Grocers push back on DoorDash's Instacart deal

• DoorDash has said its deal for Instacart will help small businesses compete with larger ones.
• Some small grocers are skeptical about that.
• A larger DoorDash could be harder to negotiate with, they said.

Some local stores aren’t so sure.

Many local grocery chains, some of which are family-owned, have inked delivery deals with DoorDash and Instacart over the past decade. The delivery services were particularly important to the smaller chains during the pandemic and after Amazon bought Whole Foods in 2017 — both events that sent them looking for a quick delivery option.

Instead of giving them a shot at competing with Amazon and Walmart, though, some local grocers say the deal presents risks for them. There aren’t many options for delivery services, and DoorDash could consolidate delivery market share, the grocers say, giving them less leverage to negotiate the terms of their deals with DoorDash.

Stew Leonard Jr., CEO of Stew Leonard’s, a grocery chain with eight stores in Connecticut, New Jersey, and New York, offers delivery through DoorDash and Instacart.

Both companies have been willing to work with Stew Leonard’s to grow online orders, whether through seasonal promotions or advertising, Leonard said. He’s also been able to pick between the two services to get better deals, he added.

If the deal goes through, Leonard worries that could change.

“We’re not any big customer of theirs,” he said. “Will they still be wheelers and dealers and want to grow our business?”

The tie-up between the two delivery services could have upsides, Leonard added. He anticipates that the combined company will have more delivery workers available to pick up orders from his stores. “We’re hoping that we can expand the radius of delivery around each one of our stores,” Leonard said.

Anne Roark, store manager at Lucerne Valley Market and Hardware in Southern California, said that she hopes DoorDash will provide better support for retailers like hers. She said that she’s spent days trying to reach Instacart customer service about an $800 invoice that she received from the company but still doesn’t know what the purpose of the charge is.

She’s also worried about the deal increasing the commission that she pays to Instacart.

Roark’s supermarket charges more for items sold through Instacart to cover the delivery service’s fee, she said. While customers like the convenience, many probably can’t justify the extra cost, Roark added.

“We really try hard to serve the customers in ways they can afford,” Linda Gommel, the chain’s CEO, told Business Insider.

A combined DoorDash and Instacart would also know a lot about what consumers buy at specific retailers, said Kevin Coupe, a retail industry analyst who has written a daily newsletter on the industry for two decades.

After Whole Foods said it would cut ties with Instacart in 2018, the delivery startup reached out to some Whole Foods customers and suggested they shop at other grocers on the Instacart app based on their past purchases, he said.

A similar move by a larger DoorDash could make it tricky for retailers to cut ties and work with rival delivery services, even if they want to, he said.

“You’re afraid to leave them because you’re afraid they’re going to weaponize your customer data against you,” he said.

Uber, which has its own grocery delivery business, has already heard from retailers looking to work more with its service in the week since DoorDash and Instacart announced the deal, CEO Dara Khosrowshahi said on an earnings conference call Wednesday. “They want choice,” Khosrowshahi said of the retailers.

“This potential deal takes one of those partners off the table,” he said.

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