Instacart, the on-demand grocery delivery startup that is reportedly valued north of $2 billion, is growing fast in 15 markets throughout the country. As it seeks to meet that demand, it has begun experimenting with outsourcing deliveries through third-party providers, according to people familiar with the company’s plans.
Multiple sources tell TechCrunch that Instacart has recently reached out to delivery and logistics startups like Postmates, Lyft and Sidecar, among others, to initiate conversations around them making deliveries on its behalf. While Instacart is interested in finding partners that can handle hundreds of deliveries per day, we’ve heard the company is not seeking to completely outsource the last-mile delivery portion of its business.
Though it’s unclear exactly which companies might have already struck a deal with Instacart, we have heard that some third parties are already making deliveries of Instacart orders. For example, one source told us NY-based Zipments is working with Instacart in New York City, while another said Sidecar is planning to start dropping off Instacart orders as well.
TechCrunch obtained a copy of an email sent out to one on-demand delivery company Instacart approached as part of this effort. As part of the pitch, an Instacart rep says the company is looking to become a “valued, long-term customer,” with volume placed in the “hundreds of deliveries per day.” The email also states that Instacart is looking to pay a fixed price for deliveries that are made by partners.
This isn’t the first we’re hearing of Instacart’s plan to have third parties make deliveries for the company. Re/code’s Jason Del Rey reported in January that Instacart CEO Apoorva Mehta described a plan to experiment with outsourcing deliveries, and it would seem that plan is already well underway.
A source familiar with the effort tells us that Instacart is not looking to fully offload deliveries, and that it maintains control of the end-to-end experience through an app developed for shoppers and delivery people. All delivery directions are provided through that app, whether it’s an in-house delivery person or someone contracted through a third-party.
That means Instacart provides the routing for third-party drivers and delivery people making the final hand-off of groceries to the customer, rather than relying on a partner’s logistics infrastructure. Those delivery people are also rated by customers in the Instacart app, whether they are being paid by Instacart itself or one of its partners.
Relying on other companies for some of its deliveries isn’t the only change Instacart has made in the way it does business lately. The company, which recently raised $210 million in Series C funding, recently moved away from a revenue model that relied on a mix of markups on groceries alongside a per-delivery or annual subscription fee. Instead, Instacart has gradually moved to a model where retailers price their own inventory and instead pay the company a fee for sales that take place on the platform.
Instacart declined to comment for this story.