Instacart focuses on diversifying technology and brand partners to drive growth

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Instacart built its reputation on being a third-party e-commerce delivery service. But the company’s growth now is based on diversifying the range of services it offers to retail customers, as well as expanding its advertising partner base, Fidji Simo, the company’s CEO and chairman, said Tuesday at the Goldman Sachs Communacopia & Technology Conference.

Instacart initially relied on big brands to advertise, Simo said, but is now focusing on bringing in more small and emerging brands.

“(W)hen certain things happen in their business, even independent of Instacart, and (big brands) can pull back on advertising dollars, we’re still too dependent on that,” Simo said. “If we had a more diverse business, it would allow us to handle those types of changes much better.”

Simo said Instacart’s focus on emerging brand advertisers led to the company’s announcement of a new retail media partnership with online grocery Thrive Market“They have a ton of emerging brands on Thrive Market, and we can be the best partner to actually turn those brands into advertisers.”

Instacart is also expanding ad placement outside of its app to retailer websites, including Costco, Publix and Sprouts Farmers Market, Simo said. Currently, Instacart can display ads on the websites of 100 retailers — a fraction of its partner base, which includes 1,500 national, regional and local retail banners.

Simo said that as Instacart tries to attract smaller advertisers, the company is focusing on helping new brands reach new customers.

In addition to diversifying its advertising customers, Instacart is also looking to improve its retail media measurement capabilities, with a goal of deriving 4% to 5% of its gross transaction volume (GTV) from advertising. In the second quarter, revenue from advertising and other sources accounted for 2.8% of GTV.

Instacart also aims to diversify the number of services its retail partners use. While Instacart has seen an increase in non-exclusive partnerships, Simo said the depth of integration, not exclusivity, is what determines how successful a retail partnership is.

In the past year, Simo said, about half of Instacart’s 50 largest partners have launched a new “major” service or integration, such as SNAP online payments, virtual convenience stores, curbside pickup or enterprise business solutions.

“If you are one of those retailers that has launched at least one new service with us in the last year, you are growing twice as fast as retailers that have not launched a gradual integration,” she said.

For consumers, Instacart is expanding its value proposition beyond convenience by offering affordability and serving as a one-stop online shopping destination, Simo said. For example, the company cooperation with Uber Eats for restaurant deliveries is a complement to the customer base, while its scheduled delivery option allows customers to save money by ordering further in advance, Simo said.

“We have a really great market where we have customers who value convenience more than price,” Simo said. “We also want to continue to develop products that appeal to people who value price more than convenience.”