After establishing its dominance in non-perishable delivery, Amazon’s (AMZN) move towards ultra-fast delivery intensifies the competitive landscape for Instacart (CART) which has typically capitalized on the challenges faced by other grocery retailers.
“We view Monday’s announcement as a pivotal step forward in Amazon’s broader strategy to capture incremental share in the category,” said Wedbush analyst Scott Devitt “and Instacart’s position has been more directly challenged by Amazon’s expansion,” reiterating his Underperform rating on Maplebear (CART) – more commonly known as Instacart — on increasing competitive pressures.
On Monday, Amazon (AMZN) made it official that it was expanding its delivery service to offer fresh grocery items and everyday household essentials in under 30 minutes.
Prime members will get discounted delivery fees starting at $3.99 per share, while non-Prime members will pay $13.99 for Amazon Now ultra-fast delivery.
By moving more aggressively into lower margin grocery delivery, Amazon (AMZN) hopes to capitalize on strong demand for frequently ordered – and higher margin – items.
“The introduction of a more competitive grocery delivery offering could diminish the appeal of intermediaries and pressure Instacart’s business, as ~60% of the company’s [gross transaction value] is derived from subscription members,” Devitt writes.
In the wake of Amazon’s (AMZN) announcement late Monday, Instacart (CART) shares have dropped 4%, while peers DoorDash (DASH) and Uber (UBER) are higher on the day.