Instacart: From Gig Economy Darling to Grocery Logistics Engine
“In the age of on-demand everything, logistics is the real product.”
Back in 2012, we watched Instacart enter the market with what felt like a clever but simple idea: what if someone else did your grocery shopping for you? I remember thinking, "This is smart, but how will it scale?". I was a freshman in college though, so I didn’t think much of it. Fast-forward a decade, and Instacart isn't just scaling—it's operating the digital backbone for a massive chunk of North America's grocery ecosystem.
If you're trying to understand modern grocery infrastructure, you can't ignore Instacart.
Timeline: From Shopper App to Logistics Platform
2012: Founded by Apoorva Mehta, a former Amazon supply chain engineer. Between 2010 and 2012, he launched 20 startups, all of which failed.
2014: Raised Series A ($8.5M from Sequoia); expanded beyond San Francisco.
2016: Landed a national partnership with Whole Foods.
2018: Valued at $7.6B; onboarded Kroger, Costco, and Sam’s Club.
2020: COVID hit—orders surged 500% YoY; 300,000+ shoppers onboarded.
2021: Valuation peaked at $39B; launched retail media and fulfillment tools.
2022: Acquired Caper AI and Rosie; introduced white-label infrastructure.
2023–2024: Filed for IPO; platform revenue surpassed $900M; doubled down on infrastructure.
How Instacart Makes Money
Here’s the breakdown as I see it (I didn’t find accurate numbers for 2024, so I used 2023):
Delivery Fees and Service Charges – what users pay for convenience. This generated an estimated $1.2B–$1.4B in revenue in 2023, still the core for non-subscribers, but lower margin due to shopper costs and delivery logistics.
Retailer Platform Fees – grocers pay to use Instacart's fulfillment infrastructure, white-label delivery, and backend tech. Estimated $300M–$400M in revenue, growing as more retailers offload their tech stack.
Advertising Revenue – CPG brands pay for visibility on search pages, checkouts, and reordering prompts. This is Instacart’s highest-margin business line, pulling in $900M+ in 2023, up from $740M in 2022.
Instacart+ – subscription revenue from power users. At $9.99/month or $99/year and over 5 million active users, it generated an estimated $450M–$500M in recurring revenue.
What stood out to me in 2023: platform and ad revenue crossed $900 million, surpassing their core delivery margin. That shift—from labor-based economics to software-based economics—isn’t just good business. It’s a moat.
Why These Retail Partnerships Matter
When I looked at who relies on Instacart, it wasn’t just small players.
Take Costco, for example. They’re known for keeping operations in-house. Yet they let Instacart handle nearly all same-day grocery delivery in the U.S., accounting for an estimated $1.5B in GMV in 2023.
Instacart is also embedded with Kroger, Publix, Safeway, and others. In many cases, these grocers:
Didn’t have e-commerce infrastructure
Didn’t want to spend 3–5 years building it
Needed to act fast during COVID
For mid-market chains, Instacart became the default digital storefront. Not a vendor. A partner.
What Changed After COVID
I was watching closely post-2020 to see what they’d do with all that demand. They pulled back on shopper headcount. They didn’t chase growth. Instead, they focused on:
Route optimization – Instacart built algorithms to intelligently assign orders based on location, time windows, and shopper proximity. Instead of sending shoppers across town for a single pickup, they grouped orders and minimized drive time—cutting delivery costs and increasing order density per shopper shift.
Order bundling – The company started aggregating orders from nearby customers into single shopping trips. One shopper could fulfill 2–3 orders at once, boosting throughput and decreasing idle time. This was especially effective in dense urban markets where overlap is high.
Gross profit per order – They began tracking profitability on a per-order basis rather than simply focusing on GMV. They adjusted shopper incentives, improved batching logic, and invested in substitutions and upsell features that lifted AOV. By Q4 2023, gross profit per order had improved 7% YoY, a clear sign of maturity in their ops stack.
As of Q4 2023, gross profit per order was up 7% YoY. That tells me they’re thinking like a logistics company now—not a gig marketplace.
Customer Retention and Customer Acquisition
Instacart+ subscribers passed 5 million. Those users are sticky: they order more, click more ads, and stay longer.
At the same time, CAC dropped 12% YoY in 2023 through smarter acquisition, in-app promotions, and co-marketing with grocers. LTV for paid subscribers is now 2.5x higher than casual users.
That’s the story here: reduce CAC, grow ad conversion, drive retention. It’s the flywheel Amazon built. Instacart is building its own.
From Order Taker to Infrastructure Provider
Here’s what people don’t see: Instacart’s infrastructure stack is deep. I’m talking:
Real-time inventory syncing with store-level SKUs
AI demand forecasting by time, weather, and region
Picker routing logic that minimizes in-store friction
Co-branded loyalty plug-ins that turn orders into marketing funnels
These tools don’t show up in the app. But they’re why Instacart isn’t easy to replace.
Fulfillment-as-a-Service (FaaS), Explained
FaaS means grocers outsource logistics to a third party—like Instacart—while keeping the customer experience branded.
Here’s how it works:
Shopper orders from a grocer’s app (not Instacart)
Instacart handles picking, routing, and delivery
The user never knows Instacart was involved
I compare this to Shopify powering DTC brands behind the scenes. Instacart is doing the same for grocery.
Who else plays here?
ShipBob (for e-commerce) - former Amazon executive Melissa Nick now leads this company
Fabric (for robotic fulfillment)
Walmart GoLocal (which powers delivery but not backend systems)
Walmart+, by contrast, is vertically integrated. That’s a brand-forward, asset-heavy model. Instacart is the opposite: invisible, modular, scalable.
And that makes them attractive to everyone who isn’t Walmart.
Where Instacart Fits in the Grocery War
This space is getting crowded:
DoorDash is making big moves with major chains
Uber is growing fast, especially in urban grocery
Amazon has its own stack with Fresh + Whole Foods
Walmart’s logistics engine is unmatched
But none of them are offering grocery tech as a service—except Instacart.
That’s where the real differentiation lives.
What Could Break?
Labor is the weak link. Instacart still depends on gig workers, and legislation could change everything—from cost structure to fulfillment speed.
The other risk? Grocers build their own stack and migrate off. But after spending a decade integrating with Instacart, that’s easier said than done.
Still—if you’re Instacart, you’re always watching your back.
Final Thoughts: Instacart Doesn’t Just Deliver. It Operates.
The shopper app got them in the door. The platform is what keeps them there.
In 2024, Instacart processes over $30B in GMV, works with 85% of the top U.S. grocers, and generates revenue not just from deliveries—but from infrastructure, ads, subscriptions, and data.
They don’t own trucks. They don’t own stores.
But they’ve built something more powerful: They own the rails.
