INSTACART
In-depth analysis of INSTACART's evolving business model, addressing key issues, strategy, action plan, financials, and risk assessment. The executive summary highlights challenges faced, including lack of partner trust and rising competition, with a focus on ensuring sustainability and growth through strategic planning. Proposed strategies include remaining an inventory-free company, reducing fees, and enhancing information-sharing with partners. Financial projections indicate significant incremental profit and revenue impact.
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Presentation Transcript
INSTACART An evolving business model John Molson MBA International Case Competition Barna Consulting Firm Naomi Di Cocco Carlos Piola Estifer Baldera Fernando Sierra
AGENDA 1 Key Issues 2 Overview 3 Strategy 4 Action Plan 5 Financials 6 Risk Assessment
EXECUTIVE SUMMARY INSTACART Lack of trust from some of your partners Rising competition Profits only in Covid years Challenges
EXECUTIVE SUMMARY INSTACART Lack of trust from some of your partners Rising competition Profits only in Covid years Challenges How to ensure Instacart business model sustainability? Key Issue
EXECUTIVE SUMMARY INSTACART Lack of trust from some of your partners Rising competition Profits only in Covid years Challenges How to ensure Instacart business model sustainability? Key Issue Develop a strategic plan to ensure growth in view of changing market conditions Goal
EXECUTIVE SUMMARY INSTACART Lack of trust from some of your partners Rising competition Profits only in Covid years Challenges How to ensure Instacart business model sustainability? Key Issue Develop a strategic plan to ensure growth in view of changing market conditions Goal Remain an inventory free company, creating trust in our partners through a reduction of fees and enhancing information-sharing to grocers through ad sales and platform development services Strategy
EXECUTIVE SUMMARY INSTACART Lack of trust from some of your partners Rising competition Profits only in Covid years Challenges How to ensure Instacart business model sustainability? Key Issue Develop a strategic plan to ensure growth in view of changing market conditions Goal Remain an inventory free company, creating trust in our partners through a reduction of fees and enhancing information-sharing to grocers through ad sales and platform development services Strategy 6% $2.1B USD Incremental profit $31.6B USD Incremental Revenue Impact increase in profit margin
OVERVIEW Key Issues Overview Strategy Action Plan Financials Risk Assessment
COMPANY HISTORY COVID IMPACT Growing Profits Growing revenues but a loss of Reached profits because of Covid $15 per order. creating high demand . FUTURE 2019 2013 2015 2020 Creation Growing Finding sustainability With the vision of helping grocers $735 million in revenue but a loss to win e-commerce of 300 million. Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
VALUE PROPOSITION INSTACART HELPS GROCERS TO WIN ECOMMERCE DO NOT HANDLE INVENTORY SAME DAY 500 MILLION Same day Sku available and Is one of the few By giving digital delivery is thousands of players that have presence and in offered to clients, partners. not. cases building aiming to get a 1 them websites hr delivery time and online stores. in the future. Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
COMPETITIVE LANDSCAPE ON DEMAND GROCERY DELIVERY + Walmart Amazon offerings 3 Variety of product Uber 1 DoorDash 2 Instacart Company size + Table: Team Creation Source 1: By a subsidiary according to CNBC Dic, 2021 Source 2: Grocery Drive article, Sept 2021 Source 3: Marketcap by Yahoo Finance, Jan 2022 O Do not own Stores O Currently building Dark Stores O Own Stores Key Issues Overview Strategy Action Plan Financials Risk Assessment
KEY TAKEAWAY Instacart is the biggest grocery delivery that does not own stores or dark stores, representing the lesser of a threat to grocery stores. Key Issues Overview Strategy Action Plan Financials Risk Assessment
MARKET OVERVIEW COVID IMPACT GROCERY Offered with alliances with strategic partners. DIGITAL ADS Important part of your revenue since 2020 ONLINE SERVICES Part of your value proposal to stores CONSUMER DATA MARKET A growing market that you might have the capability to take part. Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
KEY TAKEAWAY Small adaptations of your business Key Issues Overview Strategy Action Plan Financials Risk Assessment
STRATEGY Key Issues Overview Strategy Action Plan Financials Risk Assessment
ALTERNATIVES HOW TO ENSURE THE BUSINESS MODEL SUSTAINABILITY? 1. 2. 3. 4. 5. 6. Own Own Own Do not own Do not own Do not own inventory by inventory by inventory by inventory inventory and inventory and opening dark buying launching and focus on focus on focus on stores existing white-label ad sales platform diversifying grocery business development product delivery stores services offering Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
CRITERIA HOW TO ENSURE THE BUSINESS MODEL SUSTAINABILITY? 1. PROFITABILITY 2. RELATIONS WITH GROCERS 3. COMPETITIVE ADVANTAGE 4. EMPLOYEE MORALE 5. RELATIONS WITH CUSTOMERS 6. IMPLEMENTATION TIME Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
OWN INVENTORY Open dark stores PROS CONS 1 Dark stores are a popular new trend, where the business owns a warehouse that serves as a distribution center for online shopping Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
OWN INVENTORY Buy grocery stores PROS CONS 2 Purchase existing stores which already possess inventory and employees Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
OWN INVENTORY White-label PROS CONS 3 Form strategic alliance with grocers by launching white label products which we can create and fulfill the orders for Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
DO NOT OWN INVENTORY Focus on Ad Sales PROS CONS 4 Further grow a service that has proven to be successful Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
DO NOT OWN INVENTORY Focus on platform development services PROS CONS 5 By having alliances with grocers, we would be strengthening our relations with them, and ensuring they will use our platform for their delivery and orders fulfillment. Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
DO NOT OWN INVENTORY Diversify product delivery offering PROS CONS 6 Continue growing the offering of delivery options for products other than grocery products to further grow our customer base and participation in the market Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
DECISION MATRIX HOW TO ENSURE THE BUSINESS MODEL SUSTAINABILITY? CRITERIA ALTERNATIVES Employee morale Relations with customers Implementation time Relations with grocers Competitive advantage Profit ++ + = Open dark stores Own inventory + ? + Buy grocery stores ? ++ = Launch white-label ++ + ? = + Focus on ad sales ++ + + = + + Focus on platform development services Do not own inventory + ? Unknown Strategy + + + Diversify product delivery offering + Positive Negative = Unchanged Key Issues Overview Source: Team Creation Action Plan Financials Risk Assessment
DECISION MATRIX HOW TO ENSURE THE BUSINESS MODEL SUSTAINABILITY? CRITERIA ALTERNATIVES Employee morale Relations with customers Implementation time Relations with grocers Competitive advantage Profit ++ + = Open dark stores Own inventory + ? + Buy grocery stores ? ++ = Launch white-label ++ + ? = + Focus on ad sales ++ + + = + + Focus on platform development services Do not own inventory + ? Unknown Strategy + + + Diversify product delivery offering + Positive Negative = Unchanged Key Issues Overview Source: Team Creation Action Plan Financials Risk Assessment
WHY THIS IS YOUR BEST OPTION AD SALES & PLATFORM DEVELOPMENT SERVICES COMPETITIVE ADVANTAGE Focus on existing know how, expertise and developments MAINTAIN KEY RELATIONS Enhance trust and build strategic alliances with grocers and brands, as well as maintaining employee morale GROWTH SUSTAINABILITY Continue developing a market segment that has been steadily growing and will continue to do so Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
KEY TAKEAWAY A combination of ad sales and platform development services will result in the optimal streams of sustainable growth for the company Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
ACTION PLAN Key Issues Overview Strategy Action Plan Financials Risk Assessment
SAFE Shape Assess Finance Empower Shape your business structure for the future Key Activities o Focus on Advertising due to its higher Growth Potential & Profitability Persue more suppliers that are willing to invest in the campaigns Promotions with Retailers for store specific events such as Costco & Groger Reduce fees for promotions, holidays or Instacart Events Shape o o o Considerations Advertise promotions Expansion into Key Markets should be contemplated Promotions should be positioned Continue Expanding the Ads divisi n with and experienced workforce and Budget in accordance to revenue Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
SAFE Shape Assess Finance Empower Assess Partners and Advertisers to become Successfull Key Activities o With your information Cloud & Website services implmenent Data analytics tools for better decisi n making. Provide Market Trends for particular products, services and reas Create Dashboards & utlize machine learning to promote higher buy rate. Open APIs to Partners to Access data of thier businesses. Shape o o Asssess o Considerations Partner websites and Toolkit should be interactive and include options for campaigns . Easy to use and understand Dashboard with options for more intricate users. Market tren data should be collected anonimously and encrypted. Historiacal Market Trend Data should be provided. Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
SAFE Shape Assess Finance Empower Give Back to Your Business Partners Key Activities Revenue Split from your advertising to businesses that Fufill the Ads order As Ad revenue grows reduce the fees you charge your partners Promote strategic routes for Delivery Shape Asssess Considerations Finance Revenue Split should be 20% of the Advertising for the particular producton and Interaction. Reduction Will happen as ad growth persist with a reduction in 15% Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
SAFE Shape Assess Finance Empower Empower Growth to All. Key Activities Diversify your curent catalog to include new producto sections such as clothing, shoes, kitchen tools etc Empower Partners by creating thier catalog with existing producto data such as pictures, suggested price and others. Promote small businesses & startups with websites, pictures and Data. Considerations Shape Asssess Finance Diversify to sections where data shows a great cross-sell and that existing partners posses. New products can increase the potential advertisers that will use your app. Empower Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
Usuarios, delivery por usuarios Key Perfomance Metrics Factor Target Timeline Customer base 1.5x 2.5 years People Customer satisfaction +0.9 3 years Delivery Time 60 Mins 2 years Process Number of Partners 15% 2 years Fees to Users -15% 5 Years Revenue growth 46% YoY Profit Profit per Users 1.0 - 1.5 2 years Advertising Growth 76% YOY Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
IMPLEMENTATION Q4 2021 Q1 2022 Q2 2022 Q3 2022 Q4 2022 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024+ Focus on Advertising Focus on Advertising Start ------------------------------------------------------------------------------------------------------------- ------ User Data Portal User Data Portal Start ------------------------------------------------------------------------------------------------------ Reduction in Fees Reduction in Fees Start --------------------------------------------------------------------------- Finish Advertising Revenue Advertising Revenue Split Split Start ------------------------------------------------------------------------------------- 60 Minute Delivery 60 Minute Delivery Time Time Start ---------------------------------------------------Finish Increase Technology Increase Technology Start-----------------------------------------------Finish Diversify to New Diversify to New Products Products Start Source: Team Creation Key Issues Key Issues Overview Overview Strategy Strategy Action Plan Action Plan Financials Financials Risk Assessment Risk Assessment
FINANCIALS Key Issues Overview Strategy Action Plan Financials Risk Assessment
ASSUMPTIONS 01 02 03 GROCER FEES DELIVERY PROFIT MARGIN ADS PROFIT MARGIN Will decrease after the pandemic subsides Will increase over time as scale is reached Will decrease to average of 8.5% Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
INVESTMENT AND SOURCE OF FUNDING Funded by: Self-funded IPO Figures in USD millions Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
PROJECTIONS Figures in USD millions Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
SUMMARY By 2027 Increase in profit margin 6% Incremental revenue Incremental profit $31.6b USD $2.1b USD Source: Team Creation Key Issues Overview Strategy Action Plan Financials Risk Assessment
KEY TAKEAWAY By securing your relationships with grocers you will achieve sustained growth and better profitability Key Issues Overview Strategy Action Plan Financials Risk Assessment
RISK ASSESSMENT Key Issues Overview Strategy Action Plan Financials Risk Assessment
RISK ASSESSMENT AD SALES & PLATFORM DEVELOPMENT SERVICES RISK CONSEQUENCE Risk Mitigation Plan # Risk description Low Medium High Offer attractive packages, post sale services and data sharing Brands and grocers do not use our services High 1 1 RISK LIKELIHOOD Other delivery services copy our model Medium 2 2,3 Maintain proper labor practices and offer competitive salaries and benefits 3 Employees revolt 4 Low Clients do not use our platforms due to pandemic ending Use key alliances to provide coupons and discounts 4 Risk Level: Low Medium High Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
RISK ASSESSMENT AD SALES & PLATFORM DEVELOPMENT SERVICES RISK CONSEQUENCE Risk Mitigation Plan # Risk description Low Medium High Offer attractive packages, post sale services and data sharing Brands and grocers do not use our services High 1 1 RISK LIKELIHOOD Key partnerships, customer base, benefits and term contracts Other delivery services copy our model 1 Medium 2 2,3 2,3 Maintain proper labor practices and offer competitive salaries and benefits 4 4 3 Employees revolt Low Clients do not use our platforms due to pandemic ending Use key alliances to provide coupons and discounts 4 Risk Level: Low Medium High Source: Team Creation Risk Assessment Key Issues Overview Strategy Action Plan Financials
KEY TAKEAWAY By mitigating the risks, the business model sustainability can be ensured Key Issues Overview Strategy Action Plan Financials Risk Assessment
KEY ISSUES How to ensure Instacart business model sustainability? Source: Team Creation
KEY ISSUES STRATEGY RECOMMENDATIONS How to ensure Leverage on Instacart business current model competitive sustainability? advantage and know how by not owning inventory and focusing on ad sales and platform development Source: Team Creation services
KEY ISSUES STRATEGY RECOMMENDATIONS How to ensure Leverage on S-hape Instacart business current A-ssess model competitive F- inance sustainability? advantage and E- mpower know how by not owning inventory and focusing on ad sales and platform development Source: Team Creation services
KEY ISSUES STRATEGY RECOMMENDATIONS RESULTS How to ensure Leverage on S-hape Increase in profit Instacart business current A-ssess margin - 6% model competitive F- inance Incremental profit - sustainability? advantage and E- mpower $2.1B USD know how by not Incremental revenue - owning inventory $31.6B USD and focusing on ad sales and platform by 2027 development Source: Team Creation services
THANK YOU FOR YOUR TIME We are open to any comments & questions John Molson MBA International Case Competition Barna Consulting Firm Naomi Di Cocco Carlos Piola Estifer Baldera Fernando Sierra
