Chris Walton initially published this article in Forbes on February 16th, 2021. It is now available to Omni Talk subscribers.
All of a sudden 2021 feels a lot like 2005 all over again. In the last few weeks, both Instacart and Shipt have struck new deals that call to mind the salad days of another company that needs no introduction — Amazon.
Last week Shipt announced a new partnership with GNC to “bring same-day delivery of GNC health and wellness products to consumers across the country,” and, just a few days before that, Instacart also announced that it too had inked a national delivery deal with Family Dollar and its network of over 6,000 U.S. stores.
On the surface these two announcements may feel like just another pandemic-filled day at the work-from-home office, but dig deeper and there is far more here than meets the reusable grocery delivery bag.
What are Shipt and Instacart?
Well, on the most basic level they are e-commerce marketplaces, not all that different from what Amazon was (and still is) when it first started back in the mid-1990s.
But what else are they?
Like Amazon, Instacart and Shipt are also both infrastructure providers. They each provide the technology, the training, and the resources for efficient last-mile picking, packing, and delivery services. While both found their early roots in grocery, they have of late begun to offer their expertise to almost every retailer in the alphabet, from Aldi and Best Buy to Wegmans.
While Amazon coordinates these same types of activities for retailers and brands through its e-commerce portal and extensive warehousing and logistics capabilities, Instacart and Shipt have flipped the script and figured out how to do all these same things in a way where retailers’ own stores provide the warehousing, and Instacart and Shipt just provide everything else.
Go back more than a decade, and retailers were asleep at the wheel amid Amazon’s ascension. Back then companies like Target and Toys R Us actually paid Amazon to power their ecommerce experiences, and all the while Amazon learned how to perfect its own e-commerce offering on the back of this work.
Don’t look now, but the same thing could be happening again.
Instacart and Shipt, like Amazon before them, are now a similar heroin in the arm of many retailers. In regards to Amazon, the previous smack of choice for many was an e-commerce front-end, but, in regards to Instacart and Shipt, the smack is now last-mile picking and/or delivery. Take the needle out, and the retailers that rely on Instacart and Shipt for delivery would be forced to figure everything out on their own, just like their e-commerce-renting brethren before them.
And, while the above is cool as an idea on its own, what makes this story even more fascinating, however, is what it all looks like when placed in the context of a world where the idea of social commerce is even more evolved.
Social commerce is a term that is quite en vogue right now, as it should be. The simplest way to think about the concept is as a complete end-to-end line (see below). On one end of the line, there’s a commerce marketplace — think Amazon. On the other end of the line, there’s a social network — think Facebook or Instagram. Whoever can control this line end-to-end (which, to date, no one at a large scale within the U.S. ever has) ends up with a complete, closed loop understanding of their customers.
This end-to-end dynamic of who consumes media where and who goes to what marketplace to buy is why the Instacart and Shipt developments are just so darn interesting. The pandemic has made same-day delivery a merchandisable event. Millions of people every week now go to delivery marketplaces as a first order precondition.
Look no further than the home screen of Walmart’s mobile app. It doesn’t ask people what they want to buy. It asks people where and how they want to shop before anything else because Walmart knows delivery speed is now top of mind in American consciousness.
And the implications of this new mindset 10 years down the line could be enormous for a number of reasons.
First, Instacart and Shipt have a chance to edge out even Amazon on the line of social commerce. Amazon does not have the skill and expertise of third-party picking from stores nor does it have the same brands in its stables as Instacart or Shipt. Moreover, the quality and authenticity of products on Amazon have been an ongoing concern for years, whereas with Instacart and Shipt, consumers instead acquire products from legitimate, large scale retailers that oftentimes Amazon does not or will not ever carry.
Second, all this also means that how the consumer packaged goods companies of the world (e.g. General Mills, P&G, etc.) spend their money will also start to change. If consumers think of delivery timing first, then the CPGs will become agnostic to whatever end retailer provides the ultimate shelf from whence the product is picked.
As a result, more advertising dollars will shift away from traditional grocers and move to the third-party services by way of social media, and, by the same token, the CPGs will also begin to go direct-to-consumer within their chosen third-party marketplaces and social media networks more overtly over time as well (see PepsiCo and the launch of Snacks.com as an early harbinger of this type of activity).
Third, the third-party delivery services could also change the dynamics of food welfare within this country. Don’t look now, but quietly and by way of its partnership with Aldi, SNAP recipients can use their benefits online through Instacart at over 90% of Aldi’s stores nationwide. Not only then are Instacart and Shipt grabbing quick delivery mindshare, but they may also be on the precipice of grabbing share in the psychology of low cost retailing quite soon, too.
All of which means that, fifth and perhaps most importantly, Walmart could also soon be left holding the bag, as it gets squeezed on both ends of the line.
Walmart has been trying to stand up its own digital marketplace, but the brands it has secured (e.g. Bonobos, Moosejaw, Eloquii, etc.) don’t hold a big boy candle to what has already signed on with Instacart and Shipt — specifically, brands like Aldi, GNC, Sephora, Best Buy, and CVS — and nor will brands like this ever go in this same direction with Walmart. With Walmart, the competitive danger is obvious, whereas with Instacart and Shipt it is harder to see all the angles, even though, as is well-known, Target actually owns Shipt.
As a result, Walmart is in a tough spot.
If Amazon continues to build out more grocery stores (and reports already suggest that it will), if Instacart hits Walmart where it hurts with SNAP, and if Instacart and Shipt continue to grow the number of brands within their own stables, then Walmart will feel intense pressure both digitally and physically along the line of commerce described above.
Walmart’s TikTok plans were one defense against these possibilities — i.e. keeping its consumers within its own closed loop marketing network — but with those conversations now stalled, what else is there on which Walmart can fall back and thwart these arguments?
There isn’t anything.
Stores? No. Amazon is coming hard after physical grocery.
Digital marketplace mindshare? No. Amazon, Instacart, and Shipt all provide better convenience and more selection than Walmart’s marketplace.
Consumer connection? Still no. TikTok is almost essential to Walmart at this point. Without TikTok, Walmart will be left to fight for digital mindshare at the point of inspiration and immediacy with everyone else and with the previous two points also still in the minds of consumers psychologically.
Or, said another way, Walmart could one day become Exhibit A of all retail allowing another Amazon to spring up right from under its noses.Source: Forbes