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What Comes After 2-Hour Delivery? ‘Ultrafast’

A new suite of services from Instacart, including 15-minute delivery, could potentially shake up speed times for more than just early adopters in the grocery space.

The San Francisco-based company said Wednesday it is now offering Instacart Platform, which helps companies with digital advertising, e-commerce, data and fulfillment. On the fulfillment end, services range from 15-minute “ultrafast” to next-day delivery from either grocers’ stores or nano-fulfillment centers (NFCs).

Microfulfillment can mean anything from small format warehouses to serve customers in more urban markets, to fulfillment handled directly out of a store. Instacart calls its microfulfillment centers Carrot Warehouses in a nod to its logo.

The company said it can help retailers with faster delivery for their customers by “building new nano-fulfillment centers, devising floor plans, establishing automation services and running ongoing operations.”

The “ultrafast” delivery option further pushes the on-demand delivery model, where same day has given way to some customers having their orders fulfilled in a matter of hours. Two-hour delivery is a possibility for Amazon Fresh customers. Walmart also promises two hours or less in some cases. Target-owned Shipt goes further, offering orders in as little as an hour.

The first user of those Carrot Warehouses is Publix Super Markets, which will offer customers in Atlanta and Miami 15-minute delivery beginning this year.

“The grocery industry is undergoing a digital transformation where customers expect a seamless experience across many channels, but behind the scenes it’s taking an incredible amount of work and investment for retailers to deliver these new services,” Instacart CEO Fidji Simo said in a statement announcing the slate of services.

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The idea is to make things easier for retailers on the back end.

“We started as the e-commerce and fulfillment partner of choice for grocers, and we’ve been building on that foundation to broaden and deepen our capabilities in order to help retailers innovate faster than ever on their own properties,” Simo went on to say.

Instacart Platform
Instacart said its latest service offerings will help make things easier on the backend as its partners further digitize their operations. Courtesy

A spokesperson for Instacart, reached Wednesday, declined to say what other companies have expressed interest in the NFCs and ultrafast delivery. The logistical model for each company will also vary.

“As an end-to-end solution, we’ll work with our retailers to develop models that work for their specific needs,” the spokesperson told Sourcing Journal in an email. “Some will be stand-alone facilities that we run and manage (leases, floor plans, operations, fulfillment, delivery etc.) and in other cases they might be co-located facilities connected to existing grocers’ stores. The flexibility will give retail partners highly efficient options based on what works for them.”

Bain & Co. tempered the excitement around the online grocery space, which has seen plenty of investor capital flood the market, pointing out in a brief released earlier this month that online grocery startups will face many of the same challenges as legacy players due to the latter’s scale and the challenge all companies face with online fulfillment.

The Bain research showed the online grocery market is expected to grow to $178 billion by 2026 in the U.S., which is about 1.4 times the 2020 Covid-19 peak.

“Many grocers are likely to need multiple fulfillment models according to the density of their various catchment areas, a key determinant of viability,” the Bain brief said. “For example, a microfulfillment center’s small-scale robotic picking makes sense in a densely populated area of a city, but much less sense in a low-density small city or rural area, where in-store manual picking might be more economically viable.”

Product picking in-store, however, “has scaling limitations and a tendency to crowd aisles, to the annoyance of shoppers,” the brief added.

There’s also a balance that has to be managed in opening microfullment centers that not only generate a return for the business, but does so in the smallest footprint nearest to the end consumer.

Attabotics Vice President of Network Supply Chain Julien Seret said earlier this year at the Manifest conference in Las Vegas the balance supports a strong case for use of robotics automation and artificial intelligence in fulfillment centers, which is the technology his company offers.

“It’s about profitability and service,” Seret said.