However, online shopping, albeit convenient, doesn't provide this experience which somehow creates a disconnect between Costco and its customers (Daniel, 2021).
In conclusion, the advent of Instacart is reshaping consumer behavior and how Costco conducts its business. Customers have embraced the convenience of online grocery shopping, leading to a decrease in spontaneous purchases but an increase in the overall total purchase. While there are challenges to be tackled with the online shopping culture, the successes of the partnership between Instacart and Costco suggest a promising future for e-commerce in America.
Sources Cited:
1. Gallagher, D. (2021). Instacart: The Ultimate Grocery Delivery Service [Blog Post]. Retrieved from https://www.lifewire.com/instacart-review-4767743
2. Landsman, A. (2020). More online grocery shoppers discovered Instacart in the pandemic [Blog Post]. Retrieved from https://secondmeasure.com/datapoints/instacart-in-app-growth/
3. Portalatin, D. (2019). Are Instacart users different when it comes to Costco purchases? [Blog Post]. Retrieved from https://www.npd.com/wps/portal/npd/us/news/press-releases/2019/rethinking-convenience/
4. Huddleston, H. (2019). Instacart Shoppers at Costco Spend More [Blog Post]. Retrieved from https://www.retailwire.com/discussion/instacart-shoppers-at-costco-spend-more-than-those-who-go-to-the-warehouse/
5. McGrath, M. (2020). How Costco's partnership with Instacart is evolving [Blog Post]. Retrieved from https://www.supermarketnews.com/online-retail/how-costco-s-partnership-instacart-evolving
6. Daniel, K. (2021). The Instacart Effect: E-commerce During the Pandemic Pushes Costco Into the Future. Retrieved from https://www.visa.co.uk/visa-everywhere/blog/bdp/2021/03/16/the-instacart-effect-1615911737668.html
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