Invest Like the Best with Patrick O'Shaughnessy
Fidji Simo - Creating Delightful Consumer Experiences
Tue May 09 2023Description
This episode features Fiji Seemo, the CEO of Instacart, discussing the role of Instacart in the grocery ecosystem and the company's use of AI and data infrastructure. The episode covers topics such as building a catalog of grocery items, solving real human problems with technology, the shift towards online grocery shopping, Instacart's advantage and shoppers, retail media networks, capital allocation principles, management philosophy, learning in a complex business, personalized solutions with AI, and content creation at Instacart.
Insights
Instacart's Role in the Grocery Ecosystem
Instacart plays a crucial role in the grocery ecosystem by providing its technology platform to other grocers and helping them make their digital transformation. The company emphasizes the importance of combining long-term vision with short-term execution and building great consumer products.
AI and Data Infrastructure at Instacart
Instacart has been using AI for various aspects of their business and has invested heavily in data infrastructure. They believe that building rich data sets is crucial for leveraging AI effectively and that companies should consider building products from scratch with an AI-native approach.
The Shift Towards Online Grocery Shopping
The pandemic has accelerated the shift towards online grocery shopping, and Instacart aims to help the entire grocery industry make their digital transformation. Grocers benefit from having omnichannel customers who shop both online and in-store, reinforcing customer loyalty and avoiding losing market share.
Instacart's Advantage and Shoppers
Instacart's advantage lies in its network of 80,000 grocery stores close to customers. They have two types of customers: those loyal to specific retailers and those who prefer the convenience of a marketplace. Instacart shoppers are mostly women, many of whom are moms, and they value the customer service aspect of Instacart.
The Future of Grocery Delivery and Retail Media Networks
Existing grocery stores are already close to the customer, making them the most optimal solution for delivery in one to two hours. Instacart offers marketing solutions like sponsored products and shoppable display/video ads for brands. Retail media networks are rising as brands shift towards targeted advertising on platforms like Instacart.
Instacart's Expansion and Capital Allocation Principles
Instacart aims to become an infrastructure or software platform for grocery partners and healthcare providers. They prioritize financial discipline and profitability, aiming to generate free cash flow to fuel the business and invest in growth opportunities. Grocers have embraced the relationship with Instacart, as driving customers online benefits both parties.
Instacart's Principles of Capital Allocation and Management Philosophy
Instacart's principles of capital allocation focus on creating value for everyone in their ecosystem. They recognize the unique strengths of team members and encourage continuous learning. There is a misconception that models like Instacart are fundamentally unprofitable, but they are working to prove otherwise.
Learning, AI, and Content at Instacart
Continuous learning is important in a complex business like Instacart. The company uses AI and data optimization to create products that consumers will love. Leadership is crucial in solving problems, and AI could allow for personalized solutions based on customer constraints.
AI and Personalized Solutions at Instacart
Instacart has released a plugin for Chad GPT that allows users to ask for recommendations and order items in natural language. AI could automate the process of suggesting recipes and democratize health and nutrition advice. Content plays a role in inspiring people to change their diet, and AI can generate unique recipes tailored to individual tastes.
AI and Content Creation at Instacart
AI is still in the early stages of developing personality, but content will evolve to be more personality-driven. The next wave of creator content may involve different personalities from different channels. Deploying existing intellectual property (IP) can be powerful, and Instacart believes in taking chances on people and seeing the magic in them.
Chapters
- Teagas and Founders podcast
- Instacart's Role in the Grocery Ecosystem
- AI and Data Infrastructure at Instacart
- Building a Catalog and Solving Real Human Problems
- The Shift Towards Online Grocery Shopping
- Instacart's Advantage and Shoppers
- The Future of Grocery Delivery and Retail Media Networks
- Instacart's Expansion and Capital Allocation Principles
- Instacart's Principles of Capital Allocation and Management Philosophy
- Learning, AI, and Content at Instacart
- AI and Personalized Solutions at Instacart
- AI and Content Creation at Instacart
Teagas and Founders podcast
00:00 - 07:41
- Teagas is a research platform for investors that provides access to qualitative insights through expert call transcripts.
- The host recommends the Founders podcast and highlights specific episodes on Estee Lauder and Ralph Lauren.
Instacart's Role in the Grocery Ecosystem
00:00 - 07:41
- The guest this week is Fiji Seemo, the CEO of Instacart.
- Fiji discusses her consumer product experiences and Instacart's role in the grocery ecosystem.
- She emphasizes the importance of combining long-term vision with short-term execution and building great consumer products.
- Constraints can lead to a better business and attract top talent.
- At Facebook, they focused on understanding what consumers wanted and identifying latent demand to build new products based on existing user behavior.
AI and Data Infrastructure at Instacart
07:14 - 14:44
- Instacart has been using AI for various aspects of their business, such as search recommendations and connecting shoppers to stores.
- The company has invested heavily in data infrastructure to take advantage of AI technologies.
- Instacart's unique data set, built over the last 10 years, allows them to create AI experiences on top of it.
- Generative AI is enabling a shift towards natural language interactions in commerce, making it easier for users to find recipes and plan meals.
- To fully embrace AI, companies should consider building products from scratch with an AI-native approach.
- Companies should focus on tackling harder technical challenges rather than relying on simple software development.
- Building rich data sets is crucial for leveraging AI effectively.
Building a Catalog and Solving Real Human Problems
14:20 - 21:41
- Building a catalog of millions of items with availability, nutritional value, and ingredients is a challenging task that takes years to build.
- Understanding the catalog of different merchants is critical for creating AI experiences in the context of groceries.
- Technology should be used to solve real human problems and serve customers' needs.
- AI technologies have the potential for both good and bad outcomes, and it's important to maximize the good by focusing on solving real human problems.
- Media played a significant role in exposing the possibilities of technology and business to the speaker.
- Instacart operates within a complex landscape with multiple stakeholders, players, and regulations.
The Shift Towards Online Grocery Shopping
21:13 - 28:50
- Grocery is the largest category of commerce, with $1.1 trillion in North America alone.
- Before the pandemic, online penetration for grocery was only 3%, but it has now increased to 12%.
- Other categories like fashion and electronics have online penetration rates of 25-30%.
- The grocery industry has been slow to embrace technology, but now all retailers are realizing the need for online transformation.
- Instacart aims to help the entire grocery industry make their digital transformation by providing its technology platform to other grocers.
- Instacart's digital transformation also extends to in-store experiences, as seen through acquisitions like KaperCarts.
- Grocers benefit from having omnichannel customers who shop both online and in-store, as they are more valuable and profitable.
- The shift towards online grocery shopping is inevitable, and grocers need to embrace it to reinforce customer loyalty and avoid losing market share.
- Instacart shares data with grocers within privacy laws and helps them build direct relationships with their customers on their own platforms.
Instacart's Advantage and Shoppers
28:20 - 35:59
- Instacart has two types of customers: those loyal to Kroger who order directly from Kroger.com, and those who prefer the convenience of a marketplace with a membership program that offers free delivery across various categories.
- Scale is crucial for Instacart's unit economics. They used to lose money on every order until they reached 100 million orders. Having density of orders at the store level allows them to batch orders, saving costs.
- Scale also provides data that helps optimize operations. Instacart can tell shoppers how to pick products efficiently and minimize time spent in stores.
- Instacart shoppers are different from general delivery drivers. They are mostly women, many of whom are moms. They spend more time inside the store picking items than delivering them, which reduces fuel costs.
- Shoppers also value the customer service aspect of Instacart and often go above and beyond to exceed customer expectations.
- While there are some fully automated grocery stores, Instacart's advantage lies in its network of 80,000 grocery stores close to customers.
The Future of Grocery Delivery and Retail Media Networks
35:30 - 42:43
- Having 80,000 grocery stores close to the customer is a significant advantage
- Starting from scratch, a mix of fully automated facilities and manual picking would be ideal
- Existing grocery stores are already close to the customer, making them the most optimal solution for delivery in one to two hours
- Brands are going through digital transformation and need to capture online consumers
- Instacart offers marketing solutions like sponsored products and shoppable display/video ads for brands
- Using Instacart ads can result in a 15% sales lift for brands
- Retail media networks are rising as brands shift towards targeted advertising on platforms like Instacart
- Instacart provides opportunities for emerging brands to reach customers online and move their products at retail stores
- Designing for the online consumer is more important than designing specifically for Instacart
- Star Day Foods is an example of a company that uses online tools like Instacart ads to optimize their product offerings
Instacart's Expansion and Capital Allocation Principles
42:19 - 49:45
- Instacart uses AB testing and data optimization to create products that consumers will love
- Instacart aims to become an infrastructure or software platform for grocery partners and healthcare providers
- They are focused on accelerating the shift from in-store only to a new channel
- Instacart is developing in-store technology to create a seamless experience between online and offline shopping
- Instacart Health allows doctors to prescribe food as easily as medication, delivering fresh food to patients' doors
- The goal is for health insurance companies to reimburse the cost of fresh food, saving on healthcare costs in the long run
- Instacart already generates revenue through partnerships with retailers like Sprouts, powering their advertising and fulfillment
- Capital allocation principles are important for Instacart's growth and expansion of its ecosystem
Instacart's Principles of Capital Allocation and Management Philosophy
49:23 - 56:21
- Instacart's principles of capital allocation are focused on creating value for everyone in their ecosystem.
- They prioritize financial discipline and profitability, including tech-based compensation.
- They aim to generate free cash flow to fuel the business and invest in growth opportunities.
- There is a misconception that models like Instacart are fundamentally unprofitable, but they are working to prove otherwise.
- Instacart is not just an app; their network of partners contributes significantly to their business.
- Grocers have embraced the relationship with Instacart, as the incentives are aligned and driving customers online benefits both parties.
- Instacart's management philosophy involves recognizing the unique strengths of team members and aligning tasks accordingly.
- They encourage team members to articulate their superpowers and provide tools for them to develop those skills further.
- Continuous learning is important for managing a complex business like Instacart.
Learning, AI, and Content at Instacart
55:55 - 1:03:23
- Continuing to learn is important in a complex business like this
- Learning from the team and being open to asking questions helps in ramping up quickly
- Connecting different passions and applying knowledge from one area to another
- Healthcare system not optimized to solve complex chronic conditions
- Specialties in healthcare focus on individual organs, not the whole patient
- Feeling helpless is not an emotion in my repertoire, always believe there's a solution
- Leadership is crucial in solving problems, focus on leadership rather than the problem itself
- Charlie Munger's indifference to problems as a source of inspiration
- AI could allow for personalized solutions based on customer constraints
AI and Personalized Solutions at Instacart
1:03:01 - 1:10:06
- Instacart has released a plugin for Chad GPT that allows users to ask for recommendations and order items in natural language.
- Users can input their constraints, such as budget and food restrictions, and receive suggested recipes.
- AI could automate the process of suggesting recipes based on a picture of the user's fridge or a recipe book.
- AI could also democratize health and nutrition advice by capturing knowledge from nutritionists and tailoring diets to individual needs.
- Content plays a role in inspiring people to change their diet and try new products.
- AI can generate unique recipes tailored to individual tastes and preferences.
- The commoditization of content through AI will lead to more inspiring experiences.
AI and Content Creation at Instacart
1:09:58 - 1:12:39
- AI is still in the early stages of developing personality.
- Content will evolve to be more personality-driven.
- The next wave of creator content may involve different personalities from different channels.
- Deploying existing intellectual property (IP) can be powerful, such as using characters like Gustav from Ratatouille.
- Fiji believes in taking chances on people and seeing the magic in them.
- To learn more, visit JoinCelossus.com for complete podcast episodes, transcripts, show notes, and resources.