3. What is the role of information technology in Instacart’s business model? INTERACTIVE SESSION: ORGANIZATIONSCan Instacart Deliver?The online grocery store Webvan was perhaps themost well-known flop of the dot-com boom. ItsInstacart's app provides a detailed map of eachlocal establishment including store aisle contents.2001 failure led many pundits and investors to con-clude that the online grocery business model wasuntenable.The customer's grocery list, compiled using exten-sive drop-down menus either on the website orin the app, is organized by merchant and aisle toprovide maximum order fulfillment efficiency.Inventory is tracked for all of Instacart-affiliatedmerchants. As a personal shopper skims an aisle,bedecked in a bright green T-shirt flaunting the Insta-cart logo, items can be selected for different ordersplaced at different times. The software can also plandelivery routes and predict future customer orders.iPhone users can connect to the Instacart appHowever, Webvan's downfall was due mainly topursuing a first-mover advantage strategy. It paidmore than $1 billion to build huge distribution ware-houses, bought fleets of delivery trucks, and investedheavily in marketing. Then it offered free deliverieson any size order, at virtually any hour, at prices thattrumped its brick-and-mortar competitors. This wasnot a formula for generating profits.In recent years other companies are testing thewaters again for online grocery sales. FreshDirectin New York City has succeeded by combining freshlocal produce, organic and kosher items, and custom-prepared meals with standard grocery store fare.Established brick-and-mortar firms including Albert-son's, Safeway and Peapod.com (the online entity forboth Stop & Shop and Giant) took over as pure playonline firms perished.The newest entrant, Instacart bypasses theexpenses of warehousing and transportation alto-gether by using a legion of independent contractorsand local food retailers. These personal shoppersreceive orders via the Instacart smartphone app,from Yummly, the largest recipe search engine in theworld, and have the ingredients delivered in time fordinner. Visitors to Food Network websites, with morethan half a million recipes, can browse recipes onlineand then click a button to add ingredients they needto their Instacart shopping cart. The Instacart app isintegrated with Google Now cards so that Androidusers can place orders for either delivery or pickupusing a token generated within the app.Instacart's core competencies thus dictate its tar-get market: the price-insensitive, convenience shop-per. At first, item prices were marked up (20 percentin one sampling) and a $3.99 delivery fee charged.An Amazon Prime-like service called InstacartExpress requires a certain volume of business and a$99 yearly fee in exchange for free delivery. One ofWebvan's big mistakes was pursuing a mass-marketstrategy. It was never going to be able to turn a profitby providing quality and selection at rock-bottomprices-with free delivery to boot. Instacart is insteadcatering to shoppers who are willing to pay a pre-mium to have both quality and selection.By mid-2015 Instacart had 200 employees and4,000 personal shoppers in New York, Los Angeles,San Francisco, San Jose, Washington, DC, Chicago,Boston, Austin,der, Denver, Houston, and Portland, Oregon. It con-tinues to grow. Grocery purveyors, from large chainssuch as Costco, BJ's Wholesale Club, Safeway, Kroger,Super Fresh, Trader Joe's, and Whole Foods to localspecialty shops such as Erewhon Organic Grocer& Café in LA, Marczyk Fine Foods in Denver, andGreen Zebra in Portland are now welcoming Insta-fill them from grocery store aisles, and use theirown vehicles to deliver them to customers' doors.Like fellow "sharing economy" firm Uber, Instacartminimizes labor costs by requiring its personalshoppers to pay for their own auto and health insur-ance and Social Security contributions. Purport-edly paid between $15 and $20 an hour, dependingon how quickly they can fill and deliver an order,most Instacart shoppers work part-time on flexibleschedules.Instacart co-founder and CEO Apoorva Mehtabelieves Instacart's competitive advantage is twfold. First, customers are not limited to a singlevendor and can combine items from multiple storeson one order, so product selection is truly custom-ized. (Instacart uses special software that can trackinventory across multiple supermarkets.) And sincepersonal shoppers are on call around the clock, cus-tomers have to neither order many hours in advanceof delivery nor wait for a delivery window. In fact,customers can have their grocery list filled and deliv-ttle, Philadelphia, Atlanta, Boul-cart as a way to expand their customer bases aheadof the full national rollout of Amazon subsidiaryered in less than an hour!Amazon Fresh. 432 Part Three Key System Applications for the Digital AgeWhile many analysts predict that matching thebargain basement prices of Amazon and Walmartis unavoidable, Instacart is instead modifying itsbusiness model. Partnerships with Petco and Tom-linson's Pet Supplies in Austin, Texas, hint of addi-tional product areas on the horizon, while Mehtaspeculates that expansion into general logistics islayering labor on top of the existing grocery infra-structure is still unproven. According to a Wall StreetJournal analysis, an order of 15 common items suchas frozen peas, milk, cereal, and fresh fruit costingabout $68 from a San Francisco Safeway store wouldproduce a profit of only $1.50 for Instacart. If theorder were smaller by one 28- ounce jar of peanutbutter, Instacart would break even, and a smallerorder could push it into the red. Without price con-conceivable.Many of Instacart's grocery store partners nowset their own prices, paying Instacart a cut of eachcessions from participating merchants, can Insta-cart attract enough customers? And maintain a payscale that ensures the topnotch customer servicedemanded by its target market? And still make aprofit? And can retailers' sales gains from Instacartbe sustained? Instacart may be a great idea, but it's aorder. This has freed Instacart of the burden of mark-ups, protected it from the vagaries of variable foodprices, and provided a more stable profit structure.Retailers have been willing to pay Instacart in thehope of gaining more business because Instacartenables a single store to serve people across a largergeographic area. Affiliated retailers are reportinggains, although the numbers are small. Nilam Ganen-thiran, head of Business Development and Strategy,maintains that different types of agreements havebeen reached, declining to specify whether partnersare outsourcing their e-commerce to Instacart for amonthly fee or are charged per item purchased, perorder placed, or per customer serviced.With national chains achieving just 1 to 2 percentvery big bet.Sources: Sarah Perez, "Instacart Becomes the Default Ingredients-Buying App for Food Network's Websites," TechCrunch.com, June2, 2016; Megan Rose Dickey, "Instacart Cutting Wages for ShoppersStarting March 14," TechCrunch.com, March 11, 2016; Brad Stone,"Instacart Rings Up $220 Million More for its Grocery Delivery Ser-vice," Bloomberg Business, January 13, 2015; Carmel DeAmicis, "Onthe Way to $220M in Funding, Instacart Quietly Changed Its Busi-ness Model,"gigaom.com, January 14, 2015; Farhad Manjoo, “Insta-cart's Bet on Online Grocery Shopping, New York Times, April 29,2015 and "Grocery Deliveries in the Sharing Economy," New YorkTimes, May 21, 2014.margins on grocery delivery, the Instacart model ofCASE STUDY QUESTIONS1. Analyze Instacart using the value chain and com-petitive forces models. What competitive forcesdoes the company have to deal with? What is itsvalue proposition?3. What is the role of information technology inInstacart's business model?4. Is Instacart's model for selling online groceriesviable? Why or why not?2. Explain how Instacart's business model works.How does the company generate revenue?

Question

3.   What is the role of information technology in Instacart’s business model? INTERACTIVE SESSION: ORGANIZATIONSCan Instacart Deliver?The online grocery store Webvan was perhaps themost well-known flop of the dot-com boom. ItsInstacart's app provides a detailed map of eachlocal establishment including store aisle contents.2001 failure led many pundits and investors to con-clude that the online grocery business model wasuntenable.The customer's grocery list, compiled using exten-sive drop-down menus either on the website orin the app, is organized by merchant and aisle toprovide maximum order fulfillment efficiency.Inventory is tracked for all of Instacart-affiliatedmerchants. As a personal shopper skims an aisle,bedecked in a bright green T-shirt flaunting the Insta-cart logo, items can be selected for different ordersplaced at different times. The software can also plandelivery routes and predict future customer orders.iPhone users can connect to the Instacart appHowever, Webvan's downfall was due mainly topursuing a first-mover advantage strategy. It paidmore than $1 billion to build huge distribution ware-houses, bought fleets of delivery trucks, and investedheavily in marketing. Then it offered free deliverieson any size order, at virtually any hour, at prices thattrumped its brick-and-mortar competitors. This wasnot a formula for generating profits.In recent years other companies are testing thewaters again for online grocery sales. FreshDirectin New York City has succeeded by combining freshlocal produce, organic and kosher items, and custom-prepared meals with standard grocery store fare.Established brick-and-mortar firms including Albert-son's, Safeway and Peapod.com (the online entity forboth Stop & Shop and Giant) took over as pure playonline firms perished.The newest entrant, Instacart bypasses theexpenses of warehousing and transportation alto-gether by using a legion of independent contractorsand local food retailers. These personal shoppersreceive orders via the Instacart smartphone app,from Yummly, the largest recipe search engine in theworld, and have the ingredients delivered in time fordinner. Visitors to Food Network websites, with morethan half a million recipes, can browse recipes onlineand then click a button to add ingredients they needto their Instacart shopping cart. The Instacart app isintegrated with Google Now cards so that Androidusers can place orders for either delivery or pickupusing a token generated within the app.Instacart's core competencies thus dictate its tar-get market: the price-insensitive, convenience shop-per. At first, item prices were marked up (20 percentin one sampling) and a $3.99 delivery fee charged.An Amazon Prime-like service called InstacartExpress requires a certain volume of business and a$99 yearly fee in exchange for free delivery. One ofWebvan's big mistakes was pursuing a mass-marketstrategy. It was never going to be able to turn a profitby providing quality and selection at rock-bottomprices-with free delivery to boot. Instacart is insteadcatering to shoppers who are willing to pay a pre-mium to have both quality and selection.By mid-2015 Instacart had 200 employees and4,000 personal shoppers in New York, Los Angeles,San Francisco, San Jose, Washington, DC, Chicago,Boston, Austin,der, Denver, Houston, and Portland, Oregon. It con-tinues to grow. Grocery purveyors, from large chainssuch as Costco, BJ's Wholesale Club, Safeway, Kroger,Super Fresh, Trader Joe's, and Whole Foods to localspecialty shops such as Erewhon Organic Grocer& Café in LA, Marczyk Fine Foods in Denver, andGreen Zebra in Portland are now welcoming Insta-fill them from grocery store aisles, and use theirown vehicles to deliver them to customers' doors.Like fellow &#34;sharing economy&#34; firm Uber, Instacartminimizes labor costs by requiring its personalshoppers to pay for their own auto and health insur-ance and Social Security contributions. Purport-edly paid between $15 and $20 an hour, dependingon how quickly they can fill and deliver an order,most Instacart shoppers work part-time on flexibleschedules.Instacart co-founder and CEO Apoorva Mehtabelieves Instacart's competitive advantage is twfold. First, customers are not limited to a singlevendor and can combine items from multiple storeson one order, so product selection is truly custom-ized. (Instacart uses special software that can trackinventory across multiple supermarkets.) And sincepersonal shoppers are on call around the clock, cus-tomers have to neither order many hours in advanceof delivery nor wait for a delivery window. In fact,customers can have their grocery list filled and deliv-ttle, Philadelphia, Atlanta, Boul-cart as a way to expand their customer bases aheadof the full national rollout of Amazon subsidiaryered in less than an hour!Amazon Fresh. 432 Part Three Key System Applications for the Digital AgeWhile many analysts predict that matching thebargain basement prices of Amazon and Walmartis unavoidable, Instacart is instead modifying itsbusiness model. Partnerships with Petco and Tom-linson's Pet Supplies in Austin, Texas, hint of addi-tional product areas on the horizon, while Mehtaspeculates that expansion into general logistics islayering labor on top of the existing grocery infra-structure is still unproven. According to a Wall StreetJournal analysis, an order of 15 common items suchas frozen peas, milk, cereal, and fresh fruit costingabout $68 from a San Francisco Safeway store wouldproduce a profit of only $1.50 for Instacart. If theorder were smaller by one 28- ounce jar of peanutbutter, Instacart would break even, and a smallerorder could push it into the red. Without price con-conceivable.Many of Instacart's grocery store partners nowset their own prices, paying Instacart a cut of eachcessions from participating merchants, can Insta-cart attract enough customers? And maintain a payscale that ensures the topnotch customer servicedemanded by its target market? And still make aprofit? And can retailers' sales gains from Instacartbe sustained? Instacart may be a great idea, but it's aorder. This has freed Instacart of the burden of mark-ups, protected it from the vagaries of variable foodprices, and provided a more stable profit structure.Retailers have been willing to pay Instacart in thehope of gaining more business because Instacartenables a single store to serve people across a largergeographic area. Affiliated retailers are reportinggains, although the numbers are small. Nilam Ganen-thiran, head of Business Development and Strategy,maintains that different types of agreements havebeen reached, declining to specify whether partnersare outsourcing their e-commerce to Instacart for amonthly fee or are charged per item purchased, perorder placed, or per customer serviced.With national chains achieving just 1 to 2 percentvery big bet.Sources: Sarah Perez, &#34;Instacart Becomes the Default Ingredients-Buying App for Food Network's Websites,&#34; TechCrunch.com, June2, 2016; Megan Rose Dickey, &#34;Instacart Cutting Wages for ShoppersStarting March 14,&#34; TechCrunch.com, March 11, 2016; Brad Stone,&#34;Instacart Rings Up $220 Million More for its Grocery Delivery Ser-vice,&#34; Bloomberg Business, January 13, 2015; Carmel DeAmicis, &#34;Onthe Way to $220M in Funding, Instacart Quietly Changed Its Busi-ness Model,&#34;gigaom.com, January 14, 2015; Farhad Manjoo, “Insta-cart's Bet on Online Grocery Shopping, New York Times, April 29,2015 and &#34;Grocery Deliveries in the Sharing Economy,&#34; New YorkTimes, May 21, 2014.margins on grocery delivery, the Instacart model ofCASE STUDY QUESTIONS1. Analyze Instacart using the value chain and com-petitive forces models. What competitive forcesdoes the company have to deal with? What is itsvalue proposition?3. What is the role of information technology inInstacart's business model?4. Is Instacart's model for selling online groceriesviable? Why or why not?2. Explain how Instacart's business model works.How does the company generate revenue?

Accepted Answer

Company I, is a renowned grocery pickup and delivery store. It offers its services with the help of…