How to win on Instacart #7

June 6, 2022

This episode covers all things Instacart. Kiri Masters shares her insights on what CPGs need to know to succeed on Instacart today and in the future

What CPGs need to know to win on Instacart

In this episode we’re looking to answer one big question: as a CPG brand, how do you win on Instacart?

Instacart was the big success story in eGrocery in 2020 and it continues to gather steam. Today, Instacart is the leading online grocery delivery service in the US, capturing over 48% of market share, according to Second Measure.

But how do you win on Instacart as a CPG brand? And what mistakes should you avoid? To help us answer these questions and unravel some of the mystery around Instacart we’re joined by the Instacart expert Kiri Masters, the author of the recently published book “Instacart for CMOs” and CEO & founder of Bobsled Marketing.

📒 The Show Notes

We’ve pulled together the key insights for the following topic areas

  1. Setting the scene for how to win with Instacart
  2. Managing product content & SEO for Instacart
  3. Looking ahead: securing success with Instacart
Topic area What CPGs need to know about winning on Instacart
Setting the scene: how to win with Instacart
(05:08 onwards)
– Instacart is a four- sided marketplace (four stakeholders that interact with each other)
– All inventory is made available on Instacart through retailer partnerships Thus, retailers have a very big impact on the success of a brand on Instacart from an availability and product information standpoint so brands have little direct control over the consumer interaction
– To ensure availability brands need to work closely with retail partners which can create a bit of an internal challenge about who owns the Instacart relationship
– In a lot of cases digital or ecommerce teams need to partner with their sales teams a lot more closely than they do for any other marketplace channel
Managing product content & SEO for Instacart
(15:03 onwards)
-Think about Instacart more as a media platform, something like a Facebook or Google, than a distribution channel
-There’s great ROI for brands advertising on Instacart partly due to how the user interface encourages repeat purchases Work closely with retailers to have content issues fixed using digital shelf analytics for monitoring and PIM systems for syndication
– There are two main pillars to Instacart’s search algorithm — availability and personalization
– If your competitors are out of stock or not actively advertising on Instacart, you have an opportunity to conquer them using their brand search terms and test different bidding tactics
Looking ahead: securing success with Instacart
(24:32 onwards)
– Instacart is expected to build out their ad platform in a way that brings the best of Amazon over to Instacart, currently brands invest in what’s called “featured products”
– The search capabilities are still basic and while they’re providing a really good ROI, there are still less targeting and bidding options compared to Amazon
– The biggest challenge for brands is to bring teams together and create shared goals and outcomes that are going to suit this unique platform
– Instacart has already shown interest in moving into different verticals like electronics and beauty so watch this space
– There’s a possibility that Instacart could offer a white label solution to retailers whereby the retailers get to maintain that relationship with the end customer

📲References and People mentioned

📝Abbreviated Transcript of how to win on Instacart

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Julia Glotz: Thank you for joining us.

Kiri Masters: Thanks, Julia. It’s great to be here.

Julia Glotz: Now before we start talking about Instacart, I’d love to just find out a little bit about your own online shopping habits. Tell me about the last item you purchased online where you bought it, and what that experience was like,

Kiri MastersOh wow, what a great question. The last item I bought was some beauty products from an online store in Australia, where I currently am, called Adore beauty. Sort of like the Sephora of Australia, that’s been a good experience with repeat purchases. They offer all kinds of samples and goodies whenever you buy something there, so I’m in it for the free stuff.

Julia Glotz: Sounds like a pretty good deal for me. Now, you have recently published your book on Instacart, which is a great read by the way, and we’ll dive into the key findings and lessons from that book throughout the episode but let me just start you with this: you are someone who was clearly very much immersed in all things Instacart already. What surprised you the most, while writing and researching your book. What did you learn that you didn’t know before?

Kiri MastersIn 2020 there was a lot of interest in Instacart from CPG brands including a lot the brands that we worked with that Bobsled marketing, but in researching the opportunity for us as an agency of whether we should support this new platform we discovered it does look very interesting.

A lot of friends are jumping on board this platform there is an emerging retail media platform that’s being built and invested in by the Instacart team, but there’s very little information about how Instacart can be optimized for a CPG brand, what’s possible, what are the levers that you can pull. There was real whitespace around this topic which was getting more and more important for CPG brands. Once we started looking into the opportunity there’s a few unique aspects of Instacart that are very compelling for a brand to look at as a media channel and as a distribution channel which could be a big tick of approval for us in terms of moving forward with supporting that platform for clients. And then also just from an education standpoint and delivering insights to clients and prospects around what does this channel demand from you with resourcing, it was a big wide-open space.

Julia Glotz: And you talk in your book on several occasions about how the pandemic really was this landmark moment as far as interest in Instacart is concerned. Just talk a little bit about what happened, particularly during a pandemic in which Instacart suddenly came to such prominence.

Kiri Masters: Going back a year ago we’re all locked down at home and a lot of groups of people were starting to order groceries online, especially in the US. That was a bit of a niche use case, there weren’t so many people doing that and of course during the pandemic lots of new demographics started to adopt online grocery shopping, including the elderly. So new habit started to be formed during that time.

And if you recall, in that period of time before we understood exactly how the Coronavirus worked people were wiping down their grocery deliveries with Clorox wipes and that kind of thing, so we were at home. We didn’t want to go out to shopping so people who’ve never shopped on online for groceries before decided to try it and that really was the catalyst for Instacart to become such a big feature of people’s lives. At the same time, and it was fortuitous timing Instacart, launched its self-serve ad platform that was in May of 2020. And that was obviously something that had been in the works for a while, but great timing from the standpoint of being able to now offer retail brands the ability to target shoppers while they were searching for products and building their baskets in the app, and that really accelerated both Instacart, and the brands selling on their while, customers were changing their grocery shopping habits.

Julia Glotz: Fantastic and I think we’ll get an opportunity to dive into that self-serve platform in a bit more detail later as well. But you’ve already mentioned that Instacart has this unique model that I think is quite important for CPG brands to understand and to get their head around. In your book you describe this as a four-sided marketplace model. Can you, just in a nutshell, explain to our listeners what that model is how it works and how it’s different from other marketplaces.

Kiri Masters: Various marketplaces are two-sided. Amazon, for example, has a relationship between the third-party seller and the customer or Amazon’s retail inventory and the customer. And the same with Walmart and other marketplaces even eBay as a seller to a buyer. So, most marketplaces are two sided in that manner.

Instacart is four sided, in that there’s four stakeholders that interact with each other. You’ve got the end customer. The in-store shopper who is the person picking the items and delivering them to you. The retailer who the shopper is shopping at so that could be Kroger, or Costco. And finally, we have product advertisers who are generally the brands manufacturers. So, the implication here for brands is there’s two other stakeholders that typically don’t appear in marketplaces the in-store shoppers and retailers, and retailers have a very big impact on the success of a branch on Instacart from an availability and  product information standpoint, and really controlling a larger part of the brand experience than a brand might be used to on other platforms where they have more control and more of a direct one to one collaboration with the customer.

Julia Glotz: I’m really interested in diving into some more detail around how brands can navigate that that relationship, not just with the retailers, one of those stakeholders, but also with the shopper actually doing the picking in store. But you’ve already talked about some of the behavior changes we saw during the pandemic that contributed to Instacart success. Could you just briefly spell out from the shopper from a consumer point of view, what is it about the Instacart model that is so compelling, and attractive.

Kiri MastersInstacart is now available to 85% of US households, and 70% of Canadian households. That footprint is achieved by a way of partnerships between Instacart and major retailers, and smaller regional retailers as well. This network that they’ve acquired is very valuable because it means more people are able to shop on Instacart. So that’s one piece of it is the penetration that Instacart has amongst both large and small retailers.

Instacart was doing pretty well prior to the pandemic, one of the more compelling online grocery shopping options out there of course you’ve got Amazon Fresh and some other players, he poured infrastructure as a regional player in the northeast of the US, but Instacart had sort of the most reach from a footprint perspective.

Another reason I think Instacart has been very successful, is around that user interface. It’s a great app to use people like that experience. And it’s really heavily geared around repurchasing, which has good implications down the road for brands as well who are advertising there, but for consumers it’s very easy to build the cart and to repurchase through the app it’s very seamless customer experience. Customers like the ability to interact with their in-store shopper, when they need some more information about a product or substitution or something like that. It’s a well-designed experience.

Julia GlotzAnd you already pointed out that Instacart is really driven by that retailer relationship, and it’s not a marketplace where you as a CPG brand can just decide you want to be on. Can you just talk about this in a little bit more detail how do you get to be on Instacart, as a brand, what’s the process?

Kiri Masters: The retailers are the ones actually who are in charge of product availability, and what is sold on Instacart; Instacart doesn’t have a vendor relationship with any brands. All inventory is made available on Instacart through those retailer partnerships. So, if you’re a brand that isn’t sold through one of those retailers, you’re not going to be on Instacart. Basically, the answer there is to be in a position to distribute to those retailers, that’s the long and short of it. It’s sort of precludes a lot of brands who were smaller fledgling brands, but that’s the dynamic of the relationship right now. Instacart gets a product feed from those retailers and inventory availability feeds from those retailers and that’s how their whole product catalogue is set up.

Julia Glotz: You mentioned in your book on several occasions the importance of availability. Could you just go into this in a little bit more detail: what impact does availability have on your performance through Instacart, and what are perhaps some positive steps you might be able to take with your retail buyer to make sure that that you’re getting that availability right.

Kiri MastersThis is a source of frustration for brands because on other marketplaces, or brands will have a bit more control of inventory availability, what products are available for sale product content pricing, things like that. And mileage varies by marketplace and even the selling relationship that you have to that marketplace so a brand, selling as a vendor to Amazon, might have less control over those things than a seller, but with Instacart, there’s none of that interface at all.

So, the opportunity for a brand to impact that availability is really working with those retail partners, and this is where it creates a little bit of a challenge internally: who owns that Instacart relationship because you might think of it as a digital channel that really so much of success on Instacart comes down to how committed are your retail partners to Instacart, and how sophisticated is their inventory availability systems. So you’ve got a lot riding on these retail partners, and a lot out of your control so developing that relationship, the sales team, often has that experience with those retailers.

So, in a lot of cases we see digital or ecommerce teams or whoever is accountable for that Instacart channel needing to partner with their sales organizations a lot more closely than they do for any other marketplace channel.

Julia GlotzAnd is that something that you would recommend as best practice as well: if you’re a CPG brand, trying to figure out how you can get Instacart perhaps a little bit higher up on your buyers radar as well. It’s about having closer collaboration between those departments, potentially.

Kiri MastersYeah, absolutely. There are three models that we discovered speaking when we interviewed 10 brands for this book, and learnt, ranging from very large brands like Kellogg and Elf Cosmetics to smaller challenger brands.

There was a variety of old structures in terms of where Instacart sat between sales and marketing teams. Ultimately, there needs to be collaboration between those teams because, yes, that retailer really sits between the brand and the customer on Instacart, but at the same time, if the sales team is fully accountable for Instacart, they may not necessarily have that digital experience with retail, media, and product content and things like that which are also necessary to be managed properly on Instacart as well. So, in the ideal case, is that there’s great collaboration between those teams and shared KPIs and shared successes as well but that’s not always, that’s not always the case, it’s something that needs to be built, and certainly sold to the organization.

Julia Glotz: You said something initial earlier which I thought was really interesting when you talked about the four stakeholders in the Instacart model, one of them you identified as that in store picker, or shoppers actually. And you mentioned that there is a much closer relationship between the consumer and that shopper, or picker, then you might get on other platforms, there can be exchanges about availability and suitable substitutions. Can you just talk about how that relationship works, and what implications there are for brands?

Kiri MastersYeah so one story I came across, I think it was on Twitter, a customer had placed a grocery order and the shopper in the store sent a message saying, “Oh there’s Clorox wipes available on the shelf. Do you want me to grab some for you?” And this is at a time where Clorox wipes were out of stock, everywhere, and end customer was delighted with that of course you have grabbed me some of those. So, the in-store shopper essentially up sold that customer but in the best possible way. It’s not something that the in-store shoppers are compensated on, but it has caused some people to think well maybe that could be a bit more of an advantage that Instacart leans into in the future as this sort of shopping companion. I’m not sure if that’s an interesting idea.

Julia Glotz: One of the other points that you make throughout your book and that you made a little earlier on the podcast already is that as a brand, you really want to think about Instacart more as a media platform something like a Facebook or Google than a distribution channel and that the primary way you will typically be interacting with Instacart is as an advertiser.

Which types of brands in which types of categories are typically well suited to advertising on Instacart, and are there any types of categories or types of brands that perhaps wouldn’t be a good match?

Kiri MastersI think that they’ll always have a firm footing in the grocery category, but they have expanded to other retailers, including Best Buy an electronics retailer and Sephora as well a beauty retailer so they’re certainly moving beyond just the grocery category. I think that there’s one requirement which is that your products are sold through these retailer partners  –  you either have that or you don’t. But beyond that, we’ve seen really great return on investment for brands advertising on Instacart, and the reason for that is I think partly due to the way that their user interface encourages repeat purchases.

So if I’ve purchased on Instacart, in the past, all those purchases will show up in my previously purchased list, and I’ll be encouraged to pick items from that list again. So, if I’m doing a weekly shop. Instacart will prompt me “Hey usually buy this brand of yoghurt, when you’re shopping from this retailer, do you want to add this to your car?”. So, it’s very reliant on repeat purchases, or it drives repeat purchases. The stat that I can share on that is 20 to 25% of Instacart shopping activity actually comes from repurchasing. So, that is, if you’re a brand, and you can get into someone’s cart and purchase before list, then you’ve got a good chance of that being a longer term repeat purchasing behavior.

So that’s obviously going to work best for products which are replenishable so CPG products. Beauty pet supplies, it’s not going to work so well for high end electronics, things like that. It’s going to depend a little bit on the category and the replenishment cycle of that, if any, but in general, certainly all the brands that we interviewed for this book, counted Instacart, as one of if not the most effective media platforms that they operate in terms of return on investment.

Julia GlotzWow. And I suppose just listening to what you were saying and that amazing stat about 20 to 25% of activity coming from repeat purchases but I suppose the message for brands also is you need to get in early. If you’re thinking about potentially investing in Instacart, you need to start acting now.

So let’s dive into a little bit more detail on the practicalities of actually managing your presence on Instacart as a brand and you’ve already touched on this and the fact that this is very much driven by the retailer relationship. But of course, multinational brands leading brands will be using syndicating technology like PIM and digital shelf analytics to monitor and update their digital content, including things like SEO keywords pricing and availability. How relevant is this tech stack, when you’re working with Instacart?

Kiri MastersI think it’s a great question, and this is one of the challenges with publishing a book about Instacart, is it’s going to be out of date very quickly. And we knew that when we published it, we’re talking about a technology platform here. We published it back in January, and things have already changed. And this is an area where there’s the potential for Instacart to be the most dynamic, which is around integrations with third party solutions and opening up their product catalogue API to allow brands to provide more accurate product information.

This is a big challenge that Instacart has, in my view is by relying on the retailers to provide product information and separately product inventory information. They’re losing potentially great content that brands would be able to supply. So, while reviewing the book one of the early readers pointed out, it was the bag of chips on Instacart that had in the product title, but it was a certain size and then even the image it showed a different size, and so you wouldn’t know as a customer, which size pack we’re going to get. And that is an innocuous example, but it does lead to customer frustration. It does also have more serious implications when you think about things like allergen information or higher priced products where you’re going to be considering that purchase a little bit more.

So I think the ideal state that Instacart should really be getting that product information from the brands directly, which is going to require more wider acceptance of solutions that will feed that data in, and allow brands to manage catalogue information product information.

Julia Glotz: And you said you’ve already seen some changes since the book came out in January, what kind of evidence, have you seen that the Instacart is perhaps exploring some of this or is becoming more open to allowing brands to have greater control over the content that is published?

Kiri Masters: We’ve seen more changes on the advertising platform, more placement opportunities, different sort of branding and activation opportunities so that’s a big opportunity for Instacart to produce a very profitable revenue stream advertising is profitable for all of these retailers. So that’s where we’re seeing the most changes.  

Julia Glotz: Your expectation is that, as they move forward, that they’re going to potentially make it easier for brands to have control over this?

Kiri MastersI think that would be the right move.

Julia GlotzWhat do you think has stopped them today just this around, technical complexity, or is there an ideological barrier if you will, that would make Instacart reluctant to allow brands direct access and control?

Kiri Masters: This is a very good question. I think the first priority for Instacart has been to build that partnership with retailers. So Instacart is really reliant on those retailer partnerships and having those retailers be bought into the Instacart story.

What we have seen is some retailers in the media talking about challenges that they’ve had with the Instacart model. Their model is to take a certain percentage of sales from the retailers as a fee, and for some retailers they pass that the onto the end customer. Costco does that while other retailers absorb that cost. So for the ones that absorb that fee, their margins on Instacart orders are not great, they’re certainly worse than a customer walking into the store.

So, there’s a little bit of tension now which has probably always existed to some degree, there’s tension between Instacart and the retailers. And so I think that to a certain degree, decisions that are made by Instacart might be influenced by keeping that relationship with retailers as positive and productive as possible. Yeah, I’m not sure if that could be a reason behind allowing the retailers to provide that product information. That’s one theory. I think that might be a legacy of how the platform was built wasn’t really built with the brands in mind it was really Instacart building this platform with retailers as partners, and the brands coming in as advertisers has been a relatively recent thing, at least, at scale, has been a relatively recent thing.

Julia GlotzAnd you just mentioned this interesting example where there was a brand of chips or a chips product where the product size was wrong. Just talk us through your experience of how to best handle and fix any content issues, if needed, how should brands approach this with their retailers?

Kiri MastersYes, so getting the information correctly with the retailer would be the ideal solution there. And this is where there needs to be a commitment to investing in Instacart from the brand because you’re going to want to understand inventory availability amongst your retailers, and that’s the product information is correct, so that you can lean on them to correct that. From an advertising perspective, if you’re out of stock with the retailer somewhere then those ads will turn off, but if there’s incorrect products information products are still going to show to show up.

Working with the retailer is probably the best course of action there, and then also Instacart, is building a relationship with a lot of brands, they want to entice brands to start advertising on the platform. And so it could be that you’ve got a contact at Instacart as well it could be worth reaching out to them as well but the retailers are typically going to have the control over the feed and pointing arrows out to them. The retailer also has a stake in the game because if production information is wrong and that’s going to be coming back to them at some point in the future.

Julia Glotz: What do we know about Instacart’s search algorithms? Can you just talk us through some SEO optimization tactics that brands should have on their radar?

Kiri MastersThere’s two main pillars to Instacart search algorithm fulfilment and search personalization. Fulfilment is the product availability, is that product in stock in your zip code. Instacart is going to check across the retail partners to see if that item in stock. There’s a replacement recommendation model as well so if I’m searching for my favorite yoghurt. But that’s not available Instacart is going to recommend a competitor to me as well so that’s another reason why I want to be familiar with in stock rates and availability amongst your retail partners to make sure that that doesn’t happen. And then the second piece is search and personalization.

Julia Glotz: Kiri, what are some of the opportunities for smaller brands in that level of personalization that Instacart does around search results?

Kiri MastersI think the main opportunity there is. If you’re competitive or not in stock or they’re not really active advertising on Instacart, then you have an opportunity to conquest them use their brand search terms and things like that. It’s a question of how active your competitors are and how extensive their bidding tactics.

Julia Glotz: Thinking about CPG portfolios more generally, which products should be advertised or prioritized for search performance? Is it about promoting the entire portfolio is it about focusing on top performing products, what have you seen work?

Kiri Masters: It really depends on the brand’s objectives so if they’re wanting to maintain a position for their top sellers or if there’s new products that they’re wanting to highlight there it’s really going to come down to the brand’s objectives that what that strategy looks like.

Julia GlotzAnd you’ve already mentioned that Instacart now does have a self-service ad platform. How does it work and how does it compare to other self-service ad platforms that our listeners might be familiar with?

Kiri MastersSo Instacart has attracted a lot of ex Amazon advertising executives over to the advertising group. So I expect to see Instacart build their ad platform out in such a way that brings the best of Amazon over to Instacart where it makes sense. Right now, the search capabilities are fairly basic; like I said they are providing a really good return on investment, but there’s less targeting options and bidding options and you would find on an Amazon right now.

Julia Glotz: And what are some of the actual ad formats that brands can invest in at the moment?

Kiri MastersSo, the ad format is called featured products. This is the ad format that is self-serve. This is bottom of funnel transaction level advertising. Keyword targeted ads they show up amongst the organic results once you search for products. If you search for Greek yoghurt, it might be bidding on that search term Greek yoghurt and my ad will show up amongst the organic search results there. I think that there’s going to be a lot more options rolled out in the future as Instacart continues to develop its retail media platform.

Julia Glotz: And how much do brands typically invest in Instacart at the moment and how much do you recommend they invest?

Kiri Masters: That’s a tricky question to answer, it’s going to depend a lot on the brand what their appetite is to grow on Instacart. So, compared to an Amazon or other existing accounts which are larger and proven and have a track record of an ROI brands are not allocating nearly as much money to Instacart as they are for those more established channels, but it’s impossible to give a range. It’s going to depend on the brand and where they’re at in their view of Instacart.

Julia Glotz: What do you think then is the single biggest challenge brands need to overcome if they want to succeed on Instacart in 2021?

Kiri Masters: It comes back to something that we discussed earlier around where Instacart sits within an organization. You’ve got sales from Instacart showing up within a retailer account let’s say, Kroger or Costco, those sales are going to show up in that retailer account on the brand’s P&L. But maybe spend, because it’s a digital channel, often gets allocated to the ecommerce or the digital team.

So that’s an open loop within a brand, where that money was spent and how it was realized. So that is the biggest challenge that we found amongst the brands that we spoke to was how to rationalize that open loop and bring those two teams together and create shared goals and outcomes that are going to suit this pretty unique platform.

Julia GlotzWhat are your expectations around Instacart: is your expectation that they are going to be able to sustain their current growth rate?

Kiri Masters: The data so far suggests that consumers have developed pretty sticky habits around online grocery shopping. When you think about that 85% footprint across the US, where are they going to grow? I think that Instacart has already shown that they’re interested in moving into different verticals like electronics and beauty is they have so far so I think that we could see more of that and we could say Instacart become more of a player in the categories that we haven’t seen them be active in.

This is what I would recommend to Instacart, if I could, is the grocers, who are figuring out what’s their value add in the market in the next 10 years a lot of them are looking at Instacart and thinking, this is perhaps not the long term solution to a need that the market has around online grocery ordering, they would rather have that direct relationship with the customer, and in its current form Instacart doesn’t offer that so I think that there is a possibility that Instacart could offer a white label solution to retailers, whereby the retailer’s gets to maintain that relationship with the end customer. And Instacart is providing the backend infrastructure to enable that transaction and fulfilment.

Julia Glotz: That’s really interesting. There’s been a fair bit of speculation recently hasn’t there about precisely that, whether Instacart could essentially be primed to invest in some of its own fulfilment capabilities. Given what you’ve said before about just how central to its model that relationship with the retailer is, you wouldn’t expect them to do anything where they would be competing head on with retailers, would you?

Kiri MastersI wouldn’t that would be a huge reversal of that strategy so far of aligning with those retail partners.

Julia Glotz: Now we like to finish our episodes by asking our guests to highlight one essential piece of advice that they’d like to give to our listeners, and we’ll call this your hashtag 22nd smarts. Kiri. what’s your one essential piece of advice on how CPG brands can win on Instacart?

Kiri Masters: The trick is to get started early. There’s long term rewards for getting into that shoppers cart right now.

Julia Glotz: Brilliant. And before we wrap up, can you tell our listeners, where they can get your book Instacart for CMAs and also where they can best connect with you.

Kiri Masters: Well, ironically, the best place to buy the book is on Amazon. Just search for Instacart for CMOs on Amazon, wherever you’re located Amazon US, UK, wherever you are. And the best way to connect with me personally is on LinkedIn. My company Bobsled marketing helps brands to grow their Amazon, Instacart and Walmart sales channels as well so you can find us at Bobsled marketing.com

Julia Glotz: Brilliant, Kiri, thanks so much for being our guest and thank you.

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