Online grocery delivery services like Instacart have surged in popularity in recent years, offering the convenience of shopping from home and having items delivered right to your door. The global pandemic accelerated this growth, with nearly 60% of U.S. consumers buying groceries online in 2021.
But for budget-conscious shoppers, the question remains: is Instacart actually cheaper than shopping in-store yourself? As both a savvy consumer and retail industry expert, I dug into the data to find out.
The short answer is that Instacart is generally not cheaper than buying groceries the old-fashioned way. Instacart‘s prices are often higher than in-store prices, and the company charges additional fees on top of that. However, there are ways to minimize the markup and decide if the added cost is worth it for the time and effort saved.
Let‘s take an in-depth look at how Instacart‘s prices stack up and how you can get the most bang for your buck when using this popular grocery delivery app.
Instacart Prices vs. In-Store Prices: What‘s the Markup?
The first thing to know is that Instacart does not set its own prices. The retailers that partner with Instacart – including popular supermarkets, wholesale clubs, drugstores, pet stores and more – determine the prices of items in their virtual storefronts.
Many retailers choose to mark up prices on Instacart to cover the cost of partnering with the service. Here‘s the breakdown of how much major retailers increase prices on Instacart:
| Retailer | Average Instacart Markup |
|---|---|
| Kroger | 14.8% |
| Publix | 22.7% |
| Target | 14.2% |
| Costco | 23.4% |
| Albertsons | 17.6% |
| Sprouts | 0% (everyday in-store prices) |
Data based on a 2022 investigation by NBC Los Angeles
As you can see, markups vary quite a bit by retailer but tend to hover around 15% to 25%. A few outliers, like Costco and Publix, increase prices more than 20% on average, while others like Sprouts don‘t mark up at all.
To illustrate how this plays out, let‘s compare in-store prices vs. Instacart prices for a few staple grocery items at Kroger:
| Item | In-Store Price | Instacart Price | Markup |
|---|---|---|---|
| Bananas (1 lb) | $0.55 | $0.63 | 14.5% |
| Milk (1 gal) | $3.29 | $3.79 | 15.2% |
| Large Eggs (12 ct) | $2.79 | $3.19 | 14.3% |
| Boneless Chicken Breast (1 lb) | $3.99 | $4.59 | 15% |
As a consumer, it‘s frustrating to see this price discrepancy. You‘d think there would be more transparency and consistency in pricing across the board.
However, from a retail partnership perspective, the markups make sense. Margins in the grocery industry are already razor thin. Supermarkets operate on margins of just 1% to 3% on average, so giving up a cut of the profits to Instacart would be unsustainable without raising prices. The markup helps pay for the cost of Instacart‘s service while allowing grocers to maintain their margins.
It‘s also important to note that Instacart prices are based on in-store prices by region, not individual store locations. So even if a retailer claims to have "everyday store prices" on Instacart, you may still see higher prices than at your neighborhood store due to geographic price differences. Always compare prices with your local in-store costs to assess the markup for yourself.
Instacart‘s Additional Fees, Explained
On top of potentially paying more for the actual grocery items, Instacart orders come with several additional fees that can add up quickly. Here‘s a breakdown of the most common extra charges:
- Delivery fee: Starts at $3.99 but can increase based on demand and order size
- Service fee: A default 5% fee to cover Instacart‘s operating costs (waived for pickup)
- Heavy fee: $5 to $10 for orders with heavy items over 50 lbs
- Long distance fee: Up to $15 for delivery outside the store‘s standard radius
- Taxes: Varies by location, Instacart required to collect sales tax in most states
- Tip: Optional but recommended, 5% default with $2 minimum suggested
These fees can increase your final cost significantly, especially on smaller orders. For example, let‘s say you place a $50 Instacart order with the default 5% service and $3.99 delivery fee. That‘s an extra $6.50 in fees, or about 13% of your subtotal. Add in a 5% tip (another $2.50), and you‘re looking at nearly 20% in additional costs on top of the marked-up prices.
Here‘s a real-world example of how quickly the fees can add up. I recently placed an Instacart order from Publix for just eight items:
- 4 single-serving cups of Chobani yogurt
- 1 bag of tortilla chips
- 1 15 oz can of black beans
- 1 red bell pepper
- 1 tomato
The subtotal for these items came to $11.39. But after the $7.14 service fee, $3.99 delivery fee, and $3 tip, my grand total was $25.52 – over double the cost of the groceries themselves. Ouch.
Clearly, Instacart‘s fee structure isn‘t designed for small, cheap orders. The economics just don‘t work out in the customer‘s favor. As a shopper, you really need to think hard about whether the added cost is worth it for a given order size.
Expert Tips for Saving Money on Instacart
While Instacart orders are often more expensive than shopping in-store, there are ways to minimize the markup and make the service more affordable. Here are some of my top money-saving strategies as a retail expert and veteran Instacart shopper:
1. Choose pickup instead of delivery: Instacart‘s pickup option allows you to skip the delivery and services fees. An Instacart shopper will still assemble your order, but you pick it up at the store instead of having it delivered. Pickup fees are just $1.99, and waived entirely for orders over $35.
2. Get the Instacart Express membership: If you use Instacart at least 2-3 times per month, the $9.99/month or $99/year Express membership can quickly pay for itself. You get free delivery on orders over $35 plus reduced service fees. Just be sure to select "Express" at checkout to get the benefits.
3. Look for promotions and coupons: Check the Instacart app frequently for deals like free delivery promos, $10-$25 off orders over a certain size, or discounts for referring friends. You can also digitally clip manufacturer coupons in the app. Every little bit helps!
4. Compare prices between stores: Take advantage of Instacart‘s multi-retailer marketplace and price check your items across different stores. Sprouts may have better produce deals than Kroger, for example, while Costco could be cheaper for bulk items. Having a few go-to items at each retailer can help you build a cost-effective cart.
5. Avoid one-off, small orders: Due to Instacart‘s fee structure, ordering just a handful of items is hardly ever cost-effective. To get the best bang for your buck, try to consolidate orders as much as possible. Stock up on enough essentials to meet the $35 order minimum and take advantage of free delivery if you can.
6. Be flexible with substitutions: Instacart shoppers are directed to look for the best deal on substitutions within the parameters you set. If you‘re open to swaps, you may end up with a cheaper alternative for out-of-stock items. Just be sure to select "Pick a sub for me" when finalizing your order.
Using these strategies consistently can help you save quite a bit on Instacart orders over time. Of course, it‘s still important to comparison shop and know when it makes more sense to brave the store!
How Instacart‘s Pricing Model Works
Instacart makes money through a few key revenue streams: delivery fees, service fees, and markups on products from retail partners. Instacart‘s cut averages 10% on the order subtotal, although this can vary quite a bit.
One unique aspect of Instacart‘s model is dynamic pricing, which means that fees and markups can change based on order volume, shopper availability, and even the contents of your cart. Just like Uber uses surge pricing during times of high demand, Instacart‘s algorithm adjusts fees in real-time.
This means that Instacart prices aren‘t just higher than in-store prices – they‘re also highly variable. You may see different prices and fees depending on the time of day, whether it‘s a busy shopping period like Sunday afternoon, and how many other orders are being placed in your area simultaneously.
This pricing model is obviously great for Instacart, allowing them to maximize revenue based on demand. But it results in a lot of confusion and frustration for customers. It‘s near impossible to predict what fees you‘ll be charged, making budgeting for your Instacart orders a challenge.
Is Instacart Losing Money?
Despite rapidly growing revenue (Instacart‘s valuation soared from $7.9B to $17.7B in 2020 alone), many experts believe the company is still losing money. Instacart‘s labor costs are substantial due to its reliance on a massive network of 500,000+ independent contractor shoppers.
Instacart also gives an average of $10 per order to retail partners to help cover the costs of their partnership. So while the company may be posting impressive gross merchandise value numbers, profitability remains elusive.
The path to profitability likely lies in further increasing prices and fees for consumers. As Instacart gains an even larger share of the online grocery market, its pricing power will grow. We‘ve already seen the company get more aggressive with higher fees and surge pricing. For budget-minded shoppers, that means saving money on Instacart could get harder in the future.
The Bottom Line
So, is Instacart cheaper than shopping in-store? In most cases, the data shows that the answer is no. Retail partners mark up prices by 15% on average, and Instacart‘s labyrinth of extra fees quickly inflate your final bill.
However, that doesn‘t mean using Instacart is a categorically bad decision. For busy families, people with limited mobility, and those who simply despise grocery shopping, paying a premium for the convenience can be a worthwhile tradeoff. It‘s all about running the numbers for your own situation and weighing the costs vs. benefits.
If you do use Instacart, implementing savvy shopping strategies like using pickup, consolidating your orders, and actively seeking out promotions can significantly reduce the markup. But at the end of the day, Instacart is a luxury service and it‘s priced accordingly.
As an expert in the retail space, my take is that Instacart is here to stay, but it will never be the most cost-effective way to buy groceries. The added fees are simply too substantial, and I predict that they‘ll only grow over time as Instacart strives for profitability. The value proposition of delivery convenience may resonate with some shoppers, but the price-conscious will always be better off getting their groceries the old-fashioned way.
