- Instacart and Postmates have partnered for a pilot to offer “better” delivery service during peak hours in the San Francisco market. Through the partnership, Instacart will handle the third-party shopping and will hand off some of the deliveries to Postmates during high-demand times.
- Postmates, an all-purpose delivery service, but has begun dabbling in grocery delivery, most notably with Walmart in the Charlotte, North Carolina market. This marks the first time that Postmates has offered delivery-as-a-service to another delivery service, according to TechCrunch.
- Instacart’s Northwest General Manager Michelle McRae told TechCrunch that this pilot is a way to utilize Postmates delivery staff at times when they would be underutilized — notably during the mid-morning and mid-afternoon — and said the pilot would not affect current Instacart shoppers.
At first glance, Instacart teaming up with a budding competitor may seem unusual. But fast-growing demand for speed and convenience has delivery service providers — and their retail partners — scrambling keep up.
Nielsen and the Food Marketing Institute estimate that grocery e-commerce will achieve 70% consumer penetration and rack up $100 billion in sales annually in as little as four years. In other words, the clock is ticking to establish and maintain an advantage.
This pilot also underscores the growth of both companies. Instacart partners with grocers in more than 200 markets across the U.S., while Postmates now delivers in 385 cities.
Postmates' partnership with Walmart shows it's serious about expanding into grocery, which could raise concerns for Instacart. But the pros seem to outweigh the cons. The partnership gives Instacart a service edge in a booming market that has also posed some competitive challenges, especially from Whole Foods' growth under Amazon. In March, for example, Bloomberg reported that Instacart workers at one San Francisco store were forced to fill orders in cramped quarters after Prime Now employees took over their work space.
The benefits extend to Postmates, which is relatively new to the grocery category and has up until now worked with a fairly limited set of retailers. Partnerships between competitors tend to work well with early stage companies that are equal players in the same rapidly growing space, according to Powerlinx, which notes that 75% of executives said strategic partnerships were vital to their growth. In this case, Instacart's Michelle McRae said Postmates is normally quieter during these peak times, so that company should get additional business while helping Instacart work through a heavy workload.
The two companies are also thinking about cost-saving efficiencies. Postmates SVP Dan Mosher said, for example, there is a “big opportunity to work with on-demand services in offering extra delivery either at or below the cost of hiring more delivery people.”
Instacart expects to offer home grocery delivery to more than 80% of U.S. consumers by the end of this year. But in order to maintain an edge as the competition continues to grow, it has to ensure quality service, including and especially during critical peak hours. This partnership should help do just that, at least in one market.