Instacart will show advertisements on the high-tech shopping carts it sells to grocery stores, the latest addition to the company's growing advertising business and a sign of investment in products outside grocery delivery.
The company will begin advertising on the carts, which include self-checkout and are equipped with cameras and sensors to detect items, at Good Food Holdings' Bristol Farms stores in Southern California before expanding to other stores in the coming months, Instacart said Monday. The smart shopping carts, called Caper Carts, are available at retailers including Kroger Co. and Wakefern Food Corp.'s ShopRite and Fairway Market.
Instacart, trading as Maplebear Inc., has pitched investors on the strength of its high-margin advertising business, which brought in a better-than-expected $222 million in revenue in its third-quarter results. Advertising accounts for about 30% of overall revenue, according to company filings. Growth in Instacart's advertising and enterprise businesses could help offset the macroeconomic pressures that have moderated growth in its primary online grocery delivery business.
More than two-thirds of grocery sales are expected to be made to shoppers visiting stores in the next few years, the company said in its most recent shareholder letter. Instacart expects in-store purchases to be a mainstay for grocery sales.
"With Caper Carts we are expanding into building technologies for the store because what we believe is customers are not going to shop just online or just in store," Chief Executive Officer Fidji Simo said in an interview with Bloomberg Television. Instacart will share revenue from advertising on the smart carts with retailers, Simo said.
Only a small number of carts have been rolled out. Instacart signed its first major retailer deals in 2023 and expects to scale this year, with the goal of having thousands of these carts deployed by the end of 2024, Simo said, adding that Instacart has seen interest for the carts from international retailers.
The carts show shoppers personalized recommendations during their grocery runs. For example, if someone has added cookies to their cart, they'll see an ad for ice cream. Del Monte Foods, Dreyer's Grand Ice Cream, and General Mills Inc. are the first brand partners to advertise on the touch screens of the shopping carts, Instacart said.
Instacart made a major investment in shopping cart technology by buying New York-based Caper AI in 2021 for $350 million, its biggest acquisition to date. The carts are currently deployed at a handful of metro and suburban branches of U.S. and Canadian grocers.
Smart carts have slowly made their way to retailers across North America. Amazon.com Inc., which owns Whole Foods, has rolled out cashierless technology to some stores and developed self-checkout Dash Carts for its Amazon Fresh markets. In May, Morton Williams ordered 100 smart carts from Tel Aviv-based A2Z Smart Technologies. The supermarket chain Wegmans is also testing smart carts after discontinuing its self-checkout app because of "too many losses" from shoplifting.
It still remains to be seen if retailers and customers will embrace smart shopping carts, in part because of the limited rollout and high price tag of the technology. Retailers continue to evaluate in-store experiences as the economy and a rise in retail theft, among other factors, influence shopping habits and staffing decisions.
"Although there are other perceived benefits, like being able to track the total cost of the items in the cart or showing your shopping, these are of secondary importance to the customers and thus for retailers too," said David Bishop, a partner at grocery research firm Brick Meets Click. "The ability to serve up digital ads is likely a secondary draw to the cart."
The slow adoption rate of smart carts can also be "indicative that grocery shopping is a sensory experience and most customers are scanning the store and shelves as opposed to looking down at the cart," Bishop said.
As competitors like Amazon and Walmart Inc. grow their online delivery businesses, Instacart is betting it can see success as a technical partner -- rather than a competitor -- to retailers with stores. The company has said that customers who shop both online and in-store spend two to four times more than those who shop only in-store.
"Our strategy is to enable retailers with all of the technology they need to run their business," Simo told Bloomberg Television. "That's why we have the vast majority of retailers already on our platform, well above any competitors."
Information for this article was contributed by Paayal Zaveri of Bloomberg News.