IDJI SIMO has a back story unusual even by the standards of Silicon Valley’s immigrant elite. Born in the port of Sète, in the Languedoc region of southern France, she was raised in a family of fishermen. With her father always at sea, she barely travelled. Yet she had style—her first name comes from a Guy Laroche perfume—and she had ambition. At a young age she vaulted from the Mediterranean, via the prestigious HEC business school in Paris, to the coastline in northern California better known for the internet than fishing nets. There she made her name at Facebook’s social-media empire. As she puts it, “I jumped into the rocket ship.”
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On August 2nd, at 35 years old, she became chief executive of Instacart, an equally rocket-like online-grocery platform. The San Francisco-based firm has become a household name in America and Canada during the covid-19 pandemic for its app giving digital access to the shelves of 600 retailers, big and small, as well as its 500,000-strong army of gig-economy workers who pick and pack goods from supermarkets and deliver them to customers.
The job thrusts the Frenchwoman, like a modern-day Joan of Arc, into a pivotal position in the ongoing trolley wars. She has dark forces to fight: Instacart, she claims, provides supermarkets with the technology to battle Amazon’s expanding e-realm. She has revolutionary (some say heretical) ideas: she hopes to bring Facebook-like targeted advertising to the grocery-shopping experience. And she is on a mission: most of her top executives, 70% of her contract workers and four-fifths of her customers are women. The executive tilt is “absolutely strategic”, she says.
Yet she is also expected soon to lead Instacart to an initial public offering that will probably value it higher than most American supermarkets. (The firm declines to discuss a listing.) To underpin such a valuation, she needs to find ways of making it profitable—without alienating the supermarkets that Instacart considers its partners. The higher the valuation Instacart achieves, the more it suggests that supermarkets will get the short end of the stick. As some of Instacart’s exclusive arrangements with them reportedly begin to expire, the big grocers may be realising this.
Far from the digital throne room of Facebook, Ms Simo has now thrust herself into one of the gnarliest corners of the real world, grocery, in one of the most cut-throat businesses, delivery. If the economics of delivery platforms, from ride-sharing to meals, are tough, those of hauling baskets of produce are even more so. Supermarket margins, already thin, are falling, according to Bain, a consultancy, leaving little left over for the costs of dropping stuff on doorsteps. Shoppers are increasingly price-sensitive; hence the rise of discounters such as Aldi and Lidl. At the height of the pandemic stay-at-home orders gave people little choice but to pay extra for delivery. But as conditions return to normal, so will cost-consciousness. In the three months to June, says Bloomberg Second Measure, a data company, year-on-year grocery-delivery sales fell, after stratospheric rises in most of the previous 12 months.
Ms Simo acknowledges that after a breathless year, Instacart is at a “new resting heart rate”. As the online share of groceries in America rises from a modest 8% of total sales, she sees plenty of growth ahead. But competition is heating up. Walmart, America’s biggest grocer, may have regained the upper hand in delivery. Amazon Fresh is a force to be reckoned with. Rival upstarts, such as DoorDash and Uber Eats, are expanding from meals to everyday goods (and, according to the Information, a tech newsletter, have rejected Instacart’s offers to merge or team up, respectively).
Meanwhile, as the IPO approaches, investors will want to assess Instacart’s path to profitability. Its most recent valuation of $39bn is already higher than that of Kroger, America’s second-biggest supermarket chain, though Kroger’s revenues, at $132bn last year, dwarf those of Instacart, at $1.5bn. The implication is that investors believe either that Instacart will displace its supermarket partners in the years ahead, or that it will become a high-margin digital-ads business. Ms Simo insists it will be the latter.
She is losing no time. Already, she says, ad sales (reportedly $300m last year, or a fifth of revenues) are growing at triple-digit rates. But that’s just for starters. Within days of taking over the company, she raided Facebook for its top marketing executive, Carolyn Everson, naming her Instacart’s president. Ms Simo sees huge potential. Groceries, as she points out, are the largest segment in the retail sector. Until recently the $1.5trn consumer-goods industry was unable to target shoppers directly as they put groceries into their trolleys. They now can via internet shopping, and all the more effectively on the small screen of a mobile phone. Targeted ads give them even more bang for their buck.
Further supporting growth will be automation. Instacart, Ms Simo says, will continue to expand its numbers of packers and deliverers. But it recently signed a deal with Fabric, an Israeli firm, to build small-scale robotic warehouses attached to its partners’ supermarkets, which will make picking and packing quicker, enabling Instacart to cut delivery costs. The firm will also ramp up efforts to win hearts and minds of customers and staff. One approach, clearly, is to pay more attention to the female perspective, not least because women do most of the grocery shopping. Another will be to make online shopping more entertaining.
Checking out
How much shoppers will welcome a blizzard of ads as they peruse virtual aisles remains to be seen. For supermarkets, the big questions are how much they will sacrifice direct relationships with customers who access them via Instacart, and who will reap most rewards from the ad bonanza. Ms Simo insists the benefits will be shared between Instacart and its partners. But, says Steve Caine of Bain, many of America’s big supermarkets are building their own online platforms to rely less on Instacart. The fightback has begun. It may not be a Hundred Years’ War. But it will be a long one.
This article appeared in the Business section of the print edition under the headline “Joan of Instacart”