Instacart Aims to Cement Online Grocery Presence by Converting Casual Users Into Regulars

Instacart is ramping up its efforts to capture and keep customers as it aims to cement its status in the online grocery sector. The company is concentrating on two primary objectives: bringing in new users, elevating engagement with its current clientele, and creating “habituated customers.”

During the company’s second-quarter earnings call, CEO Fidji Simo noted 25 million people used its service in the past year. This large user base presents an opportunity for Instacart to convert infrequent customers into regular users. Many customers make only 11 purchases annually, but Instacart aims to increase this frequency.

“We want to create habituated customers because we know that when we habituate the customer, we end up getting the entire grocery spend for the month, which is incredibly valuable,” Simo explained during the earnings call. “We have a portfolio of marketing tactics, incentive tactics that really allow us to do both, both attract new customers as well as habituate them.”

Simo pointed to the 25 million annual customers, noting, “That’s a really great opportunity for us to turn these infrequent customers who purchase on average 11 orders a year with us into much more habituated customers that look more like our typical monthly active orders.

“And we’re doing that not just through incentives, but also through promoting Instacart+ through connecting these users to all of our affordability options that you can build a habit as well as introducing new use cases like restaurants, which we are seeing drive both new users, new customer acquisition as well as habituation of existing users.”

In addition to new user acquisition, Instacart is focusing on increasing the engagement of its current customers. Company officials have identified a range of strategies aimed at converting occasional users into more regular shoppers. This includes efforts to boost the number of orders from existing users and transform infrequent customers into monthly purchasers. The emphasis is on using targeted marketing and incentive programs to achieve these goals.

For instance, Instacart is leveraging its wide selection of groceries and new restaurant options to enhance the overall customer experience.

Instacart’s competitive positioning remains strong, especially in the context of basket size. According to company data, Instacart holds a dominant market share in both small and large baskets. It controls over 50% of the small basket market and more than 70% of the large basket market, which represents 75% of industry profits. This substantial market share underscores Instacart’s effectiveness in driving both frequent and high-value transactions.

Despite its strong market position, Instacart is aware of the need to continue innovating and adapting to maintain its competitive edge. The company is investing in expanding its product offerings and improving customer experiences. This includes integrating new retailers into its platform, such as Sally Beauty and The Home Depot, and enhancing its eCommerce capabilities through updated storefront technology.

Chief Financial Officer Emily Reuter said the company is focused on deepening engagement with existing and infrequent customers, adding, “We’re really excited about the strategies we’re seeing start to work on deepening engagement with the full spectrum of different customers we see in that 25 million. That means we obviously have high single-digit millions that use Instacart monthly, but we also have people that we’re trying to get from five times a year to monthly from one time a year to six times a year.”

In her second-quarter letter to shareholders, Simo said millions of people trust Instacart to help feed their families on a weekly and monthly basis.

“And, over the past year, approximately 25 million people used our service,” she wrote. “This gives us a tremendous opportunity to deepen engagement with infrequent customers while continuing to attract more new users to Instacart. We aim to achieve this by continually raising the bar across the most important dimensions of online grocery. We already offer the best grocery selection, and now we’ve added hundreds of thousands of restaurants to Instacart through our partnership with Uber Eats.”

Early data, the letter said, “affirms our belief that restaurants can be incremental to grocery by attracting new customers to our ecosystem and increasing order frequency for existing ones, especially Instacart+ members. We’re also seeing higher average basket sizes for restaurant orders than those on other platforms.

“Longer term, we believe we can create a flywheel effect where restaurants help grow our grocery orders too.”

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