What problem was Instacart trying to solve here? I use Amazon Prime Now and Google Express, but don't really factor in the tip when I think how much Prime costs me. I don't make that many orders though, so maybe people feel it as an additional cost over time.
Instacart is playing games with its workers’ pay
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Re: Instacart is playing games with its workers’ pay
#12I'm poor enough to buy my own groceries, but if you're rich enough not to do that, then "tip"/pay your servants in cash.
Re: Instacart is playing games with its workers’ pay
#13They have tens of thousands of customers, yet are worth multiple billions of dollars (valued at $2bn in 2015.) That's just incredible. Let's say they have 100k customers who each use the service every week. That's 5.2m orders per year. Let's say $100 per order, to be generous. At a 10% service fee, that's $50m for a two-year-old 40x revenue multiple. Before paying their contracted workforce. This does not make sense.…
It's basically Webvan 3.0.
Re: Instacart is playing games with its workers’ pay
#14Wow, that seems gratuitously dishonest -- especially misleading customers about what's a "tip" vs. a surcharge.
Having an $x delivery fee (paid to the company) and then a tip as a separate item ($ or %) would be fine. Making the "delivery fee" into a "service charge" is itself dishonest; making it adjustable when it doesn't go to the user is pretty bad, too.
I can't tell if this loses them more goodwill with customers or with delivery employees, but it seems like a bad decision either way.
Re: Instacart is playing games with its workers’ pay
#15They have tens of thousands of customers, yet are worth multiple billions of dollars (valued at $2bn in 2015.) That's just incredible. Let's say they have 100k customers who each use the service every week. That's 5.2m orders per year. Let's say $100 per order, to be generous. At a 10% service fee, that's $50m for a two-year-old 40x revenue multiple. Before paying their contracted workforce. This does not make sense.…
Tens of thousands of shoppers, not customers.
Re: Instacart is playing games with its workers’ pay
#16They have tens of thousands of customers, yet are worth multiple billions of dollars (valued at $2bn in 2015.) That's just incredible. Let's say they have 100k customers who each use the service every week. That's 5.2m orders per year. Let's say $100 per order, to be generous. At a 10% service fee, that's $50m for a two-year-old 40x revenue multiple. Before paying their contracted workforce. This does not make sense.…
Source?
Re: Instacart is playing games with its workers’ pay
#17Is it possible to have a value-added services company that doesn't exploit its labor? Is your answer going to be self-driving cars? What about alternatives that don't fundamentally replace the labor? In my opinion, it is impossible to achieve venture capital goals and pay service labor commensurate to the value it delivers.
Costco and Trader Joe's workers supposedly get much more than minimum wage although not venture capital based. It isn't an economic law.
Re: Instacart is playing games with its workers’ pay
#18They have tens of thousands of customers, yet are worth multiple billions of dollars (valued at $2bn in 2015.) That's just incredible. Let's say they have 100k customers who each use the service every week. That's 5.2m orders per year. Let's say $100 per order, to be generous. At a 10% service fee, that's $50m for a two-year-old 40x revenue multiple. Before paying their contracted workforce. This does not make sense.…
Tens of thousands of shoppers , not customers.
I think you might be right, but this is confusing since an instacart user is also a shopper?
Not sure what the right language is, but I'll revise my post :+1:
Re: Instacart is playing games with its workers’ pay
#19Is it possible to have a value-added services company that doesn't exploit its labor? Is your answer going to be self-driving cars? What about alternatives that don't fundamentally replace the labor? In my opinion, it is impossible to achieve venture capital goals and pay service labor commensurate to the value it delivers.
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Re: Instacart is playing games with its workers’ pay
#20I'm a customer of Instacart and a big fan of the service. It has saved me so many hours.
The contract between a customer and Instacart is very simple: The customer picks out groceries and they show up at the door an hour or so later.
Uber's decision to remove tipping was brilliant. Why impose additional uncertainty and friction into the work flow? Star ratings allow Uber to compensate top performers without creating an inconvenient friction point for users.
Instacart's initial approach to tipping was to default it to 10% and force the user to change it. This was very bad UX. It not only takes extra time, but it was included during the checkout flow before you even know how good the service was.
Star ratings (such as used by Uber) are way more powerful. People feel an archaic obligation to tip as is clear from the shaming tone of the linked article. But with ratings, customers have an incentive to be honest about the service, and the company gets to incentivize whatever qualities are most important to customer satisfaction.
I've found that in restaurant tipping, most people are reluctant to tip below 10% even if the service was really bad. This creates a bad incentive. Most service problems in restaurants are due to waitstaff being over-stretched and not having time to stop by tables often enough, etc. If a waitperson realizes that adding another worker would reduce tables/tips by 30% (for example) he/she would have to make up for that via a higher tipping percentage for it to be worthwhile. Meanwhile, customers are tipping mostly out of obligation and the restaurant owner may not realize the extent of bad service that is going on, even though it slows through-put and gives customers an inferior value.
Why we'd want to carry this sort of system over to a modern service like Instacart is beyond me.
I have written to Instacart support/management suggesting that they create a financial incentive for shoppers to be available at peak times, even if that results in something more like surge pricing. On Superbowl Sunday all deliveries were taken by around noon, and I could really have used some more tortilla chips, beer, etc. Shoppers willing to work during those times should make enough money that they are willing to miss the game themselves, etc.
I think that if Uber were competing in this space, there would be no tips and also no service fee (still not sure what it is, but it seems to be Instacart's way of charging a baseline tip for all orders).
I think the most important thing during the growth phase for Instacart is to gain market share and to deliver a service level that creates a disincentive for stores like Whole Foods to start their own delivery service (or an incentive to white-label Instacart's).
I think Instacart should be raising enough money that it can really think long term about its strategy. It's doing so many things right. The shopping experience and app experience are superb, the shoppers are conscientious and friendly.
Uber was able to grow rapidly by subsidizing rides significantly. It seems Instacart wishes to avoid this. I very much like the free delivery subscription level, but the service fee is annoying, as are the price mark-ups at some stores.
Getting this right is likely very difficult for companies that generally follow in Uber's wake but who have more challenging labor relations. I was quite disappointed to get a tip solicitation flyer like the one shown in the article. As an Instacart customer who just paid a service fee and an annual fee, I don't want an ugly reminder of Instacart's labor relations problems arriving along with my groceries.