Rather than being a disruptive economic force for supermarkets, Instacart boosts retail grocery jobs, revenue and demand, according to a new study sponsored by the online delivery giant.
The research, conducted by Robert Kulick of NERA Economic Consulting and released yesterday, examined the impact of Instacart in California, Illinois, New York and Washington. It found that, in 2019, Instacart lifted incremental grocery revenue by more $620 million in those states and created over 23,000 jobs, with the San Francisco-based company’s entry into a market resulting in an average increase of 4% in local job growth.
Instacart also stokes demand by creating an e-commerce footprint for brick-and-mortar grocers, said the report, titled “The Economic Impact of Instacart on the Retail Grocery Industry: Evidence from Four States.”
Kulick’s study terms the e-grocery firm’s market impact as “The Instacart Effect.”
"Instacart is changing the way customers engage with grocery stores by creating a complementary online service that would be prohibitively expensive for traditional retailers to offer on their own. The result is increased grocery demand, which translates into higher grocery store employment and revenue,” he explained. “These findings demonstrate that Instacart has played an important role in helping the grocery industry compete in a challenging economic environment.”
Of the states examined, Instacart’s market entry created more than 11,500 additional jobs and $337 million in incremental revenue in California; over 6,600 jobs and $154 million in incremental revenue in New York; more than 3,400 jobs and $75 million in incremental revenue in Illinois; and over 1,900 jobs and $56 million in incremental revenue in Washington.
The jobs created are direct employees of grocery stores and include positions such as cashiers, stocking associates and deli counter clerks, among others, according to the report, which added that these are net retail grocery jobs that wouldn’t have existed without Instacart’s market entry and expansion.
"It is often assumed that disruptive innovations necessarily displace traditional modes of commerce and employment,” Kulick stated. “However, with Instacart the opposite is true. While Instacart is changing the way customers interact with grocery stores, it is an example of how innovation can benefit industries and their workers."
He noted the research, which employed “rigorous statistical methods,” demonstrates that Instacart’s market impact is causal — not a false positive arising from factors in the broader retail industry — and national in scope.
"Investing in an online retail experience is critical to the success of grocers competing for consumer attention today. The technology and fulfillment needs are complex, and the cost is prohibitive for many. But, with Instacart's support, more than 75 California retailers across 3,500 stores are now online, offering delivery and pickup services that meet the growing needs of their customers," Ron Fong, president and CEO of the California Grocers Association, said in a statement. "What Instacart is bringing to the state of California and the rest of the U.S. is a growth runway for brick-and-mortar grocers that deserve the opportunity to continue to serve their local communities for many generations to come."
Instacart President Nilam Ganenthiran: “Since day one, our goal at Instacart has been to lift up our brick-and-mortar grocery partners." (Photo courtesy of Instacart)
Though nearly a $1 trillion industry today in the U.S., grocery is “only now going through its first big wave of tech innovation,” according to Instacart President Nilam Ganenthiran.
“Change in a business sector often comes at the detriment of incumbents, and we've seen this play out again and again across industries. But it doesn't have to be that way,” Ganenthiran commented. “Since day one, our goal at Instacart has been to lift up our brick-and-mortar grocery partners and give retailers of all sizes an edge in an increasingly competitive industry. While we've long seen in our own internal data that Instacart can incrementally boost retail partner sales between 50% to 80%, this study shows that when Instacart enters a market the tides turn and 'The Instacart Effect' drives meaningful job creation and increased revenue for the grocery industry.”
Currently, Instacart partners with over 350 national, regional and local to provide grocery delivery from 25,000-plus stores across more than 5,500 cities in the U.S. and Canada. The company said its delivery service is now available to more than 85% of households in the U.S. and over 70% of households in Canada.
The new study comes as Instacart continues to address lingering retailer concerns that the fast-growing company could one day become a competitor to supermarkets. In interviews with Supermarket News, for example, Ganenthiran has emphasized that Instacart sees itself as a partner of grocery retailers, not a rival, and has developed its business that way.
Instacart, too, has worked to address questions about its business practices, especially on the labor front. A year ago, for instance, Instacart instituted a new earnings model for its personal shoppers after coming under fire for allegedly shortchanging their compensation. Shortly thereafter, the company launched a new service that enables personal shoppers to get paid faster.
And earlier this month, Instacart part-time shoppers at a Mariano’s store in Skokie, Ill., voted to unionize with United Food and Commercial Workers. The workers marked the first Instacart employees to win a certified union election in the United States, according to UFCW Local 1546. The union local’s president credited Instacart with committing to honor the employees’ vote and bargain in good faith to reach a contract.