Will Instacart’s rising price turn into more income for drivers?
The onset of COVID-19 saw many Americans take a step back from grocery stores, instead opting to use delivery services like Instacart. With services like this one, users can order their groceries from home, someone does the shopping for you, and it’s delivered right to your front door at a time of your choosing for a small fee. It is a completely contactless service, which is a win-win in these COVID-19 times.
Instacart’s business has greatly benefited from the pandemic. According to a representative from Instacart, the company had slightly less than 200,000 gig shoppers a year ago. Now, the company has approximately 500,000 gig shoppers in operation. The company has added 150 new retailers to their shopper selections, bringing their offerings to a total of 600 retailers with a total of 45,000 store locations.
On Friday, February 19 Instacart made the decision to raise its service fee from five percent to eight percent in California. The move was motivated by Proposition 22, which serves to provide gig workers with certain benefits they did not have before. Most of the major gig companies, including Instacart worked hard to see the proposition pass.
Here is everything we know about the service price hike for consumers, and the impact it has on gig workers.
Proposition 22
California Proposition 22, also known as the App-Based Drivers as Contractors and Labor Policies Initiative, essentially ensures drivers are classified as independent contractors under California state law rather than classify them as company employees.
However, despite being classified as independent contractors, Proposition 22 offers limited benefits to gig workers that they did not have before. The proposition guarantees drivers 120 percent of the minimum wage for “engaged time”. This refers to time spent actively engaged in their gig worker activity (shopping, driving, etc) rather than time spent logged into the actual app.
The proposition also affords gig workers thirty cents per mile while on a trip en route for expenses. Prop 22 also provides a health care “contribution equal to 100 percent of the average employer payment” under the Affordable Care Act. To receive this, gig workers must work at least twenty-five hours a week. Fifty percent would be provided to gig workers who spend fifteen hours in “engaged time” a week.
The proposition passed on November 3, 2020. Instacart, Uber, Lyft, Doordash, and Postmates spent more than $200 million to get this proposition enacted. In the wake of the success, all these companies are now hiking their prices for consumers to compensate for their new expenses.
Instacart prices explained
It’s worth pointing out that users who have already subscribed to the Instacart Express Plan, which is offered at $9.99 a month, or $99.00 a year, will not be impacted by the new price hike. Express customers get free delivery on all orders over $35.00 and only pay a 1.9% service fee.
While an increase from a five percent service charge to eight might not sound like a lot, some users have noticed that Instacart’s prices are already higher in some cases than in actual grocery stores. Using this service also comes with a delivery fee, a service fee, and a tip for the driver delivering your groceries.
The reality is, this price markup is only in some cases. Instacart partners with several of their store offerings, while others simply remain shopping options for consumers in their app. The company charges a higher markup on products when consumers are choosing stores that are not partnered with Instacart. Regular in-store prices remain intact for Instacart preferred store options.
Instcart’s co-founder released a statement explaining that the company slaps a fifteen percent markup fee on those stores impacted by the markup. Users engaging in small grocery orders are not as impacted by this as consumers choosing to use the app for orders over $100. According to Instacart’s pricing information page, it’s the retailers themselves that set the prices of their products in the Instacart app.
Now that these new charges are being pushed back onto the consumer as well, will you continue to use this app? Or are you going to put your shoes back on and head back to the stores yourself? Drop a comment and let us know!
