Instacart is struggling to get its Uber-for-groceries model right in New York City

Better learn that PLU code.
Better learn that PLU code.
Image: Reuters/Mario Anzuoni
We may earn a commission from links on this page.

In the latest tweak to its operations in New York, online grocery delivery startup Instacart is cutting hours for cashiers at Whole Foods stores in the city, according to an email sent to workers on Tuesday (June 22) and obtained by Quartz. Instacart’s in-store shoppers, who previously just picked items to fill grocery orders, will now also be expected to handle the checkout process themselves. The changes are scheduled to take effect in the first week of July.

“As we continue to refine and improve our fulfillment model, we’ve found that our cashiers are often under-utilized and have unpredictable busy patterns,” Instacart writes in the email. “This results in long periods of idleness, with little or no work. Therefore, in an effort to ensure that all scheduled cashiers are fully utilized throughout their shifts, we plan to reduce the scheduled hours for cashiers.”

Instacart tells shoppers they will be evaluated on how quickly they ring up and bag items. Instacart’s email also notes that “advantages” of self checkout include “full ownership or your order,” “an additional marketable skill,” and “simplicity.”

“We’re reducing the number of cashier hours that are scheduled and are offering all of the affected people the opportunity to move into other roles,” the company told Quartz in a statement. ”This change is not eliminating the cashier role.”

It declined to provide any numbers on how many cashiers or shoppers it employs in New York City. Instacart’s service is available at three Whole Foods in Manhattan and one in Brooklyn, according to its website.

Instacart was founded in 2012 and sped to a $2 billion valuation by promising to deliver groceries in as little as an hour. Initially, Instacart did this by hiring a network of independent-contractor “shoppers” who completed orders from start to finish: picking items, going through checkout, and bringing everything to the customer’s door. It was Uber’s asset-light model for taxi rides applied to the grocery business.

But in New York, among other cities, things no longer run this way. The shoppers who work at Whole Foods are part-time employees, rather than contractors, and only pick the groceries. Instacart also employs shift leads to oversee its staff and cashiers to work one or more designated Instacart registers. Once grocery orders are filled and rung up, they are placed in a “staging area” for a separate crew of delivery workers to distribute.

Instacart was long rumored to be unprofitable, and earlier this year the company began overhauling its operations. It cut pay for shoppers in many cities. In New York, where it’s been operating since March 2014, it implemented new rules for how shoppers should behave in stores (lanyards always on, music only with headphones), and harsh penalties for breaking them (four weeks’ probation for a second offense, potential termination for a third).

At the time, Instacart told Quartz it was “not looking to reduce our staff in New York.” Those developments came shortly after the company had raised fees for customers, laid off 12 in-house recruiters, and announced plans to slow hiring in 2016.

Instacart operates in 21 metro areas across the US and has partnerships with several national retailers, including Whole Foods, Costco, and Petco. The San Francisco Bay Area is by far its biggest market, according to 2015 data from research firm Slice Intelligence, followed by Chicago and New York City. On Tuesday, Instacart announced that it had expanded a partnership with grocery chain Key Food to deliver from its Food Emporium brand in Manhattan.

In late March, Instacart claimed to be “unit economic profitable” in 10 markets, meaning it made more money on the average order than it spent to fill and deliver it. New York was not one of them.