What: Instacart is going public and needs to maximize its attractivity.

Why it is important: Grocers are part of the equation, but the partnership with Instacart comes at their expense, which raises questions about the IPO.

Instacart, targeting a valuation under $10 billion in its upcoming IPO, relies on supermarket partnerships for success. The company claims most grocers lack the infrastructure for effective e-commerce, citing U.S. grocers' relatively low investment in tech. Instacart's strengths lie in its technological prowess and the advertising revenue generated from its extensive user data. However, while supermarkets gain online sales through Instacart, they face fees and potential lost advertising revenues from brands that would typically pay for in-store placements. As online sales grow, brands might shift ad budgets from physical stores to online platforms. If supermarkets find the costs outweigh the benefits, they could leave Instacart or renegotiate for better terms. Larger retailers, like Kroger, have developed their own retail media arms and see digital advertising, particularly retail media advertising, as a significant revenue stream. As Instacart's presence grows, ensuring a balanced relationship with supermarkets becomes critical.

Instacart needs grocers’ support to make its IPO successful