Instacart Drives 25% Increase in Loyalty Member Purchases With Rewards

Instacart is integrating with merchants’ loyalty programs to outcompete rival aggregators on deals and discounts.

The San Francisco-based grocery aggregator shared in a letter to shareholders Wednesday (Nov. 8), accompanying its first earnings report since going public in September, how the company’s affordability-focused offerings set it apart from competitors.

“[We are] integrating with retailers’ loyalty programs so customers receive better pricing and deals when shopping on Instacart. And we added ‘native’ loyalty sign up, which allows customers to join a retailer’s loyalty program directly in our app,” Chief Executive Officer Fidji Simo stated in the letter.

She added that the company’s loyalty integrations with Wegmans, Kroger, Albertsons and others drove sales, with purchases “linked to loyalty or club memberships” rising roughly 25% year over year in the quarter.

Additionally, Simo contended that the company’s acceptance of Electronic Benefits Transfer for Supplemental Nutrition Assistance Program (EBT SNAP) payments throughout the United States also helps the aggregator outcompete rivals on affordability.

These moves to drive affordability come as competition for consumers’ online grocery spending heats up, with aggregators such as DoorDash and Uber Eats that historically focused on restaurants adding more grocers to their marketplaces.

Still, Instacart remains the category leader by a significant margin. Simo stated on a call with analysts accompanying the earnings release that the company holds a share greater than 50% in its category for small-basket orders and greater than 70% for large-basket orders.

“We have built an incredibly defensible business by adding deep integration with grocers, by uploading their entire selection online and making it available to people at the highest quality, highest accuracy, over the course of 10 years, which has really allowed us to capture the weekly shop,” Simo asserted, noting that this weekly shop includes orders over $75.

Overall, online grocery represents only a small portion of the industry as a whole. PYMNTS Intelligence’s report “Tracking the Digital Payments Takeover: Catching the Coming eCommerce Wave,” created in collaboration with Amazon Web Services (AWS), which drew from an April survey of nearly 2,700 U.S. consumers, revealed that only 12% of grocery transactions occur online.

Instacart, for its part, is looking to grow its in-store presence in an effort to meet consumers’ ongoing preference for in-store shopping. Simo noted that the company is “making progress” with its in-store offerings, especially its Caper Cart smart carts.

“This is important because even if online grocery penetration doubles or triples over the next several years as market studies expect, approximately two-thirds or more of grocery sales would still occur at brick-and-mortar stores,” Simo stated in the shareholder letter.

In recent weeks, the aggregator has continued to expand its capabilities and use cases. The company announced it was expanding its artificial intelligence-powered smart cart program through a new partnership with Geissler’s Supermarkets, adding outdoor gear to its marketplace in partnership with Camping World, expanding advertising offerings for brands and tapping card-linked offers with Mastercard to drive adoption.

Additionally, the company has been reaching new consumers by offering grocery benefits through a range of healthcare institutions and other businesses, most recently collaborating with Wellness West, a coalition of Chicago health organizations, to provide eligible members a $79 monthly grocery stipend through the aggregator’s Fresh Funds program.

The aggregator is among the top players in the world. PYMNTS’ Provider Ranking of Aggregators, which compares leading apps based on a range of factors including channel coverage, usership and downloads, ranks Instacart at No. 4, tied with Postmates and behind Talabat, Uber Eats and Deliveroo.