DoorDash indicates that its transaction to acquire Instacart for $17 billion will “help local shops win”.
However, some local shops don't agree with this view.
Over the past decade, many local grocery chains—some of which are family-owned—have signed distribution partnerships with DoorDash and Instacart. For these smaller chains, distribution services have been particularly important during the pandemic and after Amazon acquired Whole Foods in 2017; both events prompted them to seek fast delivery solutions.
However, some local grocers argue that this transaction will not provide them with an opportunity to compete with Amazon and Walmart; instead, it may pose risks to them. The grocers point out that there are not many options for delivery services, and DoorDash could consolidate the delivery market share, thereby weakening their bargaining power when negotiating cooperation terms with DoorDash.
The CEO of Stew Leonard, Stew Leonard Jr, said that this grocery chain, which has 8 stores in Connecticut, New Jersey, and New York, is providing delivery services through DoorDash and Instacart.
He is worried that if this transaction goes forward, the situation might change.
"We're not their major clients," he said, "will they still continue to do business shrewdly and try to expand our business?"
Leonard added that the merger of these two delivery service providers could also bring some benefits. He expects that the merged company will have more delivery staff available to pick up orders from his stores. "We hope to expand the delivery radius for each store," Leonard said.
Lucerne Valley Market and Hardware Located in Southern California, the store manager Anne Roark said that she hopes DoorDash can provide better support for retailers like her. She mentioned that she spent several days trying to contact Instacart customer service to clarify the purpose of a $800 bill, but she still doesn't know what that expense was for to this day.
She is also worried that this transaction will increase the commission she has to pay to Instacart.
Roark said that this supermarket will mark up the prices of goods sold through Instacart to cover the costs of delivery services. She mentioned that although customers appreciate the convenience, many may find it difficult to accept the additional cost.
The CEO of the chain store, Linda Gommel, told Business Insider: “We really work hard to provide services to our customers in a way that they can afford.”
Retail industry analyst Kevin Coupe stated that the merged DoorDash and Instacart will still possess a large amount of information regarding what consumers purchase at specific retailers. Coupe has been writing daily newsletters for this industry for twenty years.
He said that in 2018, after Whole Foods decided to cut off cooperation with Instacart, this delivery startup company contacted some Whole Foods customers and, based on their past purchase records, suggested that they shop at other grocery suppliers through the Instacart app.
He said that if a larger DoorDash adopts a similar approach, it could become very troublesome even if retailers want to cut ties with them and turn to cooperate with competitors instead.
"You'll be afraid to leave them because you worry they might weaponize your customer data against you," he said.
Uber also has its own grocery delivery business. CEO Dara Khosrowshahi said during the financial report conference call on Wednesday that in the week since DoorDash and Instacart announced this deal, retailers have already contacted Uber expressing a desire to use their services more. “They want to have a choice,” Khosrowshahi said, referring to these retailers.
"This potential deal caused one of the partners to withdraw from the competition," he said.
