Instacart Business
Instacart Business Analysis
Instacart in the UK
Product Selection
As discussed earlier, Instacart is a service delivery type of a business that helps people shop for their groceries. Bensinger (2016) asserts that the company makes use of their mobile phone app and website as avenues for their customers to log in, indicate their location, and select the items they want. An Instacart shopper gets the needed items shops and delivers to the customer (Bensinger, 2016). That way, the customer can shop for all items required in the household without having to go out.
Instacart stands a better chance of success in a new market as it provides customers with an opportunity to shop for almost all the products one needs in the house. According to Bensinger (2016), the product value of Instacart to its customers is convenience. A customer can get all groceries at the comfort of one’s house because Instacart shoppers deliver these groceries at the customer’s doorstep. The customer saves on the fuel of driving to the grocery store. Additionally, the customer saves the time he/she would spend locating item after item in the grocery store as well as the time spent queuing at the checkout points (often these queues can be quite long). Additionally, it is easy to use and create a shopping list, reduces impulse buying, and is much helpful to people with limited mobility (Bensinger, 2016).
Therefore, to provide the needed convenience to its customers, Instacart has to shop and deliver almost all kinds of groceries. Notably, all households consume groceries every day. There is not a single-family that can survive without these items (Deighton & Kornfeld, 2015). Groceries include Bakery and bread (muffins, bread, and pita pockets), meat, and seafood (chicken, turkey, beef, salmon, trout, mackerel, pork, halibut, etc.). Groceries also include pasta and rice, Oils, condiments, salad dressings and sauces, breakfast foods and cereals, cheese, dairy and eggs, frozen foods, canned foods, snacks and crackers, drinks, and farm produce (fruits and vegetables) (Deighton & Kornfeld, 2015). Offering all these products to the customers will help Instacart stand a better chance of success than offering a few. It is even easier for the company as they do not stock any of the items. Instead, they get those from stores open for everyone, which eliminates the risk of stocking products that can spoil/go bad. Notably, it also reduces the amount of capital needed to stock all these groceries.
Environmental Scan
Venturing into a new market requires an excellent strategy to ensure the success of the company. Therefore, Instacart can decide to venture into London, which is one of the largest cities in the United Kingdom (UK). After acquiring a considerable share of the market for online grocery shopping, then the company can move to various other cities in the UK. To venture into London, Instacart has to carry out a SWOT analysis to understand the environmental advantages and disadvantages that may affect the business.
Strengths
• Affordable services
• Low terrorism and political stability
• More powerful consumption-ability Weaknesses
• Cultural barriers
• High taxation
• Can be quite lengthy to register a new company
Opportunities
• Major tourist destination
• Availability of highly skilled labor
• Large population Threats
• The entry of new competitors in the market
• Global warming reducing the supply of groceries
• Government constraints
London is the ideal new market for Instacart Company. From the strengths, London provides an environment with limited political instability and less prone to terrorist attacks, which is conducive for running a business (Anyadike-Danes et al., 2015). Moreover, the population possesses a powerful consumption-ability due to stable and rapid economic growth as well as a reduction in the unemployment rate. Lastly, Bensinger (2016) posits that Instacart services are quite affordable to most of the residents.
The people of not only London but also the UK come across as reserved and distant at first, which is a significant environmental weakness for Instacart. However, with time they become receptive to new businesses and products (Anyadike-Danes et al., 2015). Taxation can also be quite high in London. Notably, the process of registering a new company can be too long due to government bureaucracy.
London provides several opportunities, as well. For instance, London is one of the most populated cities in the UK. That provides Instacart with a vast target market. In addition to the city’s population, London is one of the most visited cities in the UK, which also increases the number of the targeted market (Anyadike-Danes et al., 2015). Lastly, London provides sufficient, highly skilled labor that Instacart can exploit as Instacart shops.
Just like any other business, Instacart faces several challenges, including the entry of new competitors into the market, increasing the level of competition, and global warming, which can reduce the supply of groceries, thus affecting the ability of the company to deliver its services. Lastly, government constraints are something that can affect the running of the business (Anyadike-Danes et al., 2015).
Entry Strategy
Because of the nature of the business, Instacart should adopt the Greenfield entry strategy. Arslan & Larimo (2017) elaborate that the Greenfield entry strategy requires maximum involvement, and the company venturing into the new market has to establish everything from scratch. The organization has to buy or lease land, build a facility, and operate the business. Notably, this entry strategy is the riskiest of all strategies. Besides the high-level risks, the Greenfield entry strategy also may face government restrictions and high entry costs. However, in return, Greenfield strategy offers high levels of business control, high control of the brand and company image as well as economies of scale and scope (Arslan & Larimo, 2017).
However, in the case of Instacart, they are no needs to lease or buy land, among other entry costs, which significantly reduces the expenses. All the firm needs to do is carry out an extensive marketing program to market its service to the people and hire Instacart shoppers. That is because Instacart is a service company that does not need to have any stock. Deighton & Kornfeld (2015) posit that stock is readily available in the local grocery stores. Notably, reduced entry costs reduce the high risk of losing lots of money in case of business failure. Additionally, Instacart, which is banks a lot on significant and robust significant brand recognition, gets high control levels of brand, image, staff, and business operations (Deighton & Kornfeld, 2015).
As discussed in the SWOT analysis, people firm the UK seem distant and reserved at first. However, with the right marketing strategies, Instacart will manage to get a significant percentage of the market share to trust and use their services. Notably, when it comes to legal issues, Greenfield strategy might face challenges with the government bodies. However, in the case of London, both federal and local governments are open to the idea of international business investment in the UK even though the legal process may be lengthy (Anyadike-Danes et al., 2015).
Market Segmentation
People living in London are evenly distributed across all ages. According to Hood et al. (2016), the total population of London is approximately nine million people. They further assert that 25% of the population are children aged 14 years and below. Individuals aged 14 to 24 years make up 12% of the population. 25 to 44-year-olds make up 31% of the population, while 45 to 64-year-olds make up 20% of the population. Lastly, individuals older than 65 years make up 12% of the population (Hood et al., 2016). The median age is approximately 36.5 years old. Therefore, based on the median age and the fact that everyone uses groceries, Instacart is a viable business idea. Additionally, London’s population consists of all ethnic groups (59.8% British white, 20.9 Asian, 15. 6 black) (Hood et al., 2016). Moreover, 48.4% of the population is Christians, 20.7% have no religion, 12.4 are Muslims, 8.5% are undeclared, 5.0% are Hindu, and 2% are Jews (Hood et al., 2016). However, as mentioned above, everyone will use groceries despite his/her ethnicity, age, or religion, which makes Instacart such a viable idea.
Psychographic market segmentation looks into one’s traits, values, attitudes, lifestyle, psychological influences, motivations, priorities, among others (Hood et al., 2016). Notably, even with the variety of Psychographics, no one can genuinely avoid shopping for groceries because of its comprehensive nature to include almost all foods and drinks. For example, those who chose to lead a healthy lifestyle might not shop for meat but will buy fruits and vegetables. Geographic market segmentation is the easiest because the entry host is a single city, which means all the people are in one geographic location. It can only be divided into outer London and inner London (Hood et al., 2016). Lastly, behavioral market segmentation looks it the customers’ behavior towards the brand based on previous interactions and awareness (Hood et al., 2016).
Product Positioning
As learned in class, every brand requires a product positioning statement that addresses its customers’ needs and differentiates the product from competitors. Therefore, Instacart UK would also need a suitable product positioning statement. A proper positioning statement would be, “Spend more time with your loved ones when you do your grocery shopping with us at prices.”
Brand Development and Management
There is a common phrase that anything built on a weak foundation is bound to fall. The same principle applies in business. Notably, brand development is the foundation necessary for the success of a business. As learned in class, brand development is the process of developing a brand trusted by the customers and distinctive from the competitors as well as the provision of quality services/products (Heding et al., 2015). Moreover, it is a process that’s ongoing in serving one’s customers. It is a process that never ends. It continues through brand management. In simpler terms, one can say that a brand is a business personality developed through brand development and maintained through brand management. Notably, there is a need for brand development, especially when business ventures into new foreign marketing. Therefore, Instacart will carry out a branding process in London to differentiate its services to the new target customers.
One of the steps towards a successful brand development is to understand one’s business (Heding et al., 2015). That is possible through the SWOT analysis to understand the business’s weaknesses, strengths, opportunities, and threats (Heding et al., 2015). For example, in the case of Instacart, their services are quite affordable, a strength that gives an advantage over competitors. Notably, the world is currently experiencing the Coronavirus epidemic. Most parts of the world are in lockdown. Even the regions without a few cases of the coronavirus will be in lockdown soon. The lockdown is necessary to avoid the spread of the virus. That means that people will be stuck in their homes for a few months. That is an opportunity that allows Instacart to shine and provide a solution to everyone who needs to go out and shop for groceries. Instacart has an opportunity to position itself in the market as the solution to the restricted movement.
The second step is to understand the market (Heding et al., 2015). However, in the case of Instacart, it is quite simple to identify the market because every homestead uses groceries daily. Therefore, the target market is all individuals living in London or visiting London. The limited movement from one place to the other also will increase the number of customers willing to use Instacart services.
The third step is to create resources or, in other terms, spread brand awareness (Heding et al., 2015). That includes the creation of branding materials such as log, website, catchy adverts and commercials, and a tagline. Notably, Instacart already has a log, website, mobile app, and a market positioning statement discussed above. After the creation of content, Instacart will need to identify and utilize the most convenient media to reach the target market. In the case of London, it would be wise to use Social media (Facebook, Twitter, and Instagram, among others), television, radio, blogs, organic search, and paid search. These means are convenient because people are avoiding movement to crowded areas, which leaves the use of road billboards and hosting events useless.
The last step is to ensure the management of brand growth (Heding et al., 2015). That ensures that the company can track the progress of the brand’s acceptance in the market and react accordingly. Instacart needs to be able to track the impact of the branding process. The company will be able to do so through managing the brand through monitoring of the search traffic, website and app traffic, new leads generated, and how people are sharing the brand on social media.
Notably, brand management is also essential after brand development. Brand management is the process of maintaining a respected and reputable brand name in the market as well as managing all products associated with the brand (Heding et al., 2015). Instacart will need to maintain a respected brand for an effective, fast, and affordable service delivery brand in the new market. That way, the company will maintain a strong relationship with its customers. Some of the effective methods to use in brand management include advertising and public relationship. Customers need to feel the presence of the brand. Therefore, Instacart should draft and compose catchy and appealing adverts as well as commercial to be share in all communication means such as TV, radio, and social media. Additionally, the company can also print its logo and name on the t-shirts that Instacart shoppers will wear while on duty and shopping bags that the shoppers will use to deliver the groceries. Public relations can also be quite helpful in managing a brand (Heding et al., 2015). Doing good deeds to the members of the community and letting the people know about it helps a brand to get new customers and old customers to come back. With the current Coronavirus, Instacart can offer free face masks as part of public relations.
A comparison of the brand management and brand development in the host market and domestic market, reveals a common trend. Both the host market and domestic market use the branded house strategy. Branded house strategy, also known as the house brand, involves the use of a strong brand, mostly the company name, to identify the brand name for its products. In the US and Canada, Instacart relies on its company name to market its products. In the UK, London, the company will also heavily rely on the organization to develop and manage its brand. Additionally, some of the methods used in the US and Canada will be utilized in London. Such methods include continuous advertisement, public relations, use of branded t-shirts, and shopping bags.
Product standardization and adaptation
Product standardization is the process of unifying and ensuring consistency among various iterations of a particular product or service available in different markets (Khan et al., 2016). Product adaptation, on the other hand, involves the modification of an existing service or product to increase its suitability to different consumers. Ideally, product adaptation favors companies that export their products and services to nations outside their domestic market. That is because adaptation ensures that the products meet the regulatory requirements of the local authorities and cultural practices (Khan et al., 2016). However, in cases where even in the host market, the company does not need to bring in their products from the domestic market because they can use local products, then product standardization becomes convenient.
Furthermore, Instacart is a service delivery business. The nature of the business is simple as it involves Instacart shoppers shopping from the local grocery stores and delivering the shopping to the customer. Additionally, the company does not have to outsource human resources as they can hire shoppers in the host market. Therefore, Instacart can adapt product standardization since they will not outsource labor or bring in products from the domestic market. Additionally, grocery shopping is only shopping for groceries. It is most likely to be the same in all markets, which makes it illogical to practice product adaptation.
Product Pricing
Deciding on the price to charge for a product or a service is quite complicated that people might think. Fortunately, there are several strategic objectives associated with international pricing. One of the strategies is cost-plus pricing, which calculates the total cost of the product/serving and adds a mark-up (Weber, 2016). Competitive pricing is another pricing strategy that takes into consideration the prices charged by competitors. Another strategy is value-based pricing, which sets a price based on the customers’ belief in the product/service worth. Price skimming strategy involves setting a price that is quite high and lowering the price as the market evolves (Weber, 2016). Lastly, the penetration pricing strategy includes setting a price that is low while venturing into a new and competitive market, then later raising it to match those of the competitors.
Therefore, Instacart will have to come up with a pricing plan that achieves purchasing power parity with competitors. Instacart should consider the total expenses of their services, including the amount paid to the shopper and the delivery cost, and add a mark-up. Additionally, Instacart should consider the value that the customer places on the delivery of groceries since this is the period when most people are avoiding staying out of their houses due to the coronavirus epidemic. Lastly, Instacart should also consider the services provided by competitors. For example, in the United Kingdom, Amazon, which is a major online store (though it does not deliver groceries), charges £0.99 to £4.49 depending on the type of item bought (Amazon website). That price is for a single item. Notably, the delivery period is about one to two business days. Moreover, the items are non-perishable, unlike groceries. Instacart will have to add value to their immediate delivery and the fact that groceries can be highly perishable products. In summary, Instacart should focus on cost-plus pricing, value-based pricing, and competitive pricing strategies.
Foreign Currency Implications
Compared to the US dollar, the Pound sterling is superior. Today £1 is equivalent to $1.18. Notably, the value of the pound sterling has a history of instability. The fluctuation of the foreign currency may lead to multiple impacts on Instacart as a business entity venturing into a foreign market. However, Instacart is less likely to face such challenges, as the company will not be exporting any products (Atanasov & Nitschka, 2015). As mentioned, Instacart will make use of the local grocery shops to shop for the needed groceries. Therefore, fluctuation of the currency exchange rates will not directly affect the nature of Instacart operations as all the products are bought within the local market. However, the nature of the services provided by Instacart requires the company to use motor vehicles to move from the grocery shops to the customers. Notably, these vehicles use fuel, which is significantly affected by the exchange rate since the UK import fuel from other parts of the world. Therefore, a change exchange rate affects the price of fuel in the UK and London, which in turn affects the Instacart’s cost of operations. Therefore, Instacart can only experience the indirect impacts of fluctuations in the currency exchange range.
Channel Mix
As learned in class, the core reason for a distribution channel is to serve as a link between the service provider and a producer of a good/product to the users or the consumers (Batzer, 2019). The producer’s location can be near the consumers or thousands of miles apart. However, the channel of distribution enables trade to occur. A distribution channel is the most effective and efficient way to place a product or service into the hands of the users (Batzer, 2019). A channel of distribution comprises of various institutions facilitating the transactions as well as the physical exchange. For instance, any distribution channel must have a producer and a consumer. However, other channels my include intermediaries such as wholesalers and retailers commonly termed as middlemen connecting the seller and users. Notably, there are multiple types of distribution channels in the business. They include direct selling, selling via intermediaries, dual distribution, reverse channels among others.
Based on the nature of Instacart, the most effective channel of distribution would be direct selling. Direct selling occurs when a producer or a service provider markets and sells their product or service directly to the end-users without the use of middlemen such as retailers. Direct selling includes peddling and the use of the internet to market to the consumers. Other methods to directly sell to consumers include one-on-one demonstration, party plan, and personal contact arrangements. As discussed earlier, Instacart is a service delivery company that offers its customers the service to purchase and deliver groceries as ordered. Therefore, the organization does not require importing products from abroad. Instead, Instacart shoppers purchase ordered groceries from local retailers such as supermarkets and minimarts. Moreover, customers place their orders on the Instacart website or the mobile app. The Instacart shoppers get the orders directly from the internet, shop, and deliver to customers. In other words, the use of the internet works perfectly for Instacart to sell its service directly to the customers.
Channel Management
As the name suggests, channel management is the process of managing a distribution channel (Kaye, 2016). It ensures the reception of the orders from the consumers, processing the orders, and delivery of the items ordered (Kaye, 2016). Notably, the direct distribution channel is among the least challenging to manage. It is even easier for the case of Instacart in the host market. Instacart already has a website and a mobile app that the customers can use to place their orders. Therefore, the first step the company needs to do is to hire Instacart shoppers from the host market (London). Notably, there exists a significant level of unemployment in the UK, which means that the company will be able to get all the human resources required to successfully venture into the market.
Through the use of both the website and mobile app, the shoppers will receive orders from the customers based on one’s location. The app and website have a designed algorithm that uses GPS to match an order to the nearest Instacart shopper (Bensinger, 2016). Therefore, the mobile app and the website play a significant role in managing the distribution channel as they process the orders and match the orders to the suitable (in terms of location of both the shopper and customer) Instacart shopper. The algorithm also uses GPS to direct the Instacart shopper to the nearest grocery shop (Bensinger, 2016). He/she purchases the items and delivers them to the customer. Notably, there is a need for means of transportation from one point to the other. Therefore, the company needs to provide shoppers with the means to move around. There are multiple means to move around London. However, the most effective methods are the use of road transportation, such as the use of small cars and scooter bikes. Depending on the company’s budget, both options are quite viable, to reduce the cost of fuel. Moreover, electric means of transportation help in environment conservation.
Integrated Marketing
Integrated marketing communications plan, commonly abbreviated as IMC plan, is a broad process that incorporates market research, audience segmentation, selection of marketing channels, strategic planning, ROI analysis, creation of campaign messages, campaign metrics, among others (Percy, 2018). In part one; the paper established that the majority of the residents and tourists in London shop for groceries, which makes them the target market. However, because of the continuing, coronavirus, there is limited movement. People have to stay in their homes because there is a need for social distancing as an attempt to prevent the spread of the highly contagious coronavirus. Therefore, Instacart marketing methods need to target and reach people stuck in their homes and hotel suites. Notably, the use of social media (Instagram, Twitter, and Facebook, among others) can be quite helpful. Additionally, Instacart can heavily rely on TV and radio as these are the communication media that people are relying on for every day updates on the Coronavirus. That way the company will reach the target market in large numbers.
Formulation of campaign messages in the lines of encouraging people to stay at home and stay safe while using the Instacart services to run all the shopping errands one needs can be a winning point for the company. In addition to these messages, Instacart can also offer free delivery charges for the first three orders (trade promotions) as a way to encourage customers to use their services. Lastly, one of the best ways to capture the attention of consumers is through public relations. Therefore, Instacart can offer free masks to the healthcare workers or even go the extreme levels of purchasing healthcare vehicles such as ambulances for public hospitals as an effort to prevent the coronavirus epidemic.
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