Instacart Nears Partnership With Canada's Loblaw -- WSJ
September 29 2017 - 3:02AM
Dow Jones News
By David George-Cosh and Greg Bensinger
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 29, 2017).
Grocery-delivery startup Instacart Inc. has refrained from
rushing expansion beyond the U.S., unlike many other startups
valued at more than $1 billion. But Amazon.com Inc.'s surprising
acquisition of Whole Foods has changed those plans.
Instacart is close to a deal to partner with Canada's largest
grocer, Loblaw Cos., to launch its service there in the coming
months, the startup's first international foray amid increasing
competition, according to people familiar with the matter.
The deal will allow Instacart to begin delivering groceries from
Loblaw stores in Toronto and then expand nationally throughout the
grocer chain over the next year, one of the people said. Instacart
already has delivery deals with well-known U.S. retail chains,
including Whole Foods, Costco Wholesale Corp. and Target Corp.,
where the startup relies on contract employees to pick and bag
groceries and then deliver them to customers' doorsteps.
Instacart, which operates in 38 U.S. states, had considered
expanding into Canada for the past three years. Then Amazon's Whole
Foods deal in June jolted the food retail industry and accelerated
Instacart's talks with three national grocers, including Loblaw,
according to another person familiar with the matter.
It isn't clear what impact the Amazon acquisition will
ultimately have on Instacart's Whole Foods partnership. Whole Foods
is also an investor in Instacart -- meaning the startup is an
unlikely bedfellow with Amazon.
Instacart will face strong competition in Canada. The Wall
Street Journal reported last month that Amazon plans to roll out
its one- and two-hour Prime Now membership delivery service into
Canada later this year. Earlier this month, Metro Inc. announced it
would focus on online grocery delivery in Quebec, where it will
fulfill orders using dedicated teams at 10 stores across the
Canadian province.
Toronto-based Loblaw, Canada's biggest grocer by revenue, has
taken a relatively cautious approach to its e-commerce plans
compared with its competitors. The company currently offers a
grocery pickup service at more than 100 stores across the country,
and Chief Executive Galen Weston told analysts in February that
Loblaw may experiment with home delivery in the future. The company
has more than 2,400 locations ranging from discount and supermarket
groceries to pharmacies, and booked 46.4 billion Canadian dollars
(US$37.19 billion) in revenue during its most recent fiscal
year.
Canada's online grocery industry remains relatively small
compared with other countries, though e-commerce analysis firm
Profitero Inc. estimates that the country's online market will be
worth about 3% of C$120 billion sales by next year. Online grocery
shopping accounts for less than 5% of the nearly $800 billion in
food and beverage sales in the U.S.
Instacart's entry into Canada is expected to weigh on other
grocers such as Empire Co. as well as the domestic arms of stores
such as Wal-Mart Stores Inc. and Costco Wholesale Corp., which all
have explored shipping online grocery orders to Canadian
doorsteps.
"With all the leading retailers expanding their e-commerce
offers, fees could become an important differentiator as they start
to overlap with each other," said Stewart Samuel, program director
at IGD Canada.
Unlike Amazon and smaller services such as Fresh Direct LLC,
Instacart doesn't store food in its own warehouses. Instead, it
saves costs by relying on existing grocers' inventory and
infrastructure.
Instacart hires independent contractors as couriers to pick up
goods at existing grocery stores and has drivers use their own cars
to drop off the groceries at customers' homes. It makes money by
charging for delivery, marking up some items to pocket the
difference and collecting fees from some brands for promotions.
Instacart raised around $400 million in March in a new funding
round that valued the company around $3.4 billion. The company has
raised $675 million since 2012, according to Dow Jones
VentureSource, from venture-capital firms including Sequoia Capital
and Andreessen Horowitz.
Write to David George-Cosh at david.george-cosh@wsj.com and Greg
Bensinger at greg.bensinger@wsj.com
(END) Dow Jones Newswires
September 29, 2017 02:47 ET (06:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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