Do you order groceries through an online service like Instacart, Amazon Fresh, Peapod, FreshDirect, or Postmates? Hundreds of thousands of Americans do, and it’s an increasingly popular option despite added delivery fees and (in some cases) higher item prices than you see in the store.
These services are expensive, but very convenient. They tie into the “on-demand economy” that we hear about so much, with pickers grabbing your groceries at the store and couriers bringing them to your door. Instacart, Freshdirect, and their competitors might not seem like the best choice for personal finances and saving your money.
I’ll offer a heretical opinion… in many cases, using a grocery delivery service is the savvy choice for money management and a happy financial life.
Those Damn Economics Again
Online grocery delivery services that let you order groceries through an app or website all sell groceries at higher prices than you would pay in the supermarket.
But there’s a thing called opportunity cost. And this is where online grocery delivery services come in handy.
Basically, opportunity cost means that there’s a cost to a missed opportunity. In this case, shopping for groceries means you’re missing another opportunity–whether it’s spending time working on another project (and spending money) or doing something important like spending time with family or friends.
Purchasing groceries through Amazon Fresh or Peapod or one of their other competitors frees up time to do other things. For many of us (and especially freelancers and the self-employed!), that means an extra hour or two to work.
How Instacart And Their Competitors Make Money
Where I live, in Los Angeles, Instacart offers delivery from several local supermarkets. These include a budget-minded chain called Smart & Final and the high-end Whole Foods chain. You purchase your groceries through the app or website, choose a delivery time, and groceries are then delivered to your door.
To be blunt: In dollars and cents, it’s more expensive than going to the supermarket. As I write this in May 2016, I’m charged a delivery fee that varies according to how many groceries I order and the time of day I receive the delivery.
Instacart has an agreement with some chains like Smart & Final (love it) to offer items at the same price as you’d find in the supermarket; they add a markup to items from some other chains such as Costco.
Other competitors like Amazon Fresh, Peapod, and FreshDirect have roughly similar models. The exact way those services work depends on what part of the United States you live in and the company’s business model, but they don’t vary too widely.
I also pay a 20% tip to Instacart’s team, who are hard-working people who hustle to get me their delivery.
Is Instacart Worth It?
The thing I wasn’t expecting is that using Instacart, FreshDirect and other services makes solid money sense under a lot of circumstances.
I live in Los Angeles, one of America’s biggest cities, and the average weekly grocery run for me takes approximately two hours. This includes writing a shopping list, driving back and forth to my local supermarket, picking out items, waiting in line, and schlepping them into my house. Instacart does this for me for an average of $30-$40 per trip.
Two hours is a lot of time out of the week. Because I’m self-employed, those are two hours that I could use towards my business.
In exchange for those $30-$40, I have two more hours a week to work. If I’m spending $15 to free up an hour that I can use to work on paying projects for my customers, that’s awesome.
Alternately, I can use those two hours to spend time with my family or friends. Because work is going well for me as I write this, I’m spending as many as 60 hours a week working. Freeing up 2 hours, alternately, to have experiences with loved ones sounds great.
In opportunity cost, grocery delivery services put up a strong argument.
However, one size doesn’t fit all. If you’re on a strict budget, if money is tight, or if you need to increase cash flow above all things, ordering groceries online or through an app makes bad financial sense.
But if you are in a position to have extra cash flow and would rather devote your time to making money or having positive experiences, using Instacart is a very smart idea.