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Instacart To Build Its Own Warehouses For Grocery Deliveries


As more people have regained comfort with shopping for groceries in stores, the biggest name in online grocery delivery is seeking a new edge.

Instacart will begin creating its own network of distribution centers over the next 12 months in a partnership with warehouse automation firm Fabric, The Wall Street Journal reports. The warehouses will store 10,000 to 50,000 items and use automation to sort orders, which would then be picked up by drivers for home delivery.

Though Instacart has not detailed where in the country it will place its warehouses, how many locations are planned or how much they will cost, the delivery platform did note that the centers will be placed near grocery stores and stocked with inventory owned by those retailers, the WSJ reports.

That stands in contrast to GoPuff, the SoftBank Group-backed platform that delivers groceries, convenience store items and (depending on location) alcohol from its own warehouses through its app. A wave of similar businesses use their own micro-warehouses in the U.K., adding another layer of demand for last-mile distribution space.

To date, Instacart's model relied on delivery drivers walking the aisles of grocery stores to fulfill orders. Though the delta variant of the coronavirus looms large in its potential to cause more disruption, consumer behaviors have largely reverted to pre-pandemic status quo.

Online grocery sales for both delivery and pickup orders totaled $5.3B in June, roughly the same figure as in May, but 26% less than its peak in June of last year, Supermarket News reports. The number of customers using such services in June represented a 12% year-over-year decline.

Instacart is also dealing with increased competition from the very stores it seeks to serve. Major chains like Albertson's and Kroger had already started building their own small warehouses before the pandemic began. Despite all those potential complications, Instacart has raised $700M over the past year to bring its private valuation to $39B and has hired a chief financial officer from Goldman Sachs as it prepares to go public, the WSJ reports.