Instacart, the revolutionary company that invented the business of “delivering groceries,” is damn near “profitable!” Well.. sort of. And working at Instacart is much less profitable than it was before.
Here, from Bloomberg, is the great news for Instacart investors: thanks to innovative business practices like getting consumer goods companies or retail stores to subsidize delivery prices, the company is now “profitable.” Scare quotes included!
Instacart said it’s “profitable” in four cities, including its biggest two, San Francisco and Chicago. It said 40 percent of the company’s volume is profitable—meaning most orders still lose money. It also said it will be profitable globally by summer. However, its calculation for profitability doesn’t include the cost of office space, the cost of acquiring shopper workers, or the salaries of its executives, engineers, designers, or other employees based at its San Francisco headquarters.
The company is “profitable,” on less than half of its deliveries, as long as you don’t include many of its major costs in the calculation. Hey, me too!
There is one line in the very past paragraph of the Bloomberg story that notes, “To further reduce costs, Instacart increased delivery fees $2 per order and cut some staff in December.” Sounds responsible! But on whose backs is Instacart’s profit margin really being built? For that, you have to read today’s Wall Street Journal story, which explains quite a bit more: the company is cutting its drivers’ pay in many markets by a lot.
The company’s contract drivers in its hometown of San Francisco who collect prepacked bags from grocery stores will earn $1.50 per drop-off, a cut of 63% from the previous guarantee of $4. The company is also slashing by 50% to 25 cents the commission it pays for each item in an order that drivers collect when shopping in stores.
All praise due to Instacart’s paradigm-busting new business model: slash employee pay to the bone and you may be able to be “profitable” on less than half of your business (not including costs).
The internet has made everything more incredible.