What does the DoorDash-Instacart deal mean for retailers delivering items via these platforms?

DoorDash and Instacart have struck an acquisition deal for roughly $17 billion. What does it mean for retailers and merchants who rely on these platforms to get items to customers, and could the deal turn into a game-changer for home delivery in the US?

Zoom out: The rival delivery platforms announced their deal on Thursday. The acquisition gives DoorDash a major grocery partner on top of its restaurant and retail delivery business, which already includes Kroger, Costco, Macy’s, CVS, and Target.

“Grocery is one of the hardest things to get right online,” Tony Xu, CEO and co-founder of DoorDash, wrote in a statement. “Someone has to pick a ripe avocado, find a substitute you’d choose yourself, and get the ice cream to you before it melts.”

“Instacart has spent years learning to do that well for grocers, while DoorDash has built a delivery network and technology that local stores rely on every day,” Xu added. “Together, we could give stores of every size more of those tools and unlock the potential of grocery delivery.”

DoorDash first explored buying the Instacart business for about $50 billion in 2021.

Grocery run: “At some basic level, you don’t need more last-mile [delivery] providers to get things done,” Bryan Gildenberg, CEO and founder of Confluencer Commerce, told Retail Brew. “It’s just inefficient.”

Plus, DoorDash and Instacart play in different lanes, Gildenberg added. “DoorDash has a whole food service and restaurant business that Instacart doesn’t play in, and then even within retail, DoorDash’s strength is in urban retail formats, notably drug delivery, and Instacart, its strength is really in suburban grocery.”

The underlying economics of DoorDash and Instacart make “a ton of sense,” he added, because shoppers can get more “route density” out of their total network.

Retail media angle: The deal will be even more interesting for advertisers, brands, and retailers already working with both companies because it can possibly lead to a more efficient relationship between them as advertising platforms, Gildenberg added.

Instacart partners with more than 2,200 retail banners representing nearly 100,000 stores, while DoorDash began to move beyond restaurant and pharmacy deliveries in 2022, partnering with retailers like Sephora and Dick’s Sporting Goods to deliver non-food items on demand.

“Instacart has a more sophisticated ad network than DoorDash right now, particularly in terms of selling ads to the CPG brands that sell through retail,” Gildenberg said. “DoorDash has an ad audience that’s a little bit different than Instacart. If you think about them as a combined ad network, they have complementary skills there.”

“Over time, this allows [merchants] to have a more interesting or efficient relationship with those businesses basically as advertising platforms,” he added.

Ultimately, Gildenberg said, Instacart does not make sense alone. “Instacart is the kind of asset that, in the end, makes sense as part of something else,” Gildenberg said. “That asset is in an e-commerce world in which shoppers are going to increasingly turn their lives over to fewer and fewer solutions. Being part of something bigger probably makes sense.”