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Grocery Deliveries in Sharing Economy

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When you buy groceries from Instacart, the company summons a green-shirted personal shopper through its smartphone app to pick
up your items from a grocery store and deliver them to you. Credit Peter DaSilva for The New York Times

I hope you realize that you are about to witness a remarkable display in ineptitude, the technology
investor Michael J. Moritz said as he entered a Whole Foods store in San Francisco one recent
afternoon.
Mr. Moritz, the chairman of the venture capital firm Sequoia Capital and a recipient of a British
knighthood last year, was wearing a bright green T-shirt bearing a logo for Instacart, a two-year-old
grocery delivery start-up that Sequoia has invested in. He was here to show me what its like to work
for the start-up in particular, how unexpectedly difficult it is to quickly and accurately buy and
deliver an assortment of groceries for a stranger.
Instacart might not sound like a novel service. It is one of several companies that is trying to revive a
dream first floated, and then shelved, during the last dot-com boom the dream of ordering your
staples online and having them show up at your door a short while later. At least a half-dozen firms
offer grocery delivery across the country, including Amazon.coms AmazonFresh, FreshDirect, Peapod
and services run by big grocery chains.
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But behind the scenes, Instacart is unusual and

intriguing. It operates according to a decentralized


business model that borrows from services like
Uber, Airbnb and other firms in the so-called
sharing economy. And it is not only potentially
lucrative, but also could redefine how we think
about the future of labor.
When you buy groceries from Instacart, the
Credit Stuart Goldenberg

company summons a green-shirted personal


shopper through the firms smartphone app. The

shopper receives your list, scurries through a grocery store to pick up your items and then heads across
town in his own car to deliver your stuff.
Instacarts shoppers earn from $15 to $30 an hour, depending on how quickly they deliver peoples
food. Thats quite a high wage considering the job does not require a college degree, is part time and
can be done during flexible hours. Its substantially more than the typical supermarket worker salary of
about $9 to $11 per hour though of course without any benefits like health insurance. Instacart says
the workers are independent contractors, responsible for paying for expenses like their own Social
Security taxes.
Still, Instacarts success suggests that rather than simply automate workers out of their jobs,
technology might create new labor opportunities for people who havent acquired formal credentials or
skills in an economy where low- and medium-skilled workers face a bleak outlook. Like the ridesharing service Uber, Instacart creates work by connecting affluent customers who have more money
than time with part-time workers who have the opposite problem lots of time, not enough money.
But unlike ride-sharing or apartment rental services, Instacart isnt intruding upon a regulated
industry, and its service poses little risk to its customers health or property, so it faces few of the
complications that have dogged other sharing companies. Because it expands the customer base for
physical stores, it has also been welcomed by some grocery chains as a potential bulwark against the
wider rollout of Amazons delivery service.
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Instacart creates vast selection for customers by allowing them to shop at many dierent stores, from large chains to specialty shops like
San Franciscos worker-owned, vegan-friendly Rainbow Co-Op. Credit Peter DaSilva for The New York Times

When you ask what kind of niches well see for people who used to be in traditional middle-class jobs,
this is the kind of labor that could fit into that, said Tyler Cowen, an economist at George Mason
University whose book Average Is Over contemplates how technology is altering labor markets. I
wouldnt want to suggest people will become grocery-delivery millionaires, he said, but if you dont
have a college education but youre smart and responsible, could you make a living doing this and
maybe piecing it together with some of these other kinds of jobs? Absolutely.
Instacart was founded in 2012 by Apoorva Mehta, now 27, an engineer who spent two years working at
Amazon.com. I had this problem of never having groceries in my fridge and never having the
motivation and energy to go to the store, Mr. Mehta said. But he found most grocery services,
including AmazonFresh, too cumbersome. They required him to submit his order many hours in
advance of delivery, and they sometimes didnt offer the merchandise he was used to getting at his
local store.
Whats more, traditional grocery delivery services are costly to set up, requiring warehouses to store
perishable food, a fleet of custom-painted trucks for delivery and a staff of full- or part-time workers to
package and deliver the orders. We were the clowns who invested in WebVan, and we are only just
getting out of therapy from that, Mr. Moritz said, referring to the first booms spectacular grocery
flameout.
Instacart does not maintain warehouses or trucks. Instead, the service is assembled out of found parts

existing supermarkets, willing part-time workers and their cars. The model has many advantages. It
creates vast selection for customers by allowing them to shop at many different stores, from large
chains to specialty shops like San Franciscos worker-owned, vegan-friendly Rainbow Co-Op. It allows
for extremely quick delivery too, including an option that will deliver your groceries in under an hour.
Though he declined to provide specifics, Mr. Mehta also said the firm had turned a profit in certain
markets. Instacart now operates in ten cities, including New York, San Francisco, Chicago, Boston,
Austin, Seattle and Los Angeles, and plans to be in 17 by the end of the year. It has 50 full-time
employees and more than 1,000 independent shoppers under contract, many of whom fall into two
demographic groups: college students and middle-aged mothers looking for flexible work.
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Apoorva Mehta founded Instacart in 2012. I had this problem of never having groceries in my fridge and never having the motivation and
energy to go to the store, he said. But he found most grocery services lacking. Credit Peter DaSilva for The New York Times

Despite its low-cost business model, Instacart isnt cheap. The service charges a delivery fee of $3.99
for most orders, and it also makes money by marking up store prices. The amounts vary depending on
the item, but I noticed Instacarts prices coming in at about 20 percent more than I could find at my
local store.
The markup explains in part how Instacart can afford to pay shoppers such high wages. But as I
discovered as I shopped with Mr. Moritz, theres another factor behind high pay: Shopping is a skill,
and Instacart pays handsomely to get people who are very good at it.

Though he could talk at length about the virtues of Instacarts business, Mr. Moritz is a billionaire
investor, but he turned out to be a poor shopper. As we walked through Whole Foods, he often needed
my help to locate a customers items. I had to show him where to find grapes, bananas and Perrier;
neither of us had any luck finding Babybel cheese.
A few days later, I went on another delivery with Sharon Schedler, a 43-year-old mother who has been
working for Instacart for about a year. She was a pro. Despite my peppering her with questions, she
completed an 11-item order in under 10 minutes, including giving the customer a call to suggest
substituting chicken breasts for chicken tenders, which were out of stock. Ms. Schedler was also
meticulous about picking produce. I try to be pickier than I would be for myself, she said as she
studied zucchinis for nicks.
Lawrence F. Katz, an economist at Harvard who studies technology and labor, offered a few reasons to
stifle excessive optimism about Instacarts model. First, technology may yet one day render Instacarts
shoppers obsolete. Drones could pick our groceries, after all.
Another possibility, he said, is that wages will be bid down as more people compete to become
Instacart shoppers. Or, as the companys software becomes more sophisticated, it could squeeze more
efficiency out of workers; they may end up doing more work and not earn any more money for it.
A third problem is the lack of job security and benefits, which were once considered standard features
of middle-class jobs. But Mr. Mehta says he doesnt see that shifting. The advantage to this model is
that you choose your own hours, he said. More corporate control over work habits is something that
would drive a lot of people away. The independent contractor model Im not sure thats going to
change.
Correction: May 21, 2014
An earlier version of this column provided an outdated number of cities in which Instacart, a grocery
delivery start-up, operates. It now operates in 10 cities, not eight.