Why Platforms Like Instacart Threaten Grocers — and What the Better Solution is

Amazon.com. Walmart. Over the past decade, digital giants and mainstay stores alike turned to digitally powered solutions. From online ordering to in-app coupons, the grocery store experience has shifted from strictly out-of-home to sometimes on-the-couch. For many, it’s a welcome addition; but it doesn’t come without its caveats.

The vast majority of grocery transactions still happen in the store, and that’s not projected to change anytime soon. Brick-and-mortar isn’t going anywhere, but it is evolving. The line between online and in-store shopping is blurring, with many consumers seeking shopping experiences offering a little bit of both. For most retailers, that’s where solutions like Instacart come in.

Understanding the Dangers of Bolt-On Solutions

As brick-and-mortar retailers seek to deliver integrated digital shopping experiences, many are turning to third-party platforms they can layer onto their existing operations, outsourcing the online leg of their services and sticking to what they know best: face-to-face interactions.

Unfortunately, it’s hurting grocers more than it's helping. Digital platforms like Instacart aren’t sustainable for retailers. They ultimately benefit themselves above all, becoming billion-dollar businesses by way of lucrative partnerships and advertising revenue, at retailers’ expenses.

When a retailer decides to leverage a third party, they’re not just outsourcing delivery, they’re outsourcing a portion of their ad revenue — often a significant portion. Instacart provides a quick fix, but it also comes with substantial downstream costs and lost revenue opportunities.

There’s a substantial front-end cost, too. Steep delivery fees leave retailers covering a percentage of the sum, and that often results in increased prices. Prices on Instacart are often higher and consumers are unaware items are cheaper in-store and erroneously assume the retailer isn't cost competitive, eroding the relationship between the grocer and the consumer.

Put simply, retailers are set up to fail. Third-party players leverage their digital prominence to capture grocery customers. While it may present as a good partnership, it’s actually an aggressive game of bait and switch that’s rigged from the start. Shoppers log in through the third-party platform and the retailer loses the customer throughout the purchase journey — and the loyalty, search and purchase data along with it.

The more bolt-on solutions a retailer integrates, the more it dilutes its own brand — and the more its customer loyalty suffers. With added financial stress, building back their base becomes increasingly difficult.

Embracing Digitization Without Ceding Control

If they want to survive, retailers need to take control of their own digital narrative, building a solution that belongs entirely to them. With Instacart gearing up to take over distribution and fulfillment itself, it’s more important than ever that retailers own their customer experiences.

The good news? Retailers have access to all of the pieces to power digital experiences, they just need to assemble them strategically. By building atop a retail platform designed exclusively for brick-and-mortar, grocers can expand their digital offerings without sacrifice, connecting the customer experience across every stage of the shopping journey, and bringing in e-commerce to enhance their existing in-store operations. With a custom platform that powers more engaging in-store experiences, retailers can better serve customers and build meaningful digital relationships while retaining the bulk of the revenue.

Today’s most sophisticated digital retail media network platforms enable powerful shopper personalization and closed-loop reporting, delivering game-changing insights — from big-picture snapshots to SKU-specific analytics — while increasing conversion and incremental sales. In today’s market, investing in connected online and in-store channels is a strategy that wins. By getting on board and embracing technology, more retailers can do the same.

Sean Turner is the co-founder and chief technology officer of Swiftly, a company that empowers retailers to grow sales and build loyalty, while enabling brands to reach more shoppers.