Is B2B the Logical Next Step for Instacart and Aggregators?

For Instacart specifically, and for the aggregators generally, the move into B2B is a natural one.

Think of it this way: It’s not a stretch to go from delivering groceries, which are staples of daily life, to delivering literal staples to the office.

To that end, and as reported here, Instacart has announced that it will debut a B2B service, where enterprises place food orders, yes — but can order supplies too.

The service is called Instacart Business, and, we note, is one that tightens the ecosystem that already exists between retailers (with Costco and BJ’s in the mix), consumers and smaller businesses. As economies continue to reopen, as hybrid work models continue to evolve, the business channel is one that offers Instacart (and other aggregators that might follow suit) the ability to expand revenue streams with no real change to the business model. Small business owners, after all, are consumers and consumers who have been habitual users of Instacart would make a seamless transition to managing inventory and bulk items through the platform to keep operations humming.

Cross-Pollination Potential

The platforms, of course, are extensible, using the installed base of drivers to cater to changing needs and customer preferences depending on the audience. We’ve seen the cross-pollination approach crystalize with Uber, where drivers pivot between ride-hailing and delivery and consumers take advantage of everything from satisfying their mobility needs and food cravings to getting other items delivered to the doorstep.

For Instacart, as for other platforms, there’s also the added tailwind of membership programs, and it’s not far-fetched to think that the consumer who orders groceries also gets some mileage out of ordering supplies, cementing loyalty on the platform itself.

Reports came this week that Instacart has seen its revenues surge 50% in the final quarter of the year. That eye-popping stat signals that the underlying, core business is healthy. Elsewhere, PYMNTS research suggests that digital channels are gaining steam when it comes to buying groceries. Fewer than half of all consumers report buying 50% or more of “center aisle grocery” items at brick-and-mortar grocery stores. More than a third of consumers (37%) now say they purchase none of these grocery products from a brick-and-mortar grocery store — up from 2.2% in 2020.

But competition is heating up, too. As noted here, grocers are seeking to diversify beyond Instacart (with Shopify, for instance) and firms like Walmart are beefing up their logistics operations to hasten delivery and of course that includes foodstuffs and household goods.

In the meantime, offering a cost-effective way for smaller businesses to get the supplies they need — in a just-in-time fashion — may prove to be an optimal strategy for the aggregators broadening beyond groceries. Headed into the end of 2022, PYMNTS found that inflation is the biggest challenge for small and medium-sized businesses (SMBs). Most firms do not think that inflation will return to “normal” this year, or, really, any time soon. Two-thirds of firms have raised prices in an effort to offset rising input costs, but that strategy can only go so far when facing a fickle consumer. Margins can be improved when spending less on office supplies, and on restaurant supplies and food. In the current environment, every penny counts. And for the aggregators, every ancillary revenue stream counts too.