Unpacking the Grocery Stack

Photo: Getjustin

E-commerce has disrupted a number of large categories, including media, electronics, apparel, and home furnishings. If you’re shopping in these categories, there’s a strong and rapidly growing chance that you’re going to buy them online. But that’s not the case for the largest retail category: grocery. For the vast majority of people, filling the fridge still means rolling a cart down the aisles at the local grocery store.

As I outlined in a previous post, groceries are among the last huge e-commerce opportunities. Online penetration of groceries is extremely low. It’s not that innovators haven’t tried—it’s that they haven’t enjoyed significant success. To date, virtually all of the digital efforts to attack the grocery vertical—i.e., the brick and mortar franchises—have followed a very similar model: by building out e-commerce grocery businesses end-to-end, including warehouses, inventory, and trucks. They’ve essentially replicated the grocery store supply chain at great cost and complexity. During the first wave of Internet startups, we saw this centralized approach most famously with Webvan, but also at Peapod, FreshDirect, and more recently Amazon Fresh.

But now a new wave of digital companies is going after the grocery business with a very different approach. That’s why we’re thrilled to announce we’re backing Instacart.

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