DoorDash said its $17 billion acquisition of Instacart will "help local stores win."
However, some local stores do not agree.
Over the past decade, many local grocery chains—some family-owned—have entered delivery partnerships with DoorDash and Instacart. For these smaller chains, delivery services became especially critical during the pandemic and after Amazon’s acquisition of Whole Foods in 2017; both events prompted them to seek rapid delivery solutions.
However, some local grocers say this deal does not give them a chance to compete with Amazon and Walmart, but instead exposes them to risk. Grocers note that there are few options for delivery services, and DoorDash could consolidate the delivery market share, weakening their bargaining power when negotiating partnership terms with DoorDash.
Stew Leonard Jr., CEO of Stew Leonard's, said the grocery chain, which has eight stores in Connecticut, New Jersey, and New York, is offering delivery services through DoorDash and Instacart.
He is concerned that the situation might change if this transaction proceeds.
“We aren’t their major client,” he said. “Will they continue to operate shrewdly and seek to expand our business?”
Leonard added that the merger of the two delivery services could also bring some benefits. He expects the combined company to have more delivery personnel available to pick up orders from his stores. “We hope to expand the delivery radius for each store,” Leonard said.
Lucerne Valley Market and Hardware, located in Southern California, has store manager Anne Roark hoping DoorDash will offer better support for retailers like her. She says she spent several days contacting Instacart customer service to understand the purpose of an $800 charge, but still does not know what this fee is for.
She was also concerned that this transaction would increase the commission she pays to Instacart.
Roark said the supermarket marks up the prices of items sold through Instacart to cover the costs of delivery services. She noted that while customers appreciate the convenience, many may struggle with the additional cost.
The chain's CEO, Linda Gommel, told Business Insider: "We've really worked hard to serve our customers in an affordable way."
Retail industry analyst Kevin Coupe said the merged DoorDash and Instacart will still have access to vast amounts of data on what consumers purchase at specific retailers. Coupe has been writing a daily newsletter for the industry for twenty years.
He said that after Whole Foods announced in 2018 that it would cut ties with Instacart, the delivery startup reached out to some Whole Foods customers and, based on their past purchase histories, suggested they shop at other grocery retailers through the Instacart app.
He said that if a larger company like DoorDash adopted a similar approach, it could become very difficult for retailers to sever ties and switch to competing platforms.
“You’re afraid to leave them because you worry they’ll weaponize your customer data against you,” he said.
Uber also has its own grocery delivery business. CEO Dara Khosrowshahi said on Wednesday’s earnings call that since DoorDash and Instacart announced their deal, retailers have reached out to Uber seeking to use its services more extensively. “They want choice,” Khosrowshahi said of these retailers.
“This potential transaction caused one of the partners to exit the competition,” he said.