Instacart powers Costco same-day delivery

Costco is now offering certain food items with two-day delivery when ordered online and fresh food items for same-day delivery through its expanded partnership with Instacart. ( Photo: Shutterstock )

Costco has expanded its partnership with California-based startup Instacart and that means customers are now able to get shelf-stable food ordered online and delivered within two days. Fresh foods will be delivered the same day.

With food taking center stage in the renewed battle for e-commerce supremacy after Amazon’s acquisition of Whole Foods, Costco has officially joined the increased competition on the e-commerce food platform, The Wall Street Journal reports.

The new service began the first week of October.

Outside the reinvigorated partnership deal with Costco, Instacart has been delivering groceries as quickly as same day, working with numerous companies, including Whole Foods.

An online startup tracing its roots to San Francisco, Instacart got its start delivering online groceries for the mobile professional. Its growth has seen it expand those services to several retailers and other products.

It is still looking for partnership deals on all fronts. Instacart offers “labor (both delivery and click & collect), personalized service and data analytics,” it says.

Instacart has positioned itself in the forefront of grocery e-commerce. It helped that it secured venture capital from firms like Y Combinator, Andreessen Horowitz, Sequoia Capital, SV Angel and Khosla Ventures.

This was a slightly unexpected move for Costco. The company has been one of the so-called laggards to the e-commerce party. Operating under a discount-for-members grocery platform, most of its loyal consumers have always opted for an in-store experience.

It was a point of view that Costco’s Chief Financial Officer, Richard Galanti, acknowledged. Rather than watch its business dwindle, “we would rather lose it to ourselves,” according to Galanti. Amazon slashed the prices of its products sold at Whole Foods to get people coming into these stores and Costco has shouldered the added cost to get the online delivery process up and running.

The WSJ report noted, though, how even Costco was affected by the Amazon-Whole Foods deal. In June of 2017, Costco’s stock dropped 7.2%. Not as bad as the fall in the stock prices as that of Walmart, Kroger and Target as earlier reported. Still it was enough to get Costco’s investors quaking in their boots and fear seeing their customer base go to Whole Foods afterthe price drops.

It was a mindset not shared by Galanti, who said he had checked out some “Whole Foods’ [outlets] twice a week in many, many markets around the country and we’re kind of scratching our head” at the discovery at how most reports of the slashed prices were exaggerated. The price drop was not significant enough for top execs like Galanti to worry about losing customers.

On Oct. 5, Galanti said Costco’s sales increased 6.1% in the latest quarter. That was lower than the previous quarter as Galanti noted the effects of price drops on certain items. For fiscal year 2017, which ended Sept. 3, Costco saw a 4.1% increase in sales.

With Costco’s deal with Instacart confirmed, the companies have formally launched CostcoDelivery. Shipping is free for purchase of any of its 500 products online for a minimum order of $75.