BAIN CASE STUDY CHALLENGE

Windward School & Instacart

INSTACART'S BACKGROUND

Recent Ownership History: Comcast Ventures, Dragoneer

Investment Group, Thrive Capital, Valiant Capital, along

with existing investors Andreessen Horowitz, Khosla Ventures and Sequoia Capital.

Founded in 2012, by Apoorva Mehta

Operates in a highly Competitive food delivery service

industry; taking a strategic approach by

being the “fastest most convenient delivery service around.”

InstacartManagement Team: CEO -Apoorva Mehta;

former Supply Engineer at Amazon

fresh.

ASSUMPTIONS

• All calculated figures are under the assumption of a $7.99 1hr delivery fee and a $5.99 delivery fee for 2hr deliveries as well as planned orders. All calculations exclude “Instacart Express Members.”

• 100 full time employees and 7,000 independent contractors “shoppers” across 20 regions.

• Given the provided Instacart presentation, the average pre-tax tip accounts for 10% or $8.00 per order. Thus, we can conclude that the average Instacart order equates to $80.

• Instacart makes $16.00 for each $80.00 order.

• Following a 220 million dollars funding round, led by Kleiner Perkins Caufield & Byers, Instacart was valued at 2.1 billion dollars. (2014)

• Instacart’s hypothetical annualized revenue from current sales has grown 6 times since January 2015, where media had reportedly put it just north of 100 million dollars.

• In 2015, US consumers averaged1.5 trips to the supermarket each week.

MOTIVATIONS OF INSTACART & ITS SHOPPERS

Instacart

SatisfyInvestors/partners

Volume Efficiency

InstacartShoppers

FlexibilityCompensation

Structure

DRIVER COMPLAINTS FROM COMPETITORS

Uber/Uber eats

Lack of consistency for workAssociated Driving costs

Post-mates

Low pay Excessive over time requirements Late for orders that are not in their control App crashes Buggy UI

Fresh-Direct

Minimum wage Short breaks

Eat24 Awful pay Support staff is inexperienced Bad work environment

COMPETITION PAY STRUCTURES

THEORETICAL MODELS

Distance/Speed Model

Surge Price Model

Bonus ModelAdjusted Base Pay Structure

S A M P L E S T U DY

Additional Survey Demographic Info: Surveyed more than 60 adult Windward Parents. About 63% of surveyed adults were between the ages of 45-54. About 60% of the surveyed adults had either a Bachelors or Masters degree.

DISTANCE/SPEED MODEL

DISTANCE/SPEED MODEL CONT.

Analysis: The majority of Windward surveyed adults are in the top 5% of the tax bracket. In spite of their

disposable income, the surveyed parents are undecided whether they’re “very likely” to choose the fastest premium delivery options given the 7.99 fee. The fees, coupled with more than 70% of surveyed adults, believe it’s “very Important” that all items, regardless of brand, size, quantity, etc. come exactly as requested. Proves customers prefer “exactness” of delivery over faster delivery times.

SURGE PRICE MODEL

Goal:Incentivize Shoppers to consistentlywork during

non-peak hours.

Surge Model (Temporary Financial Incentive)

Bonus Model (Consistent Financial Incentive)

VOLUME BASED COMPENSATION

Base Compensatio

n

Volume based compensation is made up from three factors: base compensation, tip, and bonus.

Tip Bonus

OPPORTUNITIES AND RISKS: VOLUME MODEL

Driver Flexibility in Hours• Volume

model supports rapid growth of Instacart

•Gas•Flexibility to switch between apps: Uber/Uber Eats, Lyft, Eat24, etc.Opportunities

Risks

APPENDIX: BASE COMPENSATION- PRO FORMA

INSTACART LEADERBOARD

Goal: Increase performance of drivers on a daily basis.

INSTACART “CONSECUTIVE STREAK”

Goal: Encourage

shoppers to be driving

with Instacart on a

daily basis.

APPENDIX: BONUS COMPENSATION- PRO FORMA

APPENDIX: PROFIT PROJECTION

BAIN CASE STUDY CHALLENGE

Windward School & Instacart