Why Instacart Is Laying Off Workers as Deliveries Soar

Big grocery chains relied on app-based delivery companies at the start of the pandemic. Now grocers’ priorities have shifted.

Noelle Marian started working for Instacart in May 2019. She’s an in-store shopper, one of fewer than 10,000 part-time Instacart employees assigned to a specific store—in her case, a Mariano’s in Skokie, Illinois—plucking groceries from shelves, packaging them, and readying them for pickup.

Last year, she and her 15 fellow in-store Instacart shoppers became the only unionized Instacart workers when they voted to affiliate with the United Food and Commercial Workers International Union, which represents 835,000 grocery store workers across the US and Canada. Since the pandemic closed her fitness business last spring, Marian has been working close to 30 hours a week.

Last week, Marian learned she would lose her job. Instacart said it was firing 1,900 part-time, in-store shoppers, including the unionized workers at the Mariano’s. The move was widely condemned as union busting by an app-based company that takes advantage of its workers.

But the changes in Skokie and elsewhere reflect a wider upheaval in the grocery business, as the pandemic upends how people shop and eat. Large grocery chains like Kroger, Albertsons, Aldi, plus the grocery divisions of big-box stores like Walmart and Target, increasingly rely on their own employees to fulfill a firehose of online orders. That has created friction with erstwhile partners—including Instacart.

Have you worked packing or delivering groceries? Email Aarian Marshall at WIRED protects the confidentiality of its sources.

“Retailers that have historically had a laissez-faire attitude when it came to grocery ecommerce have realized that this is potentially a sustainable business, and that they surrendered too much to the app-based marketplaces,” says Sylvain Perrier, CEO and president of Mercatus Technologies, which builds software for grocery retailers. “Now they’re trying to claw back their strategy.”

Instacart denies it’s union-busting. In a statement, a company spokesperson said that the layoffs are the result of some grocers choosing to use their own employees to pick groceries. Instacart’s far larger army of independent contractors will continue to work in many of the stores affected, the spokesperson says. It’s unclear how that contractor workforce has changed during the pandemic. The company said in April it had 500,000 contract shoppers and planned to add 250,000 more in the following two months. Today, the company says it still has 500,000 contractors.

A spokesperson for Kroger, which owns Mariano’s, said, “The Kroger family of companies was not involved in Instacart’s decision to suspend its in-store operations model.”

For years, grocery delivery was the provenance of busy households in highly urbanized areas. Now, a Mercatus analysis finds US online grocery sales have more than doubled since February 2020, to 10.2 percent of all grocery sales. Thirty percent of all US households ordered a grocery item online for pickup or delivery in November, compared with 12.5 percent in August 2019, according to the retail analytics firm Brick Meets Click. Retailers report that the stream of online orders is down a touch since its summer high, but they expect eaters’ new behavior patterns to stick around well after the pandemic.

When Covid hit the US last winter, grocers scrambled to keep pace with this surging demand for deliveries. Companies like Instacart stepped into the breach. Now grocers are reordering priorities, pouring money into tech for online ordering, smartphone apps, and getting food across customers’ doorsteps.

It’s expensive and intense work. The CEO and president of Albertsons, the second-largest US grocery chain, said this month that 30 percent of the company’s capital spending now goes towards technology. Kroger saw its digital sales almost double in each quarter of 2020, compared with the previous quarter, and it is spending on its “drive up and go” pickup options.

The abrupt pivot is even reshaping the physical store. Walmart and Target have reordered sections of some stores to make it easier for employees to fulfill online orders. Amazon-owned Whole Foods and Giant, a subsidiary of the Dutch company Ahold Delhaize, last year createddark stores,” which only sell food via the internet—no customers allowed inside. “Grocery stores weren’t designed to be fulfillment centers,” says David Bishop, the research lead at Brick Meets Click. Now, that’s changing.

Workers are caught in the middle. In July, Instacart announced it would cut in-store shopping jobs as Aldi and Sprouts shifted to use their own employees to pick and package groceries for online orders. Kroger has store employees fulfill pickup orders, the bulk of its online business. Target and Walmart have built their own in-store “picking apps,” which guide employees through an algorithmically derived optimal path through the aisles. These merchants have realized that when you’re using an outside company for these tasks, “you’re at the mercy of the experience that company provides,” says Perrier.

Meanwhile, smaller chains squeezed by the low margins of the food business complain about the reported 9 to 10 percent commission charged by app-based services. “We don’t think we make money from an Instacart order,” a Wisconsin-based grocer told The Wall Street Journal last month. The company still works with the service, he said, because it generates more revenue.

Many retailers know that, even if they don’t like it, some customers prefer to shop through the delivery and shopping apps. “There’s a realization in the grocery industry that customers at times prefer the marketplace platforms, and at times prefer to shop directly with the retailer,” says Jordan Berke, a former Walmart ecommerce executive who now leads Tomorrow Retail Consulting. “Retailers have embraced the need to be great at both.”

Some grocery giants, meanwhile, are leaving delivery to app-based services—leading, in some cases, to more layoffs. This month, Albertsons said it would soon let go some of its in-house delivery workers, opting instead to use delivery companies—and independent contractors—from DoorDash and Instacart. In California, the move was widely linked to the recent state ballot initiative allowing delivery companies to continue to treat workers as independent contractors rather than employees.

Albertsons says it cut delivery operations nationwide, and that the move had more to do with making deliveries more efficient as the volume grows. Andrew Whelan, an Albertsons spokesperson, says the company plans to offer the laid-off workers other jobs within the company, and says that those who stay with the company through the end of next month may be eligible to receive severance.

As retailers hammer out their online strategies, the systems today can be opaque to shoppers and sometimes even workers. DoorDash offers so-called white-label delivery services for companies such as Walmart, Macy’s, Wakefern, and Woodmans, which means customers ordering through those company’s websites may end up with a DoorDash delivery person at their front door.

Annie Snyder has driven for DoorDash in Tracy, California, for a little over a year. There’s a busy Walmart near her home, but she won’t pick up orders from the store anymore. Unlike the DoorDash app, the Walmart system won’t let people tip until after their delivery is completed. In Snyder’s experience, the majority forget. “That’s not worth it for me,” she says. A DoorDash spokesperson says DoorDash is converting Walmart from post-checkout tips to pre-checkout tips, and that the transition will be completed “shortly.”

In Skokie, Noelle Marian, the Instacart in-store shopper, has received an informal offer to work at Mariano’s once her job with the app-based company is done. (She’s unsure whether all her fellow unionized Instacart workers will receive the same offer.) “It’s a great sigh of relief,” she says. The Mariano’s store where she works is unionized, under a different local of the same union. The paycheck will be steadier, and for the first time in three years, she’ll have health insurance. “That’s definitely a help,” she says.

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