Petco Adds Online Delivery With Fast-Growing Startup Instacart

Xconomy National — 

[Corrected 1/26]
Dogs need groceries, too.

Instacart, the grocery-delivery startup that recently raised $220 million from investors, is taking its quick-turnaround online delivery service beyond the supermarket for the first time in a partnership with national pet-goods retailer ​Petco.

The partnership is hitting the Boston and San Francisco markets first, and could be expanded if Petco likes the results it gets from letting customers order their pet food, cat litter, chew toys, and other supplies online.

The deal is a pretty natural expansion for Instacart. The San Francisco-based company’s bread-and-butter service is online grocery delivery, in as little as one hour, fulfilled by a team of free-agent couriers who field their orders over a smartphone.

Grocery delivery services aren’t new, but working as an outside party lets Instacart shoppers do something they can’t with in-house grocery delivery: skip around between multiple stores. That’s somewhat helpful when you’re talking about several bags of regular groceries, but adding different types of stores to the mix could make the variety even more attractive.

Expanding into pet-store delivery also foreshadows more possible expansions by Instacart—the company’s founder and CEO, former Amazon engineer Apoorva Mehta, has previously said the company might add new retail categories.

One reason Instacart has focused on grocery stores, Mehta has said, is the frequency of orders. San Diego-based Petco fits that bill too, since furry (or feathered or scaly) friends need to eat, and also go through bedding, cleanup supplies, and other gear relatively quickly.

Depending on the size of your pet and how much they eat, the stuff can also get pretty bulky, as anyone who has hoisted a 40-pound bag of dog food can tell you.

“We view this as groceries for other cherished loved ones in the family,” said Nilam Ganenthiran, Instacart’s head of business development and strategy​​.

For Petco, the Instacart experiment is a way to see if the company can grow its sales and better serve its existing customers in a way that might be less expensive than offering its own deliveries.

Petco has offered delivery in the past by contracting with local delivery companies, but the service hasn’t expanded beyond Chicago and New York, Petco operations vice president Bryan Dean said.​

Instacart was an attractive partner because of the high value it places on customer service, Dean said—a pretty crucial consideration when you’re formally tying up with an outside company to represent your brand to consumers.

The speed of Instacart’s service also helps. The startup charges consumers different delivery fees based on how soon they want their items delivered, with one hour being the fastest. That means higher-end pet food that’s kept cold can now be ordered online and dropped off in time to get into Fido’s bowl while still fresh.

“The kicker for us, which I think would be great for the customers, is the fact that they can get fresh or frozen items from Petco delivered to them,” Dean said. “That’s big for our customers.”

It probably doesn’t hurt that Instacart users are already using the service to do their shopping at grocery stores that sell pet food and a more limited assortment of animal supplies. If there are already Petco shoppers among the Instacart user base—and they’ve been asking for a partnership, Ganenthiran said—it makes sense to try for a foothold in the growing market.

“First and foremost, our consumers are pet owners. We know that in talking to them and seeing what they buy,” Ganenthiran said.

Dean and Ganenthiran​ wouldn’t discuss the financial side of their pilot project, but the deal fits squarely with Instacart’s central business plan of charging retailers for partnerships that can bring them increased sales.

One prominent Instacart partner, the premium grocery chain Whole Foods​, is heavily advertising Instacart deliveries and has even installed dedicated checkout kiosks and staging areas in stores to help Instacart’s delivery speed the orders to customers.

The Petco deal is an interesting test for Instacart, especially with Petco openly labeling this a test run. If the two don’t expand or continue their partnership, it’ll be a telling window into the growing pains of a fast-moving private company. If it works, and other retailers start signing up, there’s a good chance that Instacart’s take on digital delivery couriers has the legs its deep-pocketed investors are betting on.

[Corrects spelling of name to Ganenthiran throughout.]

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