A challenge that most former Amazon executives face when they leave the company for a new opportunity, is failing to realize the company they’re going to is nothing like Amazon. What makes Amazon unique is that there is no such thing as the words ‘can’t’ or ‘impossible’.

For example, the majority of retail analysts stated prior to 2017 that Amazon would never be a major player in groceries. Amazon thought otherwise. After successfully acquiring Whole Foods in June 2017, Amazon  leads the grocery industry in technology and innovation. Amazon has increased its market share and will continue do so through its strategy of building grocery stores and scaling AmazonFresh.

Walmart, however, is a different story. The words ‘can’t’ and ‘impossible’ are used frequently. In fact, Walmart is full of failures especially as it relates to its grocery business and attempts at competing against Amazon in e-commerce. As someone who worked for Amazon, I shake my head in disbelief at what I view as failures at Walmart beginning with its decision to acquire Jet.Com instead of Shopify, and failing to leverage its store associates to deliver groceries and other products to their customers.

I’m disappointed that Walmart has failed to understand the importance of order density to reduce their last mile delivery costs. If Walmart can increase order density across their ecosystem, they will be able to take greater command and control over their last mile delivery needs thus eliminating the need for 3rd parties (like Instacart and gig workers). With the right amount of density, Walmart can profitably use its own leased vans and drivers to deliver groceries. (This is the model of Ocado. Louis Borders’ new company is using its own drivers and vehicles to make deliveries vs. using gig workers).

I’m disappointed that Walmart isn’t the leader in mobile retail.

I’m also disappointed that Walmart hasn’t done a better job of leading the grocery industry in the use of micro-fulfillment centers to automate the fulfillment of online grocery orders and curbside pickup orders. Walmart continues to test micro-fulfillment solutions from companies like Alert Innovation, and based on reports, a combined solution from Dematic and Fabric. Walmart would be wise to stop trying to brute force a micro-fulfillment solution using startups and instead, sign an agreement with the leading micro-fulfillment company on the market, AutoStore.

Most recently, I rolled my eyes and shook my head in disbelief at the news that Walmart has partnered with Instacart. I’m known as the writer who labeled Instacart a ‘Trojan Horse’ hell-bent on learning the strengths and weaknesses of every grocery retailer they do business with. My initial reaction was that Walmart had finally thrown in the towel on last mile delivery. Partnering with Instacart is just easier than delivering groceries the Walmart way.

And then something happened? I began to doubt myself. Uh oh. After all of the bad things I wrote about Walmart partnering with the Devil in Disguise, Instacart, could I really have missed something?

Time to throw the Red Penalty Flag on myself and conduct a review.

Minutes went by. Then hours. Another uh oh. This isn’t looking good. And finally, the ruling.

I made a mistake. I committed a cardinal sin. I didn’t give the partnership between Walmart and Instacart a fair ruling because I keep thinking Walmart is going to rise above the industry and create something special; similar to what Amazon has done. I didn’t give the partnership between Walmart and Instacart a fair ruling because I asked myself, “What would Amazon do?” when I should have asked, “Is using Instacart honestly bad for Walmart?”

My apologies, Walmart and Instacart.

Upon Further Review

Walmart frustrates me as I believe they can do more. Lot’s more. For example, I did recommend to Walmart to acquire Shopify over Jet.Com or acquire both companies. In July 2019, I made the argument that Walmart, or Walmart and Microsoft, could acquire Tik Tok. Although it appears Walmart and Microsoft are now bidding on Tik Tok, I can’t help but think acquiring Tik Tok in 2019 would have been a better play for Walmart. Because of the current political environment between China and the U.S., circumstances may derail an agreement.

Instacart angers me because they don’t take care of their people as well as they should. I also think Instacart can do more. Lot’s more. For example, I believe Instacart can become an online retailer including opening its own branded stores. More on what I think Instacart can do later.

My judgement was clouded by the fact I expect Walmart to be more like Amazon. The clouds are now gone.

Do I still believe that Instacart will learn Walmart’s strengths and weaknesses including their pricing strategy? Yes. However, Walmart isn’t like the other retailers that have contracted Instacart. Walmart will insist on controlling their data and putting additional safeguards in place. In other words, I don’t believe there’s much Instacart can do to harm Walmart, nor do I believe it makes sense on any level for Instacart to put the relationship at risk.

Do I still believe that Walmart made a mistake in partnering with Instacart? No. In fact, I believe the partnership presents Walmart with a solution to several problems they’ve been battling. In addition, it will allow Walmart to take additional market share. Let me explain.

Agree or disagree with Walmart’s last mile delivery strategy, what’s certain is that Walmart needs a better strategy. This is especially true now that Walmart has launched Walmart+, which provides unlimited free delivery from stores (on orders of $35 or more) on more than 160,000 items from groceries, household essentials, tech, toys, etc. If Walmart+ is successful, it will generate increased e-commerce orders requiring Walmart to provide a flawless last mile delivery experience. (I’m not convinced Walmart+ will be successful as there are moves Walmart can make to minimize the impact of the program).

I anticipate Instacart will play a big role in delivering orders placed through Walmart+, because Instacart is better at delivering groceries than Walmart. I’m still incredulous that Walmart, who generated 55% of its revenue in 2019 from groceries, doesn’t have a better strategy for delivering groceries, but facts matter – Walmart needs Instacart.

I believe the real value of Instacart to Walmart is this: Although Walmart is starting small with Instacart (service in only four states), over a period of months, it’s conceivable that Walmart will scale its partnership with Instacart nationwide. This is bad news for every retailer on Instacart not named Walmart. Here’s why.

Walmart prides itself on being the Everday Low-Price Leader in retail, including groceries. I’m convinced that Walmart will become very aggressive about reducing its grocery prices as a way to lure consumers from shopping at their preferred retailer listed on Instacart and instead, convert them to become a Walmart shopper. I’m sure Walmart will be aggressive in promoting Walmart + as well to their new customers.

I don’t believe it’s a coincidence that Walmart chose four markets in California as part of its pilot with Instacart. Walmart views California as a market where they can increase their market share. I have no doubt that the grocery retailers in those markets currently using Instacart, are exploring options for replacing Instacart or reducing the services Instacart provides. Instacart partnering with Walmart will be considered a shot across their bows and in some ways, a betrayal.

As for Instacart? They’re getting what they need most – a marquee retailer using their platform and services. Why is this important? Because Instacart wants to go public and Walmart’s brand and reputation will help increase Instacart’s value. I believe Instacart will launch their IPO between October 1st, 2020 and December 31st, 2021. I see no value in Instacart waiting.

Once Instacart goes public, I anticipate that they will morph into a logistics company and a distributor. Unlike Uber which has failed with Uber Freight, I believe Instacart will make better decisions and be more successful than Uber at moving into new channels.

I also believe Instacart will form a unique partnership with the U.S. Postal Service as a way to accelerate its ability to become a leader in e-commerce fulfillment. (I will cover this topic in a future article).

I raised the possibility of Walmart acquiring Instacart in a prior article and I stated that I don’t believe Walmart will acquire Instacart for one simple reason – the value of Instacart will decline significantly as grocery retailers will dump Instacart if the company is acquired by Walmart. I still believe what I stated is true.

Is it beyond the realm of possibility that Walmart will acquire Instacart? No. An argument can be made that Walmart may view Instacart the same way Amazon viewed Kiva. Acquiring Instacart provides Walmart with an opportunity to significantly grow its fulfillment and logistics capabilities. (If Walmart acquires Instacart, it will happen before Instacart goes public).

Do I believe Instacart is in danger from Walmart somehow stealing their secretes and copying what they do? No. Instacart’s platform and business model isn’t rocket science. If Walmart had wanted to put Instacart out of business, they would have already done so.

The Contender

Reevaluating my initial reaction to Walmart partnering with Instacart caused me to come to this conclusion – Instacart is in a league by itself. Yes, the company has competitors but what Instacart doesn’t have is a challenger capable of going toe to toe.

The only company that I believe has a shot against Instacart is Shipt. However, regardless of the massive growth experienced by Shipt and Target (Target acquired Shipt in 2017 for $550M) as a result of the pandemic, Shipt is way behind Instacart in terms of the volume of orders fulfilled and delivered, number of customers and revenue.

I’m not convinced that Shipt has been managed as well as it could have been since the acquisition by Target. I believe Target should have been much aggressive in scaling Shipt and going after Instacart. To rectify the situation, I strongly advise Target  to name Daphne Carmeli, CEO of Shipt, with a mandate to turn Shipt into a contender. It’s possible that Shipt can go public within three years with the right growth strategy.