Instacart does mark up prices but for specific stores only. The app has partnered with several stores and does not charge a higher price for these preferred stores. Furthermore, they provide a list of stores besides the preferred stores. Therefore, if a consumer opts to buy from a preferred store they can make purchases at normal prices, but if they choose any other store the app charges a higher markup.
The markup system of Instacart is very relative. It depends a lot on what stores you purchase from. The markups from non-partner stores are unavoidable since they markup on retail prices and cut their own costs. A consumer cannot oppose that since several businesses function in this manner and charge higher amounts to earn margins and cover handling, transportation, and other costs. Therefore, these non-partner retailers function on a very basic, established business model. Similarly, the markup to cover delivery fees and service charges is also justified since convenience is provided to a consumer.
How Much Does Instacart Markup Prices?
As stated by the company’s co-founder, Instacart charges a markup of 15%. Although the markups vary from store t6o store and go up to 50%. On an average they markup prices by about 23%. Upon digging deeper, a markup of 42.8% has been seen between in-store and app prices, before the additional $12 service fee, a $6 delivery fee and other charges such as taxes and delivery partner tips.
Who Marks Up Prices?
There have been a lot of interpretations as to who marks up prices and why. Some say that the retailers themselves mark up prices and charge 15% higher than in store prices to offset the costs of partnership with Instacart. On the other hand, people also say that Instacart marks up prices since it charges delivery fees and service fees from the customer.
If the first case is true, we see that not all retailer’s markup prices on Instacart. Those who have partnerships with the app find it easy to access their wide consumer base without paying extra.
On the other hand, the apps which have not partnered with the app find it more difficult to sell. Therefore, these companies tend to upcharge to cut their costs of working with the app.
Instacart adds the charges that might drive up the cost of service. The service fees that might be applied are as follows:
Delivery fees Heavy Item charge Alcohol charge Bagging fees, etc.
There is still a lot of uncertainty as to who earns the profits. Some argue that the app does not overcharge at all besides the service and delivery fees, but some contradict and say that the app earns all the profits.
Which Stores Do Have and Don’t Have Markup Prices?
The stores that do not markup prices are as follows:
PetcoKrogerSafewayPublix CVS pharmacy Whole foods
The stores that do markup prices are as follow:
Costco – 15%LoblawSafeway – 15%Fresh and Easy – 10%
Reasons for Instacart Markups
The app uses a web of independent workers rather than hiring full time workers. The payment to these employees is made on an order basis. Therefore, to cover these salaries and wages, the app needs to markup prices. Costs associated with using the app are also a reason. Consumers must pay for using the service as well as the grocery. There is a cost of convenience as well. Since Instacart provides doorstep delivery, they charge higher since they have high delivery charges to cover too.
Is Instacart Transparent About the Markups?
Yes, the app has a website which is extremely transparent about the stores they partner with and do not charge markup prices on and the stores which do charge mark up prices. Furthermore, if one checks the fine print of the app, it very clearly states that the prices might be higher than those in stores.
Are There Any Cheaper Alternatives to Instacart?
Is Instacart Worth it?
The answer to this question remains very subjective in nature. For those who can and like to shop in-store it is way more reasonable to do so. Grocery delivery on the other hand is extremely beneficial for those who cannot afford to drive up to the store and purchase groceries.
Conclusion
In my opinion, Instacart charges for convenience. Furthermore, the costs are justified as well. Convenience does bring costs since one saves on time and their own transportation costs too.
Whether or not to use the app or services is totally on a need and preference basis. For instance, a new mom might find it far more convenient to get a doorstep delivery since it avoids wastage of time and makes it extremely convenient to grocery shop from the comfort of her home. On the other hand, a college student might find it more economical to go to the store and shop since they have a budgetary constraint and need to minimise costs.
Why do consumers still use Instacart if it is more expensive for them?
Consumers tend to use Instacart because these grocery stores normally charge a higher amount of money for memberships. Therefore, consumers find it cheaper to pay markup and higher charges and use Instacart rather than purchasing memberships.
Does Instacart charge more for replacing items?
There are no additional charges on replacement besides the tip. If the new item is costlier than the replaced item, one has to pay the difference and an additional percentage of it as a tip.
How does Instacart make money on partner store orders?
The app has a wide array of revenue streams and earns from advertising, deals, etc. Therefore, the app even earns deals with partner stores.
