Trends Report: Sharing Services Disrupt Markets

Sharing is caring profitable. The sharing economy, an unexpected byproduct of the digital revolution, has cemented itself as a marketplace here to stay. People share rides, hotel rooms and apartments. Ride-sharing is the legal justification for taxi-like services that have caused outrage among traditional cab services in Europe. A few entrepreneurs have even begun selling free parking spaces and restaurant reservations – though these startups have seen slightly more controversy, mostly for regulatory or business-subversive reasons. The sharing economy is entering the retail space, as grocery delivery service Instacart is rapidly gaining popularity.

Sharing Economy is Entering Retail

Instacart is two years old, and has expanded to 10 major U.S. cities including Boston, Chicago, Los Angeles, New York, Philadelphia and Washington, D.C. The founder, Apporva Mehta (a former Amazon employee) just announced a $44 million round of financing from venture capital firms. The primary attraction of Instacart to these investors is simple: it’s a “people marketplace.” Hired ‘shoppers’ buy and deliver the products that customers order from a variety of supermarkets that provide updated inventories. The companies, and the shoppers, make money off of delivery fees. As a result, Instacart has an advantage over FreshDirect and other grocery disruptors in that they don’t have to invest in, maintain, or update capital-intensive infrastructure. The company does not own warehouses or delivery trucks.

Grocery is the single largest category of retail

“Grocery is the single largest category of retail in the United States and is virtually un-digitized at this point,” said Jeff Jordan (former CEO of OpenTable), a partner at Andreesen Horowitz - one of the venture capital firms investing in Instacart. “We’re making a bet that Instacart’s partnerships with brick-and-mortar grocery stores will be the winning play in grocery delivery to the home, with the ability to fend off competition from e-commerce companies that build out their own infrastructure.” Instacart has begun selling annual subscriptions in place of a pay-per-order. Over the past nine months, revenue has multiplied by 15. Mr. Mehta expects to operate in 17 cities by the end of 2014, and to expand to all major U.S. cities by the end of 2015.

The Sharing Trend

In the digital economy, sharing is a mainstay of the trends landscape. The efficient operation that results allows for the consolidation of expensive capital. Mike Lavigne highlighted a similar benefit as it relates to Uber salaries here. Consumer-based subscription services meet consumer expectations, and are quickly gaining traction in a myriad of industries. Businesses need to adapt to these consumer demands, and plan for and optimize modes of delivery with minimal capital investment and maximum customer service.