Grocery delivery startup Instacart used to be valued at $39 billion. Now, it has dropped that valuation to just $24 billion, a drop of 38%.
Instacart cites “market turbulence” and a need to attract talent as reasons why it has reassessed. Another reason could be a steep drop in sales growth rate since the start of the pandemic, when many people suddenly became interested in getting groceries dropped off at their door.
Deliveries for food as well as other products are only becoming more common, but the gig economy may not be as well positioned to offer stable infrastructure for full-time vehicle drivers.
Instacart's New Direction
According to Bloomberg, Instacart cited the need to attract talent as a reason for the drop in valuation — that's a reference to the current strong labor market for tech jobs, which has given employees more freedom to choose a job that's right for them.
By ensuring their value isn't bloated, the company will net its employees better equity over time. But the steep drop in valuation isn't exactly a great morale booster, either.
“We are confident in the strength of our business, but we are not immune to the market turbulence that has impacted leading technology companies both public and private,” Instacart said in a statement.
They have a point: Other companies in similar businesses — advertising and delivery — have also seen declines in stock value lately, with Shopify, DoorDash, and Meta all lowering in valuation.
Still, some say the valuation remains too high:
Even at the lower $24B valuation, Instacart is grossly overvalued. It’s worth maybe $15B in public markets today. Pandemic beneficiary with $1.8B in revs & only grew 21% in FY21. Notably, GMV grew triple digits in 1Q21 but then decel’ed to flat-single digits rest of the year… https://t.co/EtUzjjJK8z
— Fat Tail Capital (@FatTailCapital) March 25, 2022
Instacart Explores Advertising
Instacart also launched a new set of digital tools yesterday, “Instacart Platform,” which is designed to help retailers and grocers offer faster fulfilment, get better analytics, and potentially get started with advertising.
Carrot Ads is the biggest new feature: It'll allow businesses to monetize the ecommerce sites they own while using Instacart's own ad tech.
It uses a profit-sharing model, so retailers can earn a little more while giving Instacart a new revenue stream that it definitely needs. It's being piloted with a small set of grocers currently and may roll out later in the year.
Delivery Is Evolving
Instacart deliveries aren't the only game in town, with many grocers opting for additional ways to get their goods to customers, from curbside pickups to other delivery services such as Amazon Fresh.
Larger retailers can cut out the middleman by offering their own grocery delivery within certain location ranges. For example, Walmart Grocery charges $9.99 per delivery, with the option to get unlimited free deliveries for $12.95 per month or $98 per year.
Smaller stores or chains might not have the ability to offer delivery — but they do have the tools should they ever decide to explore the option. Google's just-launched fleet vehicle tools are aimed at helping with same-day last-mile deliveries, and we've ranked all the more established fleet management systems over here as well. Instacart's value may have dropped, but delivery is here to stay.