Instacart Aims to Help Grocers Become Restaurants

Instacart is making a major investment to help grocers scale their foodservice operations.

The company is acquiring FoodStorm, an SaaS order management system that powers end-to-end order-ahead and catering experiences for grocery retailers.

With this acquisition, Instacart says it is expanding its enterprise technology portfolio to further support its retail partners’ digital foodservice, investing in more technology solutions that aim to help retailers grow, compete and better meet the evolving needs of their customers. 

"People eat 21 meals a week, give or take, and we want to help our retail partners create more opportunities for their customers to get more and more of those meals from the grocery store," said Instacart Chief Technology Officer Mark Schaaf in an exclusive interview with Progressive Grocer. "We think for customers, this helps unlock a healthier, more affordable alternative than restaurant delivery, and creates an easier way for people to order prepared foods online, directly from their favorite retailers that they shop from already today. And so that's another really exciting aspect of this acquisition."

FoodStorm offers a comprehensive SaaS solution that covers multi-channel ordering — e-commerce, phone or in-store kiosk— order management and payment and fulfillment. Its technology also integrates with a large variety of third-party systems, including point of service systems (POS), and offers CRM capabilities that help grocers collect feedback, market their offerings and leverage promotional features.

FoodStorm, founded 14 years ago in Australia, has developed strong partnerships with a number of Instacart’s existing retail partners including Albertsons Cos. banners Balducci’s and Kings Food Markets, Bi-Rite Market, Mollie Stone’s Markets, Uncle Giuseppe’s and Roche Brothers.  Instacart will make FoodStorm’s technology available to more retailers through Instacart’s enterprise technology offering.

Order-ahead technology solutions provide grocery retailers with a significant growth opportunity. On the Instacart platform, customers who purchase prepared foods and catering items like hot and cold side dishes, cakes and sushi from the grocery store have significantly larger baskets and shop more frequently than those customers who do not, the company said.

"Prepared foods are very big at all these retailers and a huge growth area for these retailers," Schaaf said. "But we want to help retailers provide the best possible experience for their customers, which means bringing their entire catalog of products and services onto the marketplace, which they don't have the best experience right now on Instacart. And we want to make that better."

For retailers, order-ahead items and prepared foods are also typically more profitable than traditional groceries like produce and package goods.  

"Grocers see this as an incredible growth area for their business," Schaaf said. "We've seen that baskets on the Instacart platform that include meals are significantly higher than baskets without prepared or premade foods. We've also seen customers who purchase meals order more frequently than customers who do not purchase grocery meals, and today meals are in I think 21% of customer baskets. And we think there's a large opportunity of growth for our retailers in this space."

Schaaf said the FoodStorm technology could also help grocery retailers launch or expand dark or ghost kitchens. 

"It's up to retailers how they will use the solution. Some retailers have kind of made bigger pushes into that," Schaaf said. "We will be the technology department that will work with the ghost kitchen or a physical store."

Instacart’s enterprise technology today powers the e-commerce platforms of more than 175 local, regional and national grocers across North America, including Costco Canada, Heinen’s, Sprouts, The Fresh Market and Wegmans. Instacart first began offering enterprise technology to grocery partners in 2017. Since then, the company has continued to make significant investments in its enterprise business, scaling its engineering team and developing new technologies for grocers.  

Instacart partners with more than 600 national, regional and local retailers, including unique brand names, to deliver from nearly 55,000 stores across more than 5,500 cities in North America. Instacart’s platform is available to over 85% of U.S. households and 80% of Canadian households.