Inside Instacart's $110 Basket Strategy | Ryan Hamburger, Instacart CCO

[00:00:00] Caper Carts are a smart trolley. It's a fully weights and measured certified AI powered cart trolley. So whether you're a loyalty member, if you have recipes, if you have list building, you can do that at your home. And then when you get to the store, you just load it right up on the smart trolley and you're on your way. On the high end 15 to 20% of store sales going through online channels. So that still leaves the vast majority going through brick and mortar. And that's why core to our strategy is building technology that bridges that right not being a digital only player not being a delivery only player. And I think that's also why we are a

[00:00:29] the basket leader in the industry. You know, we average 110 US in North America, but whether you're coming for 10 to 15 euros worth of stuff or 100 euros worth of things, we want that shopping experience to be intuitive. But then also how do we use that experience to make the retailers lives better? Welcome to Retail Disrupted, a podcast that explores the biggest trends shaping the future of retail. I'm your host, Natalie Berg. And joining me on the show today is Ryan Hamburger, Chief Commercial Officer of Instacart.

[00:01:07] I caught up with Ryan last week on the sidelines of Shop Talk to get his views on grocery e-commerce. We talked about online grocery profitability, pricing parity, AI powered smart carts, retail media, and so much more. Before we dive into today's episode, a brief word from our sponsor. Today's episode is brought to you by Manhattan Associates. While customer expectations continue to rise, consistent execution is now the real differentiator.

[00:01:36] Manhattan helps retailers deliver on the promises they make to shoppers across stores, e-commerce, fulfillment, and customer service. From AI-driven operations to unified commerce, Manhattan works with many of the world's most recognized brands, turning every customer interaction into a moment of trust.

[00:01:56] Now, one final thing before we dive into today's show. Please do hit that subscribe button if you haven't already. We release new episodes every week and subscribing is the best and easiest way to support the podcast and make sure that you are staying ahead of the latest retail trends. Okay, let's dive in. Ryan, welcome to Retail Disrupted. It's great to have you on the show. Thanks for having me.

[00:02:25] No, it's great to be here in Barcelona at Shop Talk. We are going to talk all about Instacart and online grocery, but first, for those outside of North America, can you just give us an overview of the business? Yeah, sure. So Instacart was founded about 14 years ago as really the first online grocery delivery service in North America. So most folks know us for what we call the Instacart app or the marketplace, which is where you can go on.

[00:02:50] We have over 2,200 retailers on our platform in North America, cover 98% of U.S. and Canadian households. And that's just getting the groceries you want delivered when you need it. And since we've obviously expanded, but that was really the core product that we launched, you know, 14, 15 years ago and have built on that since. Yeah. And you have incredible reach. I think I read that last year you served 25 million consumers across North America.

[00:03:14] Yeah. So, I mean, you must have incredible insight into what customers are looking for when it comes to online grocery, because obviously expectations have evolved and I think they continue to evolve with technology getting better and better. So I'd love your take to sort of the pulse of the consumer. What are customers looking for when it comes to online grocery today? Yeah, it's a great question. And to your point, it's evolved probably weekly, if not daily at this point. But again, level set, I mean, we've done at this point over 1.6 billion orders in our history.

[00:03:41] So you can imagine the number of data points that we have on what customers are buying, what they're looking for. And that has allowed us even pre-AI to use machine learning and other algorithms to really create a personalized shopping experience that meets your needs, but doesn't feel like it knows too much about you, because there's always that fine line to watch.

[00:04:00] But when we think about the AI evolution and also, I would say more macro pressures, like just overall affordability, we are seeing consumers be very thoughtful with how they're spending their dollars on groceries. Just to use a few examples, we have club retailers like Costco's, Costco Sam's, excuse me. We're seeing a lot of consumers shop there because obviously there's good value, bigger pack size, but good value.

[00:04:24] We're also seeing a heavy push on retailers that are priced the same as in-store, meaning what you pay online is the same as if you walked in the store. And retailers that are priced at that same level generally grow 10% to 15% faster than retailers who have a markup. So you can clearly see consumers are thinking about how to stretch their dollar and where to best put that. Yeah, and also I guess it reinforces the idea that customers don't think in channels, right? So they want the same prices, whether they're shopping online or in stores.

[00:04:52] I'd love to hear more about some of your partners because I know you work with a wide array of retailers, everyone from Kroger to Aldi. Retailers that have very different business models, very different customer relationships, different margin structures. Can you tell us a little bit more about those partnerships and what a successful partnership looks like? Yeah, I think first and foremost, it's not a one-size-fits-all. I mean, you named a bunch of great brands that we work with. You walk into a Sprouts is going to feel very different than an Aldi, which is very different than a Costco.

[00:05:19] And so our view is how do we build the best grocery technology that allows those brands to engage with their consumers or members if you're on the club side in a way that is kind of natural or a natural extension of their brand? So if you use Sprouts as just one example, we power their entire digital ecosystem, including their loyalty program, which we built kind of hand in hand with them.

[00:05:40] And they're a great partner because they love our technology, but they're also very, very thoughtful in the feedback they give to us so we can make it look and feel Sprouts. And so whether that's the online shopping journey, how it engages consumers in store, how does it connect to the prepared food area, like you name it, we have to make sure the tech works for the ecosystem that the retailer operates within.

[00:06:03] And I'd say something that we're seeing certainly here in Europe is that this growing demand for convenience and also the basics are still very important to customers, which you've already alluded to. You know, you still need affordability, you still need quality, you still need range, but convenience, the whole quick commerce boom or on demand delivery, I mean, however you want to call it, customers want to be able to do that top up shop or that the lack of thinking, I guess, being able to just sort of not have to plan a big weekly basket and just shop for tonight.

[00:06:29] So is that something that you'd say you're seeing in North America and more globally? Yeah, I mean, actually, we see both. And, you know, we recently launched Costco here in Spain, as well as France on our Storefront Pro product. And the first thing we thought is, okay, baskets are going to be smaller, even though it's Costco versus the US. And what we're seeing is actually close to on par for what we're seeing in the US business. Now, hard to anchor totally on that because it is still a club channel and Costco obviously tends to be a little further from city centers.

[00:06:58] But the beauty of how we've built our shopping experience is whether you're coming for 10 to 15 euros worth of stuff or 100 euros worth of things, we want that shopping experience to be intuitive and allow you to find that. So whether it's things like agentic tools throughout the experience, recipe integrations, how do we help you find either what's for dinner tonight or your full shop in a way that doesn't feel like it takes a lot of time investment?

[00:07:25] And I think that's also why we are the basket leader in the industry. You know, we average 100 and I think 10 US in North America. And again, you have to slice that a little bit by category. But that is by far and away the leader in any quick commerce space simply because our shopping experience is so great and so seamless for the consumer. But you have to pair that with fast delivery as well. So that's where I think all of the secret sauce of our fulfillment algorithms behind the scenes so that we're getting the shopper to the store as quickly as possible.

[00:07:54] They're getting in and out of the store as quickly as possible to the consumer's home because that's how you keep those delivery times very short. Yeah, because it needs to be frictionless for the customer experience more broadly, whether they're ordering the products or how quickly they're arriving. You touched on Costco. I wonder if you can build on that a little bit because is this your first sort of venture into Europe? It is. So Costco was our first launch of our Storefront Pro product, which is effectively our enterprise white label experience for all the digital ecosystem. And so that launched earlier this year.

[00:08:24] We're very excited about it. It's going incredibly well. We had also launched Caper Carts, our smart trolley with Kohl's in Australia. And we have a couple of exciting launches coming in Europe as well that will hopefully be breaking here in the next month or so. Particularly Morrison's is one that we've talked about. They'll be launching with us. So we're very excited because... Oh, wow. I didn't know that. Morrison's in the UK? Yep. Yes. They'll be launching here this year. And the beauty of our Caper smart trolley is it obviously creates a very cool in-store experience.

[00:08:53] It's a fully weights and measured certified AI-powered cart trolley, smart cart trolley. And it allows the consumer to shop. But when you have our enterprise technology, it actually connects all the dots. So whether you're a loyalty member, if you have recipes, if you have list building, you can do that at your home. And then when you get to the store, you just load it right up on the smart trolley and you're on your way. So there's some cool things that we're doing, again, to bridge that in-store and online experience.

[00:09:16] Yeah, that's really interesting because I was going to ask you for your take on stores, which I know is kind of a strange thing to ask someone at Instacart. But I guess when it comes to grocery, you know, we still like shopping in physical retail. And I think to some extent that will always be there despite the huge growth opportunities that are clearly there for e-commerce. I guess my question to you is what should grocery stores look like bearing in mind that customers still want to shop online? No, I mean, I think it's spot on.

[00:09:42] In the U.S., which is a fairly well-penetrated e-commerce market, we're looking at, you know, on the high end, 15% to 20% of store sales going through online channels. So that still leaves the vast majority going through brick and mortar. And that's why core to our strategy is building technology that bridges that, right? Not being a digital-only player, not being a delivery-only player. But how do we really create technology that connects whether you're on the phone, on the way to work, at home, sitting in front of your computer, or physically in the store?

[00:10:10] We want technology to make that shopping experience better and easier so you can get really what you want when you want it. And that's why, whether it's our in-store mode, right, you could pop up your app and it'll help you navigate the store, see what's on special that week. So I mentioned the smart trolleys already. But then also, how do we use that experience to make the retailer's lives better? And so we have this whole concept of store view where we can use our technology on the smart trolleys as well as the shoppers in the store to help retailers understand what's on the shelf, what's not on the shelf.

[00:10:40] What do you need to change from an inventory buying behavior perspective so that you can keep the right product in the store, on the shelf, so that when that customer does walk in, they find what they need and they're not having a bad experience. Yeah, yeah, definitely. So it is interesting, I think, as an analyst, just to observe, and globally as well, just how stores still play an important role. They always will. But they need to be repurposed. Absolutely. They need to be digital assets. You know, we're seeing the rise of sort of micro-fulfillment hubs in stores, proximity to the customer. I think all these things are critical.

[00:11:10] One thing that is still a little bit tricky to do online is make money. So I would love to just get your thoughts on online grocery profitability. I had an online grocer on the podcast earlier today, and I'm going to tell you his take, and I'd love to just know if you agree with this. He was saying that there is no quick AI fix. There's no magic wand. What you need to do as a retailer is focus on lots of marginal improvements. So getting the basics right, plugging those holes, and focusing on things like automation and efficiency. It's the long game, right?

[00:11:40] But clearly, as more and more of us are shopping online, it's going to become more important for retailers to ensure that the economics stack up and businesses can do this in a viable way. So more broadly, what's your take on that? Yeah, I mean, I don't know that I disagree with anything you just said. You know, I would put it through a few different lenses. First, you think about the customer that walks into the physical store today. One way to have, you know, long-term margin and revenue growth is to have that customer shop more frequently from you, right?

[00:12:09] Don't share their wallet with another retailer down the street. Retailers who activate a consumer to digital, meaning they, you know, just place one digital order. It could be pickup, could be delivery. Share of wallet goes up 30% just by doing that one simple thing. So you make your customer omni, they are now in your ecosystem in a more sticky way, right? How do they want to think of you regardless of what they're looking for when they're looking for it? I think there's also the concept of retail media, which obviously is a world we plan as well.

[00:12:37] You have to have retail media complement your online digital experience. Can't be done in a way where the consumer just feels like they're being served ads all the time, of course. But that is another good way to obviously generate incremental margins on the business. And I think the last piece is, and this is sometimes scary, sometimes exciting for retailers. I think it's about going back to that Omni flywheel. Keeping the customer engaged sure has a higher share of wallet. But when you lose that customer, it's hard to get them back.

[00:13:05] We see this in North America a lot. If a customer leaves to go shop Walmart, for example, they become very sticky on Walmart. And so sure, it's not inexpensive to offer the complete digital ecosystem. But I think it's becoming a necessity for you to retain those customer relationships that are just so critical to the long-term business. Yeah. Yeah. And also, I guess the opportunity for personalization as well. I think that's probably another important role of technology and AI.

[00:13:32] And actually, that was something I wanted to ask you about was you mentioned Agentic earlier. There's so many changes happening with AI. I think as an analyst, sometimes it's hard to work out what's hype, what's going to stick. But I guess my question to you is, how do you see AI impacting grocery retail? Do you think it's going to power a new wave of adoption? Yeah, I think it certainly could. I would say we're seeing some what I call green shoots. Nothing to your point of what's real, what's not. I don't think we're seeing any magical wand yet. Two different lenses to put it through.

[00:13:59] So we partner with a lot of the hyperscalers like Gemini, Anthropic. And our logic there is obviously we need to be where the eyeballs are. So if someone's going to go to one of the hyperscalers, as we call it, and try to shop for groceries, we want to play in that game. We need to do it in a way where the data is protected. Because as I noted, 1.6 billion orders. Few can replicate that. And we can't just let that data go into the ether. Otherwise, we're allowing the hyperscalers to obviously gain on our data set there.

[00:14:26] But I think more importantly, how do we bring AI into our channels? So we're building this concept of card assistant, which is now live on our marketplace in the US. Right? Being able to shop with an agent, find certain dietary patterns or restrictions if you're shopping for a kid's birthday party. But then also weaving that throughout. Because not every customer wants to talk to an agent to shop. Right? So how can I say, oh, you've shopped gluten-free in your past. And when you get to checkout, be like, did you know this item is not gluten-free?

[00:14:53] Different ways to just prompt the consumer so that they're getting the best of the personalization that you noted. But also all of the data that we have on the catalog so that they don't make a mistake and are, you know, regretful or inadvertently eat something that they shouldn't. So there's a lot of cool things we're doing. But I would say it's still very early days in how that's going to look and feel three, four, five years from now. You know, anyone's guess. But it's certainly a big area of investment for us. Yeah. Fantastic. Ryan, it's been great having you on the podcast. Thanks so much for coming on. Of course. Thanks for having me.

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