Grocery delivery service Instacart today added its first new major market, expanding to Chicago. The company found its footing in the San Francisco Bay Area, growing its cadre of stores to include Costco, Trader Joe’s, and its own hybrid solution that in some cases can offer foodstuffs at prices lower than local grocery stores.
Unlike in the Bay Area, shoppers of Instacart in Chicago will only have access to Trader Joe’s at launch. But that will change in time, as Instacart digs deeper into the locale; it plans to add Whole Foods, Mariano’s, and Dominick’s in short order.
Instacart CEO Apoorva Mehta told AllThingsD that his company built a “feasibility matrix” to determine which city it would expand to. Components of the matrix included what you might guess: car-ownership density and income. Weather was reportedly also a factor. Mehta tells TechCrunch that “33 percent of the year, Chicago has some form of precipitation” and that his company has learned in the San Francisco area that “people just do not like grocery shopping when it’s raining.” Seattle, you might be next.
Mehta also mentioned Peapod, a competitor in Chicago, as a sign that demand already exists in the area. That is true only if Peapod is seeing high demand, but the logic is partially sound. The company continues to grow quickly, with revenue and number of deliveries expanding at roughly 10 percent week over week. That figure, according to Mehta, will rise with Chicago coming online for the service.
Instacart operates in a space that is littered with failed companies. Its own caution is therefore worth noting: Instacart took time to expand its product offering in its initial market area before adding new geographical domains. The company told me previously that this was to ensure that it had proven its model, and that its unit economics worked. Expand too fast with a money-losing model, and you only accelerate your losses. Instacart is trying to do the opposite. The company recently raised $8.5 million from Sequoia.
The fact that Chicago has horrific weather, is an important factor for Instacart. As a former resident of Chicago and a current user of Instacart, I am interested in seeing how the two will mix. It’s as cold as the last circle of Dante’s Inferno in Chicago about half the year, and it is likely harder to delivery groceries when the landscape is iced over. The weather here in the Bay Area is rarely inclement. Chicago lives that way, with blistering colds and blasting heat. Physical activity, such as carrying 14 bottles of Fiji to my house, would be less fun in such conditions. Tips will become all the more mandatory, in a sense.
Instacart has hopefully weighed those concerns. If Chicago goes well, expect the company to continue expanding.
Top Image Credit: lord enfield