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Since its 2012 debut, Instacart<\/strong> has made significant progress in convincing Americans that grocery shopping can be done online. The pandemic helped, of course, but that alone can\u2019t account for the company\u2019s impressive growth over the past 13<\/strong> years.<\/p>\n More than 1,500<\/strong> retail banners and 85,000<\/strong> individual stores are now available online via the Instacart app. In its most recent quarter (Q3 2024, which ended Nov. 12, 2024), the company handled 72.9 million<\/strong> orders (up 10%<\/strong> YoY), which drove $8.3 billion<\/strong> in gross transaction value. Since going public in September 2023, the company\u2019s stock has maintained a steady upward trajectory, from the $30<\/strong> IPO price to nearly $53<\/strong> as of Feb. 19, 2025. And that\u2019s just the company\u2019s first act<\/strong>, according to David McIntosh, Instacart\u2019s Chief Connected Stores Officer.<\/p>\n McIntosh\u2019s title gives a hint of where Instacart is headed next: \u201cWe think about online delivery as Act One,\u201d he said in an interview with Retail TouchPoints<\/em>. \u201cAct Two is digitizing the in-store experience with services like Caper [smart carts] and FoodStorm [order management]. Where we\u2019re going is to unify the experience. Our vision is that, on a 10-year horizon, customers won\u2019t have to choose between shopping online or in store; it\u2019ll be one single, unified mode, powered by Instacart.<\/strong>\u201d<\/p>\n This sentiment was echoed by Instacart CEO Fidji Simo in his Q3 2024 letter to shareholders: \u201cBecause we have already built integrations with retailers\u2019 core systems \u2014 from their point-of-sale to catalog to loyalty programs to couponing \u2014 we can much more easily launch new technology offerings for their stores as well, which gives us a right to win in omnichannel<\/strong>,\u201d he said. \u201cOur strategy of deeply integrating with our partners sets us apart from the competition and will fuel our future growth.\u201d<\/strong><\/p>\n It\u2019s an interesting point \u2014 while Instacart has a number of competitors in online delivery, as the company continues to rapidly expand its business proposition, it\u2019s harder to identify exactly who Instacart is competing with. <\/strong>Given McIntosh\u2019s response to that question, Instacart clearly sees itself as playing in a whole new league these days: \u201cA lot of our retailer partners work with us because they want to grow and uplevel their business, and when they talk about their competition, they often cite Amazon<\/strong>,\u201d he said. \u201cWe\u2019re building our technology for our retailer partners to help them compete with much, much, much larger players and grocers.\u201d<\/p>\n McIntosh took Retail TouchPoints<\/em> behind the scenes of Instacart\u2019s evolution, from online delivery company to full-fledged technology partner helping to reshape one of consumers\u2019 most fundamental shopping occasions \u2014 and where it\u2019s looking next.<\/p>\n While its business has now evolved beyond simply providing online delivery, Instacart\u2019s newly expanded role in the grocery ecosystem couldn\u2019t have existed without that first step, which involved not only bringing retailers\u2019 offerings to the centralized Instacart marketplace but also building white-label ecommerce storefronts for them.<\/p>\n \u201cIt seems obvious now, like the world\u2019s always been this way, but a decade ago, nothing was digitized in North American grocery,\u201d said McIntosh. \u201cSo to get retailers excited about the proposition of moving their business online, Instacart approached them both with the marketplace and their own site \u2014 it was that two-fold proposition that really drove that first wave [of adoption]<\/strong>.\u201d<\/p>\n From that point, in-store digitization was simply a natural progression<\/strong>, for both Instacart and the retailers it serves. \u201cSo many of our retail partners were coming to us saying, \u2018Hey Instacart, you\u2019ve successfully helped me digitize my business and bring it online, but can you also help me in the store? We\u2019re facing all kinds of problems in the store. How do we drive more loyalty adoption? How do we digitize more of our customers? How do we unlock incremental revenue streams?\u2019,\u201d said McIntosh.<\/p>\n \u201cAnd then on the other side, we were hearing from our online shoppers, and they were saying, \u2018Instacart, I love the convenience of online, I love the personalization of online, but I also like going to the store.\u2019 So many customers are omnichannel customers, and they were saying, \u2018How can I get what I love about shopping online in the store as well?\u2019<\/strong> That was really the birth of Connected Store \u2014 it was the intersection of those two insights from our retailers and from our consumers.\u201d<\/p>\n Instacart now has a full range of in-store digitization solutions, with more on the way. \u201cBroadly, we think about [our remit] as anything that can uplevel the in-store environment, either for consumers or, in some cases, it\u2019s retailer-facing,\u201d explained McIntosh.<\/p>\n This includes things like the company\u2019s Caper smart carts<\/strong> and its new FoodStorm order management system<\/strong> for foodservice areas like the deli department, as well as less visible solutions like the pick-to-light system<\/strong>, which ties into retailers\u2019 electronic shelf labels to help Instacart Shoppers find the right products quickly as they\u2019re fulfilling online orders. This also includes functionality such as an API for retailers that allows Instacart Shoppers to signal when inventory is running low or out of stock<\/strong>.<\/p>\n And as retailers bring in more solutions, those solutions become more interconnected. For example, a retailer with both FoodStorm and Caper can enable customers to place deli orders from their smart cart and continue shopping while their food is prepared.<\/p>\n That modularity is central to the Connected Stores offering, said McIntosh. Retailers can take the full suite or start with one element and build from there. \u201cWe\u2019re observing a natural gravity around the product suite<\/strong>,\u201d he said. \u201cA retailer doesn\u2019t have to take everything. They can start with one product. But they\u2019re seamlessly integrated, so it\u2019s really easy for a retailer to stack them on top over time.\u201d<\/p>\n For many retailers the starting point is Caper carts, which offer shoppers both a more seamless and a more personalized shopping experience simultaneously.<\/p>\n The benefits to retailers can be immense \u2014 McIntosh said that many Caper partners see as much as a double-digit lift in basket size among customers using the smart carts.<\/strong> But what exactly is driving this?<\/p>\n One answer is that the connected capabilities of the cart allow retailers to provide customers with more relevant promotions and recommendations. Approximately 90%<\/strong> of Caper cart users log in with their loyalty card at the start of their shopping trip, allowing retailers to \u201cengage with customers digitally in a whole new way,\u201d said McIntosh.<\/p>\n When that loyalty ID is then combined with intel from the cart\u2019s various sensors that tell it where the customer is in the store and what she currently has in her cart, it creates what McIntosh calls a \u201cwin-win-win\u201d scenario for customers, retailers and brands.<\/strong><\/p>\n \u201cWe construct an understanding of what\u2019s the most relevant thing for you to see, which means CPGs can now access consumers in brand-new ways,\u201d<\/strong> said McIntosh. \u201cThey can get the measurability and the targeting and the personalization they love on our online app products in the store [environment]. They make new deals available to customers, which customers love, and then retailers win as well, with lower prices for consumers and incremental revenue streams.\u201d<\/p>\n This has led to Caper\u2019s newest offering, gamification<\/strong>, which can take a number of different forms depending on the retailer and its CPG relationships. Retailers can offer a treasure hunt-style map-based game; a Temu<\/strong>-style spin-to-win discount; or rewards for certain customer behaviors, like total spend or number of shopping trips in a given time period (for example, $5<\/strong> off if you come in and use Caper four<\/strong> times in one<\/strong> month). And retailers can open that opportunity to their CPG partners \u2014 $1<\/strong> off if you buy three<\/strong> Pepsi products, for example.<\/p>\n \u201cThe combination of that loyalty adoption, with the screen, with an understanding what\u2019s in your cart, with the location system, unlocks all these new possibilities around gamification that not only digitize customers in the store but just make the shopping experience so much more fun<\/strong>,\u201d said McIntosh. \u201cIt\u2019s very rare to find something with so much consumer pull. It transforms grocery shopping from a utility to an adventure.\u201d<\/strong><\/p>\n This kind of real-time data intake, analysis and subsequent personalization in a physical environment was impossible as recently as just a few years ago. But just as retailers are rapidly adopting AI in their backend and online systems, AI also is part of the magic that drives the Caper experience.<\/p>\n However, as McIntosh points out, Caper\u2019s use of AI is very different from other, more common online applications because of where<\/em> it happens: \u201cWe\u2019ve heard a lot about AI in the cloud,\u201d he said. \u201cWhen you hear about OpenAI<\/strong> and Anthropic,<\/strong> what they\u2019re basically doing is building systems that work really well in the cloud. What we\u2019re doing with Caper sits at the opposite end of the spectrum. We\u2019re building AI models that have to respond in 200 milliseconds at the edge [that is, close to the user]<\/strong> to make the experience good. You can\u2019t be waiting minutes to get a recommendation as the customer moves through the aisle.<\/p>\n \u201cEdge AI is a totally different technological approach, a totally different technological expertise, a totally different data set [than cloud AI],\u201d McIntosh added. \u201cWhat\u2019s also unique about our approach is the ability to connect with the cloud piece. <\/strong>For example, with Carrot AI [Instacart\u2019s AI suite] I can say, \u2018Make me a meal plan for a family of five under $X per month and avoid these specific foods that my kids don\u2019t like,\u2019 build that list all in the cloud and then sync that list to Caper, the edge AI experience. We\u2019re building an advantage in AI overall, leveraging our data set both in the cloud and at the edge, and then connecting them together in a very unique way.\u201d<\/strong><\/p>\n As one might imagine, the technology that Instacart is bringing to stores today is only the tip of the iceberg; after all, the Connected Stores division has been around for less than three years<\/strong>. The company\u2019s growing ad business is increasingly coming into play<\/strong> across its platforms, including on Caper. New integrations with pricing and promotions platform Eversight<\/strong> (which Instacart acquired in late 2023), such as list-syncing from app to cart<\/strong>, are in the works. And the opportunities for Caper seem almost limitless; for example, McIntosh mentioned future plans to incorporate side-facing cameras on the carts that could provide inventory information<\/strong>, such as stock levels, to retailers, as well as heat maps to help them understand store traffic patterns.<\/p>\n The ultimate goal is \u201cto power every in-store transaction<\/strong>,\u201d said McIntosh, and while the company is still focused primarily on grocery, as indicated by the expansion into other verticals on the marketplace side of the business, Instacart doesn\u2019t intend to limit itself. \u201cWe\u2019re still very grocery focused, but we have opened up [delivery] to other verticals that we think our customers are asking for,\u201d noted McIntosh. \u201cOn the Connected Store side, we\u2019ve definitely got an interest outside of grocery, it\u2019s something that we would entertain.<\/strong> At the moment I would say that it\u2019s [relegated to] anything that comes down to a big basket shop, by that I mean you\u2019re shopping with a cart, not something like a hand basket.\u201d<\/p>\n And as McIntosh points out, there\u2019s still plenty of untapped opportunity in the grocery realm. \u201cIn my view, we\u2019re just at the beginning of digitization,\u201d he said. \u201cOnline grocery penetration in the U.S. is around 10%<\/strong>, and depending on the study that you look at, on a five- to 10<\/strong>-year horizon the estimates are that penetration anywhere from doubles to triples<\/strong>. What that means is that even in that period of time, you\u2019re going to have more than 70%<\/strong> of customers still going to the store. There\u2019s a huge opportunity to give those customers an experience that leverages the things they like about shopping online \u2014 it\u2019s more convenient, it\u2019s more personalized and so forth.<\/p>\n \u201cOne of the things I\u2019m most focused on in the coming year is developing new formats that are win-win-win: They\u2019re good for consumers, they\u2019re good for CPGs because they can capture consumer attention in new ways, and they\u2019re good for retailers,\u201d McIntosh added.<\/p>\n<\/p><\/div>\n![\"Instacart](\"https:\/\/www.retailtouchpoints.com\/wp-content\/uploads\/2025\/02\/Instacart-IPO.png\")
Horizon One: Bringing Grocers Online<\/strong><\/h2>\n
Horizon Two: The Connected Grocery Store<\/strong><\/h2>\n
![\"An](\"http:\/\/www.retailtouchpoints.com\/wp-content\/uploads\/2025\/02\/Caper-Hi-Res.jpg\")
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The Win-Win-Win Solution: Caper Cart<\/strong><\/h2>\n
![\"Example](\"http:\/\/www.retailtouchpoints.com\/wp-content\/uploads\/2025\/02\/Gamification.jpg\")
Bringing AI to the Edge of Retail<\/strong><\/h2>\n
The Future Horizon: Powering \u2018Every Store Transaction\u2019<\/strong><\/h2>\n