In Walmart and Amazon’s food wars, Instacart may be the collateral damage.

What happened

  • Walmart continues to rev up its grocery operations at home and abroad. This week, the company announced that it will merge its grocery chain Asda with Sainsbury’s in the UK.

  • But as Walmart expands the grocery category in the U.S., it isn’t partnering with Instacart, the country’s fastest growing grocery delivery company. Instead, Walmart wants shoppers to order food from its site and app, using Instacart purely for delivery. Instacart wants to users to be able to buy food and beverages on its own app and cover delivery.

Why it matters

  • Walmart is the largest grocer in the U.S. According to the latest data, it captures about 15% of the overall market and 9% of the online grocery market, second only to Amazon’s 18% online share. Walmart’s efforts to improve its grocery services are also paying off.

  • Instacart could help activate Walmart’s growth in the sector—its national presence is much broader compared to grocery delivery competitors, which mostly operate in urban areas. But after working to establish itself as a standalone company that partners with grocers, all of whom list their items on Instacart’s app, Instacart understandably wants to obtain the most traffic possible, as well as collect service and delivery fees from the orders it fulfills.

  • Instacart works with a number of grocery stores, but it is increasingly falling victim to the Walmart-Amazon war. In March 2018, Amazon began ramping up its Prime Now delivery service from Whole Foods, despite its five-year contract with Instacart (Instacart still lists Whole Foods as a partner on its site). Now Walmart seems to be following suit. Walmart struck a deal with Instacart in February 2018 to provide same-day delivery from Sam’s Club in three cities. But it also plans to provide in-store grocery pickup in 2,200 Walmart stores by the end of 2018 and wants to keep the delivery service housed within its own infrastructure, using companies like Uber and Postmates to fulfill the orders. The question now is whether Instacart will hold up without Walmart and Amazon as future partners, especially after its February 2018 fundraise, which values Instacart at $4.2 billion and means it will have to keep expanding.