> Instead of the tipping option appearing on the checkout page as it originally had, a default 10 percent “service fee” sat in its place.
If I could take a guess, I'd say this is more related to the user experience. I hate tipping. I'd rather just attach a 10-20% fee instead of needlessly evaluating someone else's performance with every delivery.
Or better yet, I'd rather just use a company that adequately pays its own employees instead of attempting to offload a portion of that cost on its customers.
I feel like even if they paid their delivery people a reasonable wage they'd still expect tips. Ive had movers that made over 50/hour not including the cost of materials/truck/etc ask for a tip.
I was all for Uber being tip free until drivers started driving for Lyft which does tips in-app, and now all the drivers expect it.
I've always felt this way with Pizza. Most places charge a delivery fee. That itself should be the tip. If it costs more to deliver a pizza then work it into the price.
I believe Amazon did this with Amazon Fresh. The tip option in the app went away, and when I asked the delivery person, he said their pay had been increased and they were good. No tip required. He said it with a smile on his face, but who knows if he was really dying inside.
The worst part for me - places here in NZ are trying to introduce it. I've solved it by not going back, that that doesn't work if the practice spreads.
Curious, I live in Auckland and haven't seen mention of tips except in 'hipster' cafes and I rarely see gold coins or notes. I wonder if it's less about baiting Americans and more about emulating Americans.
I live in Lithuania and random places are trying to introduce it, such as news agent type of convenience store. "A pack of cigarettes and here's your tip", em, no.
>The solution is to pay them better and forbid them from taking tips. Make it clear to customers that it's not even allowed, let alone expected.
That's basically what Uber did (except for "you have to refuse once"). They tried to make it a tip-not-required zone and make everyone understand this going in. And yet still, you hear the refrain,
"What, I'm basically a cabbie. Don't you tip cabbies? Shouldn't I be getting tips?"[2] [3]
Even the media coverage comes with that implicit assumption. To paraphrase: "under the ruling, Uber drivers can solicit tips -- you know, like cabbies, duh".[1]
It's like people think that tipping cabbies is some fundamental invariant of reality rather than a default custom that can be overridden by explicit agreement. [2]
My uncle still thinks I'm a bad person because I didn't visibly tip the Lyft driver. "No, it's through the app" 'sure, sure...'.
I imagine the "contractor" status of Uber drivers gets in the way. If they'd bite the bullet and hire drivers as proper employees, a prohibition on taking tips might stick.
There's a restaurant in my neighborhood that does this (no tips, built into the price) and I really appreciate it. It's so much "easier" that I'm more inclined to drop in.
Why are we taught by people to tip some personell and not to tip others?
Because the first group has a very low income. That's why.
Because corporations cannot be trusted to treat their people nicely. That's why.
Because the first group usually works hard and shows effort, while the others don't. That's why.
I don't mind to tip when someone has done an excellent service, but i always try to make sure my tip goes to that person directly and not some weird strange thing like a jar or a fund the corporation came up with.
Don't neglect that you get a little bit of affirmation from it. I am the powerful money holder here, you are the person relying on charity from me to make the rent. Maybe I'll even make you dance a little for it.
Really helps cement the power relationship and emphasise the class differences.
That's the incentive to work hard so that you are not part of that group. That group doesn't have much to offer, and often didn't work hard to offer anything society valued. I knew, from an early age, that the consequence of not trying at school was ending up in a dead-end job.
> Because the first group usually works hard and shows effort, while the others don't
Citation needed - their work is hard because they have little leverage. Some have the deck stacked against them, fair enough, but that first group exists in places with less opportunity inequality, and far more welfare than in the US.
Many people spend most of their lives on their careers, trying to improve their worth to society, and offer things deemed valuable. Few go into accounting for the love of it, but because society desires accountants.
EDIT: there are exceptions. Temporary jobs held by students, people from impoverished backgrounds, or who were never motivated to succeed, low-skilled immigrants that fall into these last two categories. These are exceptional, sympathetic situations (except students, their condition is temporary), but society should seek to reduce these groups, rather than normalise them by developing some kind of coping mechanism. Welfare is a good safety net for all citizens, but low-paid work is too. The problem is groups who are stuck in ow-paid work with little opportunity to escape; in those cases it's not "greedy" corporations to do anything - it's exclusively the governments role to participate in any social engineering efforts.
>That's the incentive to work hard so that you are not part of that group.
It's an incentive, but not the solution. It's way way more complex than a "just work hard and everything will be ok" stigma.
>Some have the deck stacked against them, fair enough,
Over 80% of the world population lives in poverty. I don't know what kind of decks are dealt, but casinos would be purchasing these decks by the millions.
> and not some weird strange thing like a jar or a fund the corporation came up with.
BTW, if a company puts out a tip jar, by law that tip jar must actually go to the employees. The company cannot come along and take the contents of the jar for itself (and if they try, employees can sue them).
Sometimes the company just takes it for itself. Sometimes the restaurant is contracting out with a third-party company for deliveries and the delivery fee goes to the third-party company (but, again, not to the driver themselves).
With pizza, your solution can't work. You have to pay the driver base pay, and they get tips on top. So the base pay has to come from the menu price + delivery fee, and if you get rid of the delivery fee, it has to come from the menu price. But if you raise that, you're distorting demand by making in-restaurant purchases more expensive.
> Or better yet, I'd rather just use a company that adequately pays its own employees instead of attempting to offload a portion of that cost on its customers.
I also really dislike tipping, but in reality it's not the cost they are offloading onto customers (all the cost is paid by the customers, since costs are paid out of revenues, which come from customers), but rather they are offloading compensation decisions onto customers - since the difference between a tip and having the cost of service built into the price is that you can decide the amount of the tip.
There are industries where the employees are paid less than minimum wage as anticipated tips are factored into their overall compensation. If the tips do not meet the minimum wage threshold, the business is responsible for the difference. In this case, the costs (wages) are being offloaded by tips. Not to mention the industries that pay low wages as the tips subsidize a living wage.
That's because you're doing it wrong. Don't evaluate their performance. Consider the tip a "variable buyer price-sensitivity upcharge". You're comfortable paying 20%. Me too. So: just always pay 20%, without thinking about it.
That's in fact the actual economic purpose of the tip anyways. People think it's to encourage good service, but in fact, in jobs where you can make significant money tipping, there's already competition for slots. And, either way, insurance of good service is the job of the business owner. Any way you slice it, a tip is simply a cost sharing mechanism.
Amazon Prime Now and Grubhub both ask you to "tip" their drivers before they even do the run. You can't possibly be asked to evaluate performance in those cases. I'm fine with that, too! I'm not sensitive to the amount of money we're talking about, but across all their jobs, those tips probably make a pretty significant difference.
What's not OK is transforming a "tip" to a "service charge" that is then split with other elements of the business.
You're welcome to propose other objections to tipping. I'm only addressing the one about how tipping obligates the consumer to make snap evaluations of the quality of service they've received. No, just tip 15-20% invariably. That's what you're expected to do.
No, in fact, market segmentation by price sensitivity is a pretty basic mechanism of applied capitalism, taught to basically everyone who has ever taken a marketing class in business school.
No, it very much is. See, for instance, all airline pricing, which is almost shrink-wrapped around the meta-itinerary of a typical business trip. That's not "socialism". It's ruthless capitalism.
I don't understand this response at all. You suggested that making people who are less price sensitive pay more isn't a goal of market segmentation. In fact, it's literally the textbook example of market segmentation.
> You suggested that making people who are less price sensitive pay more isn't a goal of market segmentation
No I didn't. I said the specific thing being discussed was not market-segmentation. Venn-diagram.
> it's literally the textbook example of market segmentation
If you aren't just trying to be patronising, then please point me to a textbook that literally uses tipping as an example of market-segmentation.
Note, tipping higher amounts in different, more up-market places doesn't count, because like I already said:
> Just go to cheaper places if you are 'price-sensitive'
OP was suggesting people choose to tip higher amounts based having a higher income; regardless of venue, and regardless of social-signalling or marketing encouraging you to do so, simply because you can, and because it's a moral and socially responsible thing to do.
I recently stopped using Instacart, there wasn't a single reason, but the sum of:
1. I'm paying 15-20% more for groceries just on line-item price. The prices Instacart shows vs what you see in store are sometimes a bit less, but more often not, 20% or more more.
2. Inconsistency between what's in Instacart's catalog and what's in the store. Making special requests isn't easy and they usually just go unfulfilled as it's up to the discretion of the shopper if they want to spend the extra time to find something special.
3. Safeway.com's online store got a little bit better -- and next day delivery is usually okay with me.
4. This service fee issue to top it off -- I just don't feel like paying 20% more for stuff, 10% for delivery, 10% for a service fee, then I'm compelled to add a tip? Poor UX IMHO if the solution is to manually change the service fee to 0% and tip 10%.
5. I had an incident last year that was sorta hilarious -- I had a shopper tell me Safeway was out of ice cream. Like, completely out of ice cream -- I went to their online store at the location the shopper was supposed to be and they list 400 different ice cream products. There is no way they were out of ice cream unless they had lost power for a day or something. It was just completely nonsensical and made me think they were maybe trying to fulfill my order out of their own warehouse because they had 90% of the stuff there -- and 90% in crunch time is maybe okay? That was maybe the first nail in the coffin.
> I'm paying 15-20% more for groceries just on line-item price.
In San Francisco at least, almost every store is listed as "Prices are same as in-store." Target and Whole Foods have "Everyday store prices," which means Instacart doesn't match sale prices. Costco and Cash&Carry are the only stores where Instacart prices are not matched.
I'd expect they'd get called out right away if they weren't honoring this.
But if you agree to a service fee and tip, you'll still end up paying 10%-20% more.
Yeah, they say that, but I challenge you to do the experiment I did -- put some stuff in your cart you use every week on instacart and safeway.com and compare the total.
I'm an avid Instacart user, and I refuse to pay the service fee, nor the tip.
Companies need to pay the drivers fair wages, and charge the customers enough to do so. Don't push that responsibility to the customer.
Also, the service fee is perfect example of a Dark Pattern[1].
The actual service fee option (which is pre-selected at 10%) is hidden below the fold in the iPad app (and iOS?) checkout widgets. You have to scroll to see it, but it's aligned just perfectly, and with a hidden scrollbar, to hide the additional options. If you're not looking closely at the final cart total you'll never notice the extra 10% charge.
Yeah, I'd prefer to not pay the service fee, or the tip, but realistically by not doing so you're screwing the delivery folks, who get deliberately underpaid by companies like Instacart.
If there was an organized effort, and it was actually sending a message, then great, let's all do it! But really all you're doing is stiffing some poor underpaid delivery person.
Where I live (Seattle) we've passed minimum wage law increases ($15, on a 7yr schedule) that has already resulted in many restaurants adding an automatic & non-optional 20% gratuity to checks, where the fine print says it will be shared between front & back staff.
So yes, there's an organized effort and it's making a (slow) difference in shifting the culture of companies under-paying their employees and expecting customers to make up the difference.
I see, thanks. In that case the customer sees the gratuity on the bill and then presumably doesn't feel the need to tip? So if I understand correctly this is kind of a way to run a no-tipping restaurant located in a place where tipping is part of the culture.
That isn't how it works. The folks talking these "gig economy" jobs do it because they don't see other options being viable. They aren't casual upper-middle-class folks with reasonable incomes looking to fill their idle hours with side-work doing grocery shopping.
The presence or absence of tips may influence some, but not all, and I'd speculate not the majority.
I'm glad I'm not the only one who doesn't tip and tries to avoid the service fee. The problem is that often most of the desirable delivery times disappear unless you've opted to pay the fee.
I agree these are dark patterns. Better to just keep the transaction obvious and clean and leave out tip shaming of any kind.
Of course you have the right not to tip, it's optional after all, but many people do choose to give tips, and then the question is whether part of the tip is being skimmed off by Instacart.
Restaurants have paid large fines under the Fair Labor Standards Act for tip skimming; I have no idea if FLSA applies here, but if a consumer chooses to tip, s/he has a reasonable expectation that the money will be going to the person providing the service and not to the person's employer.
Do you also not tip at restaurants? Cultural norms are what they are. Just because you don't like them isn't a good reason to screw over working people.
I usually tip % but I don't go to eat at places with such high bills.
I can understand the logic though of a fixed tip. There are all kinds of situations where a server spends the same amount of time/effort for each table and get different tips based on what the person ate?
Why does that make sense that I would tip more because I got a steak instead of a burger and the server had to just bring it to me in either case?
That is a logical argument and I guess I understand why one would choose that line of thinking.
I guess I tend to eat at the same 3 restaurants around my house. They all know me and are also my neighbors. The social pressure to not be "that guy" has pushed me to tip generously I guess.
Cultural norms in the US are different from those where you grew up. Service employees earn a much greater percentage of their income from tips here than they do there.
You are, for all intents and purposes, stealing from people poorer than you.
The default assumption is that customers will tip at least a reasonable amount for all service. If you aren't going to do that you need to announce your intentions in advance. Whenever you go to a restaurant just let the hostess know your plans. That way you won't be deceiving people who are serving you.
You have a unique perspective on this situation. I don't have to do shit. I want food, I get food. Not my fault you create a barrier between me and food.
Regardless, I don't go to restaurants because of this.
Also, if I have to state my intentions, then a server should have to say, "we ask for money because I chose to work for a company that doesn't pay well. Sometimes we deserve it. Most of the time we don't"
There is an important difference between the servers intentions and your intentions. The servers intentions are well inline with cultural norms and hence the default assumption in a restaurant. There's no need to bother restating them. This is what cultural norms are.
Your intentions, on the other hand, are very unusual and not standard. That's why it's important for you to tell people what is going on so that they are not caught by surprise.
But surely it is not common to tip delivery drivers in the US? (Correct me if I am wrong.) Tipping is normally done for 'personal service' type jobs, e.g. where you have someone wait for you during a meal.
They have tens of thousands of customers, yet are worth multiple billions of dollars (valued at $2bn in 2015.)
That's just incredible.
Let's say they have 100k customers who each use the service every week. That's 5.2m orders per year.
Let's say $100 per order, to be generous. At a 10% service fee, that's $50m for a two-year-old 40x revenue multiple. Before paying their contracted workforce.
This does not make sense.
EDIT
What I'm really getting at is that these are optimistic numbers, in the wealthiest country in the world, that just elected a populist president (partially) due to economic insecurity.
What is the market for +10% on groceries and basic necessities?
EDIT2
It may be tens of thousands of contractors, not customers (thanks @trevyn!) This is confusing, since I'm not sure what verb to use for the end user on Instacart. ("I am _______ on Instacart" (consuming, shopping, grocing?))
Regardless, my number could be an order of magnitude off. I stand by the conclusion.
>What is the market for +10% on groceries and basic necessities?
People who live in the suburbs without cars.
Cities are successfully discouraging car ownership by making parking scarce near downtown offices and even the suburban transit stations that lead to downtown offices. At the same time, cities aren't permitting the construction of dense, walkable neighborhoods, at least not fast enough to make them affordable. So you have a large and growing segment of the population with:
- A built environment where distances are scaled for driving.
- A hard time justifying car ownership, since it isn't useful for commuting.
- Neighborhoods which are now becoming crowded enough that parking is a hassle, but haven't become dense enough to have useful businesses within a convenient walk. (When they reach this point, they may cease to be affordable).
"Outsourced driving" is immensely popular in such environments. Instead of Target and Walmart and BestBuy, you use Amazon Prime for most purchases. Instead of driving the SUV to the supermarket every week, you use Amazon Fresh, or (in the case of Instacart) pay someone else to do it or you. Instead of going out to eat or picking up takeout, you order from UberEats/Grubhub/whatever. Each use case for personal car ownership can potentially be replaced with a fleet of service workers from further outside the city, and each permanent parking space can be replaced with one of them double-parking for 30 seconds every few hours.
How do the economics work?
- Labor + car operating costs for some contractors < value of the land the people they serve would otherwise park on.
- Delivery fees and markup on everything you buy < parking, gas, insurance, maintenance, and depreciation (by a couple hundred bucks maybe) < rent premium to live in similar apartment in a walkable area (by $1000+/mo) < psychological cost of the tradeoffs you'd have to make, like roommates, to live in high density on a middle-class income.
Whether that's $2bn, I don't know. But I think selling car-based services to the carfree will be a winning proposition as long as NIMBYs and anti-car activists remain simultaneously empowered.
I think if cities make car transportation a hassle, what will happen is dense locales will see more Aldis, Trader Joes Lidls, etc. (small footprint, high turnover goods at affordable prices) and that will enable more people to walk to their grocer, rather than use shopping and delivery services. These services are basically luxuries. Middle class people with families aren't the ones using these services. Upper class and upper middle, sure. DINKs, sure.
They have to stop making it illegal to build dense locales, though.
The grandparent makes a great point. Anecdata, but it mirrors perfectly my experience living in a moderate-density mixed use neighborhood (South Park, San Diego). My wife and I managed without a car for several months largely through techniques they describe.
> These services are basically luxuries. Middle class people with families aren't the ones using these services.
I use these services occasionally (2-3x/mo) for a family of five (DI3K). When you're outnumbered and have to play zone-defense against your kids, taking a trip to the grocery store at rush hour is neither fun nor productive (kids are usually hungry by then and late snacking = poor appetite for dinner).
I'd love to see the US cityscape turn into something more akin to Europe's (what you described), but I think you have to instead promote mass-transit (to be better) instead of making car transportation a hassle.
The flip-side though is that car and petrol industry do lobby to prevent electrified mass transit from being viable.
I've ordered lots of Instacart in NYC and Chicago. I used to have it drop off a few things at the office for lunch, and a few to go in the fridge for lunches later in the week. Consider that Instacart will charge 10% to deliver a baguette and some cheese, which can make lunch for several people. This is a way better deal that Seamless.
Seamless charges what amounts to a 25% markup to deliver food which has often taken so long on the way to its destination and ends up relatively unappetizing.
In NYC the startup Maple has tried to solve the soggy Seamless problem by improving logistics. I haven't tried it, though, so I don't know if they were successful.
I live in the suburbs with multiple cars. That said I would love if a service (ideally for grocery and restaurant delivery) was in my area. I just don't feel like dealing with rush hour; or the time it takes to grocery shop. I have tried taskrabbit and hiring someone off craigslist. I had better luck with craigslist (for grocery shopping), yet then all sorts of legalities some up that I don't feel like dealing with either.
I live in a major east coast US city in a neighborhood that has fantastic rail access during peak commute times to downtown but isn't exactly walkable all times of the year.
These services are great for people who live in urban ring communities. I use uber to get downtown, prime same day delivery replaces trips out of the city and while I haven't gotten lazy enough to use instacart, I'm probably going to give it a try one of these days.
To get to work, you might walk 30 minutes to a train station, wait 10 minutes, and ride a packed train for another 30 minutes. Many (grudgingly) find it acceptable to do this 2x/day for commuting, but aren't keen to do it for a quick grocery run.
It's easier for public transit to do an okay job with "trunk" routes from the suburbs to downtown at commute time, than to do a passable job with connecting neighborhoods to their nearest grocery stores at all the times people might want to go shopping.
There are inner ring suburbs in the US that have good transit access, short bike trips to jobs, and even dense portions with trendy bars and restaurants, but getting groceries for a family there can still kinda suck. Even if the store is only a mile away, liquids are very heavy.
Dense was incorrect, in retrospect. Let's say denser than stereotypical suburbia. Single family homes and duplexes, few garages. Subdivisions from around 1910 or so. Areas, which are acceptable for car-less living for some people, but not great.
I lived in Santa Clara without a car for years. It was not terrible. Where I live now is better, technically not a suburb, but a pretty suburban feel, mostly duplexes.
In the very long run, maybe. I don't see NIMBYs losing steam and I don't see the migration into major metros slowing down either. Maybe when the self-driving car comes?
Two years ago downtown L.A. didn't have a Whole Foods Market, and Instacart-branded packages were commonplace in residential complexes. Low and behold downtown L.A. gets a Whole Foods Market. Someone at Instacart probably has the right numbers, but combined with Costco delivering more of their everyday stuff, anecdotally I see fewer Instacart bags around.
So your argument is that Instacart will profit by delivering long distances to sparse neighborhoods of people who can't afford a car but like marked-up groceries?
Say the average wage is $10/hour. If it takes one hour to go and do that shopping, I break even by paying someone else that $10, if I value my leisure time as equivalent to my wage.
More likely, most Instacart customers earn much more than $10/hour. For someone with a busy work schedule, there might be 2 hours of leisure time available per day during the week. This means that by using Instacart I increase my after-work leisure time by 10-20% per week.
If you consider that grocery stores are more crowded during the weekend, and assume 10 hours per day of leisure time, someone who places one order per week likely increases weekend leisure time by 10%.
Since stores close early on Sunday, having Instacart do the shopping on Monday instead can make a weekend getaway possible that would otherwise have had to end in time for that Sunday shopping trip.
I'm sure some people prefer to wander through the store filling up a cart, searching for difficult-to-find items and waiting behind several people for the checkout clerk to finish bagging all their orders. I do not.
I've also found that Instacart sorts items by price, so it's easy to fill the virtual cart without falling victim to all the end-cap advertising and impulse purchase scams that the stores have going. When I go to a physical store I frequently end up buying things I didn't really intend to, but with Instacart, I only end up with the things I actually wanted.
your value isn't set by your own standards - your value is what someone else will pay you for your time! I.e., the opportunity cost of leisure is the value of leisure.
People on salary earn a fixed amount per month - they don't get paid extra if they work an hour longer in the evening instead of shopping.
People on most hourly jobs have their schedule set by their manager. They can't pick up an extra hour of work unless their manager has some to offer, and not at the time of their own choosing.
People working on their own businesses have an even less direct correlation between extra hour worked and extra income.
Only the very few people who do remote freelance work on an hourly basis have the flexibility to decide between going shopping for an hour or doing billable work for an hour.
For everyone else, the opportunity cost of leisure time is close to 0, but they might be willing to pay for services for other reasons.
> For everyone else, the opportunity cost of leisure time is close to 0, but they might be willing to pay for services for other reasons.
If you define leisure time as the time not spent in paid employment, the opportunity cost of leisure time is actually very high, since each of us has many unpaid tasks that we must do to keep our lives going (such as keeping the living space tidy, stocking the fridge with food, obtaining clothing, etc.)
If we opt for "leisure" and fail to do these things, the cost of rectifying the situation increases.
I think a more accurate way to look at it is that most of us have paid labor (hourly or salaried) and a lot of unpaid labor that we need to do to keep our lives in order. Things like chores, maintenance of our living space, etc.
Leisure time is actually what is left only after we've done all of the paid labor our job demands AND all of this unpaid labor.
For some people, this leaves very little leisure time, but it may leave some extra money that can be allocated to hiring out some of those unpaid tasks in exchange for more time available to do whatever else.
When I go to a physical store I frequently end up buying things I didn't really intend to, but with Instacart, I only end up with the things I actually wanted.
Specifically what products do you end up buying? I have always wanted some insight as to who buys these items near the register and why, as I rarely see anyone pick them up.
They're not necessarily talking about just those items. The entire store is designed so you buy things you weren't intending to buy. You never said/thought: "Ooh look ice cream's on sale..." and failed to resist?
Exactly, I rarely add anything from the checkout lane area, but I'm often enticed to buy unplanned stuff from the ethnic foods aisle, and now and then I'm taken in by the end-cap displays featuring product pairings, especially if I've been inclined to try a similar combination.
Gum and mints, for me. Sometimes batteries if I need them, even though they are cheaper at WalMart or Target.
I don't personally buy things like tabloid magazines, but I'm sure grocery stores have spent lots of time researching this to optimize the placement of these products
Half of my pantry is food I found in the clearance and damaged goods sections. I never go to the store with the intent of buying three big cans of enchilada sauce, but the bent ones are half off and I'll use them eventually...
I was thinking mainly about the entertainment value of using scarce recreational funds to have groceries delivered, but as someone else in the thread pointed out, there are cases where taking a taxi to get groceries (as I did in college) is actually a lot more expensive than Instacart, so I could see it appealing to an even wider range of people for similar reasons.
It makes a lot of sense if you know how perverse financial markets are. The difference between those millions and those billions is the perceived potential of the company. All you need is some investment banker becoming convinced that noone wants to visit physical stores anymore, and suddenly money starts pouring into companies supporting that view of the future, almost regardless of whether they are actually profitable or are creating any real value.
Right, so the question becomes "Why do enough people perceive the potential of Instacart to be billions when a back of the envelope calculation by a guy on Hacker News suggests that's not the case?"
Presumably said investment bankers are capable of doing the same math as Hacker News readers, so why did they still fork the money over when they have many other crazy bets to choose from?
Because a healthy portfolio is distributed not only in the amount of risk (I.e. low vs high risk) but also in economic sectors (I.e. tech/futurism, health, energy, agriculture).
For any given investor, the decision to invest in Instacart or any other "crazy bet" is not made in isolation, but within the context of their existing portfolio, which means that the same investor could rationally decide to either invest or not invest, because that decision depends on the rest of their portfolio.
Back-of-the-envelope calculations on HN are always calculated in isolation.
Well, sure. They usually know they're going to lose money going in, and they can pick all sorts of things to lose their money on. That doesn't explain why the picked this one particular thing to lose money on.
Of course I can't find the source for it now, but during Instacart's last fundraising round they did some really weird stuff. For starters, the investors were only allowed to view their financials in a printed book in a room, and were not allowed to take pictures or write anything down to mull it over and make a decision.
Apart from that, you have to understand that there are a lot of investors, and if you can convince just a few of them that the upside is huge then you've got funding. It's not hard to get traction in a space like delivery where everybody knows it's something people want. But the problem is they get traction by operating at a loss, so when they try to run profitably they inevitably fail as people bawk at the prices.
> But the problem is they get traction by operating at a loss, so when they try to run profitably they inevitably fail as people bawk at the prices.
Well, in a competitive environment like Uber vs Lyft, both companies subsidize the service to the benefit of the customers (and employees) in an attempt to maximize market share.
There is a lot to gain by becoming the market leader in a service like ride sharing or grocery shopping. The market is very big and it's a basic need that most people have.
If anything, I think there is too much expectation by investors that a success in a non-ridesharing market will generate earlier-stage financials that look like Uber's.
With Instacart, the value add is such a no brainer. Imagine if everyone had to go to a shop, park, and walk around picking out mail that had been addressed to them. It would be hugely inefficient. This is why the postal service delivers mail to everyone's home.
The service is considered so essential to the functioning of society that it's viewed as a legitimate state-run monopoly and aggressively subsidized.
Most people spend significantly more time grocery shopping than they do picking up letters and parcels. This is a significant amount of leisure time wasted.
Instacart can also easily swoop in and source certain high-margin goods on its own, or offer price comparison or even auction-style services where merchants bid on the virtual cart and it is fulfilled by the merchant offering the lowest price.
All these are obvious next steps for Instacart, which wisely sees Grocery stores as a relic of the past ready to be replaced by something better.
Grocers are market makers who specialize in understanding demand patterns. This is what makes a grocer successful, but grocers must spend lots of money simply to help alleviate the drudgery of being at the store shopping for one's self. One place near where I live features an elaborate player piano, hot bar, oyster bar, and wine bar!
Most customers don't buy the oysters or a glass of wine, but having those side-acts makes being at the store pushing a cart through aisles feel less like demeaning, robotic drudgery.
Instacart has found a better way. You take out the app, easily search for products, see recently/frequently purchased products, set up a delivery time, and you're done. It all arrives as if by magic.
Maybe someday the shopping will be done by actual robots and the delivery by drone. But even in that world, the market-maker wisdom of local grocers will be just as relevant as it is today, and the high quality shopping experience of the Instacart app will be at least as useful.
You clearly like Instacart, and that's fine, but I strongly disagree with you that they've built something better than the grocery store. For starters, right now they depend on grocery stores existing for their business, otherwise they are exactly like WebVan. Also, grocery shopping is nothing like postal delivery. You don't choose what mail you want, you just take everything that's addressed to you. Obviously this varies from person to person, but some people actually like choosing their ingredients and meals and deciding what they want to eat - the opposite extreme for this is to buy Soylent. Every time I've used Instacart they've made annoying substitutions that cost me money and weren't what I wanted, and the hassle of explaining item for item substitutions with back and forth texts is just frustrating. I've only used it a few times, but I've never had a pleasant experience with Instacart where I got everything I wanted - and this is ignoring the added cost and "convenience" of using their service.
> There is a lot to gain by becoming the market leader in a service like ride sharing or grocery shopping.
There is no evidence of this. In fact, there is a lot of evidence that these companies are losing money.
> All these are obvious next steps for Instacart, which wisely sees Grocery stores as a relic of the past ready to be replaced by something better.
Just because you don't like grocery stores doesn't mean they're going to disappear.
Honestly, you sound like a shill paid by Instacart, but I'm giving you the benefit of the doubt that you just really like their product.
> The market is very big and it's a basic need that most people have.
> With Instacart, the value add is such a no brainer.
> All these are obvious next steps for Instacart, which wisely sees Grocery stores as a relic of the past ready to be replaced by something better.
> Instacart has found a better way.
> It all arrives as if by magic.
I should have cited my evidence, but that seems excessively positive to me. I wasn't trying to be inflammatory, I thought he came across as someone trying too hard to promote the company.
Right, to go from "seems excessively positive to me" (you put that very well) to astroturfing/shillage is an enormous non sequitur that is easy to fall into on the internet. It's corrosive of civil discourse, so we don't allow it on HN.
Actual astroturfing or shillage is of course not allowed either, but that's almost an entirely separate problem from people slinging accusations around over-easily.
Maybe I do particularly dislike grocery shopping. Everywhere I've lived it's been a real drag:
Midwest: In the store with lowest prices you spend half your time shopping and half waiting to get through checkout. Whole Foods is pleasant but overpriced. Mariano's is somewhere in the middle.
NYC: Great small boutique grocery stores, much more expensive than Whole Foods, unbearably crowded at peak times, packed full of customers who are tripping over each other. Employees look ready to burst from the stress at any moment. Lower-end stores stock a very small number of items and are also overpriced. Not all neighborhoods have walking access to a larger, higher quality store like Whole Foods.
SF: Whole Foods is a zoo and is undersized and frequently sold out. Safeway lacks many of the higher quality items but only offers paper bags which are a nightmare to carry if you walked. Safeway delivers but the quality of service is poor, and you are guaranteed to get the produce they had to get rid of that day. Parking to shop at any of these is a unique nightmare.
I don't think I'm alone in not enjoying most of these experiences, or at least preferring to avoid them most of the time.
Instacart may be losing money (who knows) but likely has ample room to increase prices. Uber and Lyft are both burning money and nobody cares.
Regardless of how you calculate the valuation this is bad for business.
People don't like companies being disingenuous, and not realizing that treating employees fairly is actually an important part of building a healthy company (putting aside it's the right thing to do).
If they really needed to do this then don't play games. Just explain that revenue growth can make or break a company at this stage so we need to take these actions. Just being honest about the realities of business and your choices go a long way.
This week Uber and Instacart have damaged their brand due to nothing other than poor leadership.
I agree that companies like Uber and Instacart should be doing a lot more to foster employee loyalty.
Who knows, maybe the future of these semi-infrastructure businesses is actually as co-ops, with workers earning a stake that can be worth more in the long term.
I'd like to see one of these companies create a special class of stock and award one unit for every dollar of business each employee participates in.
I'd guess that none of them want that to happen, and it would only be a new entrant who would ever be so disruptive. I hope you're right though, that could be a truly superior business model. You can't underestimate the power of a radically engaged workforce.
True, I think Uber and Lyft are very unlikely to do it. As a consequence, drivers are extremely disloyal and many have two phones, one running each app and they pick on a ride by ride basis which app to use.
I think it's getting easier and easier for a new entrant to disrupt the market by offering a platform that better incentivizes driver loyalty.
It's not necessary to force drivers to switch, only to put the new app on one of the phones they are already using.
In the UK, which is much less car focused, we've had a successful instacart equivalent, Ocado, for a decade. They're presently turning over about £1 billion per year ($1.25 billion) [1]. Market cap on today's market is £1.5 billion ($1.85 billion)[2].
Now all the major supermarkets home deliver and have for 5+ years. There's been a massive shift in the big chains' store building, they now build small "express" stores in town centres and near offices allowing people to pick up minor things without having to do a full shop. As far as I know, no-one's building large stores at the moment.
And the American market is potentially worth more a lot more than the UK one.
EDIT: Other interesting note, in the UK, the markup for delivery is free or a fairly nominal charge (£5/$6), but only if you pick a slot in a few days. If you want it sooner, or in a prime-time slot, you have to pay more for those delivery slots. The supermarkets are building the costs into the prices.
Also, here gas costs a lot more and it's almost cheaper to pay £5 than it is to drive to the supermarket.
EDIT2: I should add the small stores have a regulatory reason they're small, UK law means only stores under a particular size can be open more than 7 hours on Sundays.
Tesco has actually been doing this forever. There is a mention of them doing online shopping in 1986!
But they actually launched the product proper, in 1996, where they would give you a CD-ROM and it would then sync the diff of products available when it connected. Very ahead of its time - nearly 20 years.
The US grocery market is so far behind on this it's pretty crazy.
What you might not know? Ocado has built the backend for a lot of those major supermarkets offering online shopping. Another revenue stream for them as they are shopping the technology abroad too
That's not really true. They do it for Morrisons but noone else. They haven't been able to sell the technology abroad yet, and the CEO commented in their last annual report how this was a big disappointment.
To be honest though, the technology is superb. Compared to Tesco, Asda or Sainsburys, deliveries are always bang on time and I have only out of dozens of order had one item that was out of stock, which is much better than the competition who always have to substitute random items in.
Literally anything... In San Francisco, if I remember correctly, they delivered within like 20 minutes. It was basically an online convenience store. At the time I was working really strenuous hours at a startup (that sadly followed Kozmo), so getting basic things that you'd normally run to a corner store for. Batteries, junk food, movies... if a bike messenger could carry it, they delivered it.
It was awesome... funnily though, I don't use any of the other delivery services now; can't explain that.
It was the standard "forget profitability, achieve growth and market share." When the crash happened in March/April 2000, the money started running out.
There was some general missteps that were glaring errors both from the outside and inside.
From the outside: no minimum order until a few months before the end. So you could order a pack of gum and a delivery person would bring it out to you. In bike messenger cities, it wasn't awful, but in car cities (Boston), it's brutal.
They also didn't focus on a particular series of products, they wanted to be "amazon in under an hour". Amazon's the only company I know of that's been able to pull off a "we sell everything" model and they didn't start that way (I think Amazon was still mostly books even as late as 2000/2001). That meant massive inventories sitting in warehouses in downtown locations (as opposed to Amazon's distribution centers in the middle of nowhere).
From the inside, setting staffing levels correctly early, expanding too quickly to second tier cities (as opposed to reaching profitability in the larger ones first), and inventory was awful. A couple of inventory stories:
"Why did we just get another 5 boxes of tootsie rolls in? I don't think I've ever seen us sell one." - Me
"We can't ever be out of stock on anything." - Boss
"Well, yeah but could we at least sell ONE box first?"
I was also there when someone fat fingered an inventory order. We were supposed to get 40 copies of The Green Mile for rent and wound up with 400.
I definitely learned a lot there and it was interesting. The model "could" work, but requires such a massive capital outlay and a lot of things to go right that I don't know if someone would be able to pull it off any time soon.
I use Instacart because I don't own a car and convenience. When I'm making $60 an hour overtime during the weekend for a 12-14 hour shift, you bet I'm going to be using Instacart for a nominal 10% markup for groceries from Costco.
It makes sense when you take into consideration investors' expectation for exponential growth. The company's valuation is based on that expectation. If the company stops growing, expect the valuation to pop like a bubble.
I applaud your willingness to edit. I am bearish on Instacart, but acknowledge that you shouldn't value them based on current cash flows.
It's half a bet on massive growth combined with eventual profitability, and half a bet on some massive non-linear outcome. (For example: search -> ads, or books -> hosting)
Imagine if people routinely traveled to a shop and spent 20-30 minutes collecting mail addressed to them, then traveled home. If mail happened regularly enough, this would be a very inefficient arrangement.
Why is grocery shopping any different? Most people buy pretty much the same stuff on a routine basis. Items have varying shelf-life, making parcel shipment practical for only a subset of items (not to mention the hassle of dealing with all the boxes).
Local grocery retailers are essentially market makers for the items they carry. They also provide parking, merchant processing, and a variety of other services (like store brand items, made-fresh refrigerated items, etc.)
Unless you are a chef looking for inspiration or insist on getting the absolute best looking tomato in the whole store, for most people, the time spent trudging through the aisles is mostly wasted.
In other words, the lack of delivery imposes a significant transaction cost upon obtaining groceries. Thanks to Instacart, I buy a lot more groceries than I used to, which means I spend less money at restaurants. Instacart turns grocery stores into a bigger competitor for restaurants.
Unlike Seamless where you pay close to $5 for delivery of a single meal, with Instacart you can order food for a whole week and pay not much more to have it delivered.
Instacart makes keeping the fridge in stock with just the right items significantly easier and removes the immense hassle of manual shopping/transport.
Thank you for a sensible analysis. However, if you're off by an order of magnitude, 4x revenue for a fast-growing startup in a $582B industry seems reasonable [1]. The key data point is number of customers.
What's a reasonable ratio for customers to contractors/shoppers? Perhaps we could estimate the number of customers from the number of contractors/shoppers. (Of course, "tens of thousands" may be a lifetime value, not currently active ones.)
>What is the market for +10% on groceries and basic necessities?
Lots of people are willing to pay for delivery even if they own cars though it's not necessarily a huge market. In general, in the US, people haven't really embraced online grocery shopping unless hopping in a car and driving to the store is inconvenient for some reason.
Personally, I used Peapod for a period when I was on crutches but it wasn't great. (Frequently didn't deliver everything, etc.) I'd probably use Instacart now and then today but it's not available where I live. Friends who live in a city but aren't easy walking distance from a good grocery store and don't own a car use it all the time.
I have a good friend who lives a15 minute drive from a supermarket, but has a draining job. He makes good money. He Instacarts everything since he doesn't have the energy or time to do that one extra chore. He certainly doesn't mind the 10% surcharge. That probably not a sustainable market but there are certainly cases where paying 10% makes sense.
The parent poster can't control who up votes his comment. Thinking about the capital angle doesn't mean someone doesn't think about the workers. Also, what happens to the workers/shoppers once Instacart runs out of funding?
Before Instacart was on the scene, my brother and I thought of about a similar service. My brother in his college days used to be a pizza delivery driver, so he had the "real world" experience. Over the weekend, I quickly created a simple dropwizard java jar that would take in two variables - number of drivers, and number of orders. Everything else was randomized to be close to reality - such as delivery times, routes, etc. To be clear this was a bare bone, CLI application. I would run the service for 5 minutes, and collect the metrics. One thing was clear as mud, the more we scale up, the higher the loss. The thing was that my brother kept telling me that I am paying too less to my drivers, and that no one would work for me at that rate. Also, I will admit that my algorithm was a "simple Fed-ex" style hub-spoke model.
Interesting! You estimated the costs using a small program. Have you ever done this with other ideas? Is there some resources which teaches the best ways to do such estimates?
I've done this before with an excel sheet for a specific business my friend was enthusiastic about. It turned out he would have been alright had he gotten a loan.
Wow, that seems gratuitously dishonest -- especially misleading customers about what's a "tip" vs. a surcharge.
Having an $x delivery fee (paid to the company) and then a tip as a separate item ($ or %) would be fine. Making the "delivery fee" into a "service charge" is itself dishonest; making it adjustable when it doesn't go to the user is pretty bad, too.
I can't tell if this loses them more goodwill with customers or with delivery employees, but it seems like a bad decision either way.
How is it dishonest? It's a fee for the service that one receives. You pay one amount for groceries and another for the service of those groceries being delivered. That's exactly what a service fee should be.
Consumers should understand that services have a cost. Companies should charge consumers an amount that is commensurate with the cost that it takes to deliver that service (unless they operate in a non-competitive market in which case they are free to charge whatever their customers are willing to pay). If there are humans involved in providing that service, they should be paid a living wage.
Tipping is the backward part of US consumer expectation. Not service fees.
You may have missed the part where the service fee is optional and can be removed, or replaced with a tip to the employee. The fact that the fee is optional, instantly makes it not a "fee". Service fees are not a discretionary addon that customers can choose to eliminate.
Yes, you can set it to 0, but they are 100% trying to trick people into not tipping and giving instacart the money. At my neighborhood restaurant they eliminated tips and replaced it with a fixed service fee of 20% they give to the employees. It's common to call such things service fees and to think that goes to the end workers, instead of the corp. It's indefensible to say they didn't mean to trick people into thinking it was a tip for the delivery people.
The article doesn't say that the service fee is _not_ given to workers. It may pass through Instacart. It may all go into a common pool paid to workers. Instacart may take a rake. We simply have no idea. Until someone shows some data, everything that you've said is assumptions.
I didn't miss it. I just think way more information is necessary in order to understand whether or not it's a positive or negative. As originally implemented, it doesn't appear to be in any way dishonest.
My understanding of the article is that the service fee wasn't originally optional. It was a static 10%, required, service fee. No information is given about how much of that fee goes to workers, meaning it's entirely possible that all of it does. It doesn't go to _the_ worker who delivered your groceries, it goes into a common pool that is distributed across all workers.
If 10% is enough to break the barrier into a living wage then this could be a positive change. Workers no longer have to fear having a "bad night" where they have 5 runs to get a single $10 items vs a "good night" where they have 3 runs to get $200 worth of groceries.
They made it optional and mutable when their workers protested.
I don't disagree that tipping has a lot of problems. However, instacart is intentionally using "dark patterns" in UX (names, positioning) to mislead end users into thinking paying a higher service fee goes to the driver.
There was a far easier way to do this (a fixed order charge which is clearly an instacart fee, and then a separate tip clearly marked as per driver) -- the right solution would probably be to do like Amazon and reduce the fixed order charge or eliminate it when customers buy certain high margin items, make large orders, or sign up for a subscription.
Labeling a service fee a service fee isn't a dark pattern. Nothing about "service fee" makes me thing it's going to the driver.
Also, per the article, the service fee wasn't originally something that could be changed. It was a static 10%. Neither you nor I have enough information to know if 10% is enough to pay drivers a living wage. Maybe it should have been 15% or more but there is no way for me to know.
I am, however, very confident that a service fee that goes into a common pool and is paid out across all workers is a better solution than customers tipping.
Instacart is different than other delivery services because multiple shoppers may be involved in a single order. Some shoppers work in stores, for example, while others are involved in driving to deliver an order.
The service amount is used to pay this entire set of shoppers. Furthermore, it helps to ensure that all shoppers are compensated fairly and competitively, and that shoppers are working collectively toward the common goal of providing an excellent experience for all customers throughout the entire order process.
Should I still tip the shopper delivering my order?
Additional tipping is optional. The entire amount you select goes directly to the shopper delivering your order.
Why is there as service amount and a tip?
The service amount is distinct from a tip. Instacart uses the service amount to provide higher guaranteed commissions to all shoppers on the platform. This will help us ensure that shoppers no longer rely on unpredictable tips for the majority of their compensation. Leaving a service amount is optional, and you may set the service amount to $0 in the checkout flow before you place your order.
If you wish to include an additional tip for exceptional service performed specifically by the shopper who delivered your order, you may do so on our online platform, or in cash.
The way I read this is "the service fee is a way to give us more money, so we have more money to pay to everyone who works for us". So then why not just raise your prices and pay your employees more?
If the service fee was split across everyone who participated in your individual transaction, I could understand. Otherwise this is just a way of them saying "a service fee is a way to tip the company, so we can maybe pay our employees more".
Because their basic fee is just the delivery fee. They don't set the prices - the supermarkets do. The service fee is a consistent way for them to generate enough revenue to pay their shoppers and drivers, compared to the variability of user-provided tips before.
This sounds extremely scummy, and if the story really is as simple as this article tells it I don't understand how the CEO of this company can look at himself in the mirror.
I think a great example of an app that lets me give positive feedback to service people is Uber. They let you get a ride ASAP with as little decision making as possible, and then you can rate it after you get where you're going and you have some down time. If they let me, I would probably leave a tip along with my good ratings. Everything else is invisible: I have no idea if there's a "service fee" included in the ride fare. They don't make me worry about it. They definitely don't make drivers have to hand out paper flyers in order to feed their family.
Right, but why not offer tipping in the app? I think everyone knows that would reduce the friction for tipping. One of Uber's original selling points was convenience -- not having to carry cash around for taxis. Now they've solved their problem, but who cares about the driver, right?
Lyft simply asks you after your trip to rate and tip, all optional.
> They definitely don't make drivers have to hand out paper flyers in order to feed their family.
I don't know how Instacart works, but could it be that Lyft/Uber drivers have ratings they need to maintain, whereas Instacart delivery people don't? (Someone feel free to shine some light/correct me here.)
I don't understand the outrage, I like Amazon Fresh even more, next to the tipping box it specifically says in big letters tipping is neither required nor expected and defaults to zero. If the current laws regarding minimum wage are inadequate why not try to pass new laws instead of trying to read between the lines on why Instacart moved an input box and put it somewhere else?
Why keep things murky? If it is against the law we have a justice system, I will not all of a sudden be reminded of greedy bankers on Wall Street being the reason that box was moved to a different screen. Do people benefit when things are less crystal clear? Why do we want them to stay that? Why should the tradition of tipping should still be alive in this country? What are we trying to prove? Who is benefiting? Do we enjoy this sadistic power imbalance every time we get a meal at a restaurant? Is it because it gives us control over livelihood of someone else? How is it any different that the Romans throwing Christians to the lions for their enjoyment? Let's create a society that we think is fair and just instead of trying to take things in our own hands. Engaging in social debate to win over your fellow citizens to see eye to eye with you on things like increasing the minimum wage would be a benefit not only to those at the bottom but also to the society as a whole if that's what you think is the right thing to do.
So Amazon Fresh has an optional tip. Instacart is adding a default 10% fee that goes into their pockets - it is not a tip. And they do not pass the 10% fee on to the employees in wages - it stays as part of their bottom line. Higher-ups realized just how much the tips are worth, are now stealing them by default behind a purposely confusing interface that their customers cannot understand, and pocketing the difference while affecting their employees' income.
This is 100% nefarious. There is no reason to have both an optional service fee and a separate optional tip. It's one or the other; combining both options makes absolutely no sense.
I understand it's not the most conventional way of doing it, but why it's someone "higher up" and that's a bad thing? Instacart is not Mother Teresa, its sole purpose is to make profit and I want it to do that as much as it possibly can. I want this service to exist so I don't have to feel like a chimp in a grocery store with a basket going from aisle to aisle in fact why do I even need to justify why I want it to exist? I am willing to give them my money for the services they provide, period.
Again if someone thinks what they're doing is illegal or should be illegal one day then either take them to court or change the laws!
> I want this service to exist so I don't have to feel like a chimp in a grocery store with a basket going from aisle to aisle in fact why do I even need to justify why I want it to exist?
You're asking why you need to justify paying someone else to "feel like a chimp" so that you don't have to?
They may not feel like a chimp and also I like to be the kind of chimp best referred to as a code monkey, thank you! And what makes you think grocery stores with all their deceitful marketing will exist as we know them today? If everyone is a worker for Instacart shopping on behalf of someone else the stores will have to adapt and there won't be any point of distracting those workers with random product placements forcing them to move aisle to aisle since they're only allowed to buy whatever they're asked to buy and nothing more. It seems very shortsighted to think pain can only be transferred and not eliminated altogether with technology if that's what you're implying.
Grocery stores will be redesigned to accommodate personal shoppers just like cities were redesigned around the Segway. If the Segway or personal shoppers were free you might have an argument.
Because it is deceptive to label something a 'service fee' which most people would assume to be charges for services rendered by the feet on the ground.
In other words, it is, by way of social conventions, implied that the money goes to the 'chimp in a grocery store' doing work on your behalf. There is nothing wrong with them adding fees all day every day as long as it is made clear to the customer that said fees are not actually benefiting the actual service provider and consumers opt-in to this transaction. The shady part here is where consumers THINK the services fees goes to the service provider when actually it goes to the broker.
The problem with bringing up the minimum wage is because it doesn't apply here. Quoting chron.com[1]:
"The Fair Labor Standards Act does not apply the minimum wage payment requirement to independent contractors. However, merely classifying a person as a contractor instead of an employee does not automatically keep the worker from being considered an employee entitled to minimum wage."
Searching around led me to [2], which talks about Form 1099-MISC, which is used for independent contractors. On the other hand, I found [3], which makes me think that some can choose to become part-time employees, but I don't know what the status of that is.
It's also worth noting that, for full-time employees, vehicle-miles traveled are often reimbursed for car usage as part of the employee's work. I don't know if that's being done here, and that would be a major expense. It would also be an expense that your normal full-time employee would not have to pay, as they wouldn't use their car as often.
Profit has to come from somewhere. You can't reimburse the workers the full value of their labour if you wish to make a profit. I'd say that counts as exploitation. Unfortunate, but thats the reality of capitalism.
"You can't reimburse the workers the full value of their labour"
But this is exactly the point.
* Assume that hamburger ingredients cost $2.
* Assume that hamburgers sell for $5 each.
==> Net added value per hamburger is $3.
* Assume that a worker can make 1 hamburger per hour manually.
* Assume that the same worker can make 10 hamburgers per hour after the business owner has invested in a $300 hamburger machine.
* Assume that the same worker can make 100 hamburgers per hour after the business owner has invested in a $1000 hamburger machine.
==> Is the "full value of the worker's labor" $3 / hour, $30 / hour, or $300 / hour?
The worker's value add is not solely dependent on the worker and the products being created, but also on the capital invested by the business owner (and other factors). Just because the worker is not paid the entire economic value added being produced by the business does not mean s/he is being exploited.
Is value created by labor necessarily the only way to create value? Can labor by itself cost $10, I pay out $10, but when I combine that labor (a largely undirected force) with thought (scheduling, order placement, etc) I get a multiplier over the labor?
It seems like it should be possible to do this. I pay for raw, undirected labor. It's like raw iron. When I use my skills for planning (speaking as the management for the company), I can pay full price for labor, but get synergistic effect not possible without thought? To keep with the iron reference, in the end I produce steel or even better a car. Seems like the labor to extract the iron met a multiplier of my metallurgic enhancements.
The mistake here is the assumption that value comes from labor. Value is inherently subjective, depending on what the purchaser is willing to pay for, not due to intrinsic properties of whatever the good or service is.
Suppose in your raw iron example, instead of making steel or a car, you make an inferior product because either you or the people who work for you are incompetent. Suppose you make the 1960 Chevrolet Corvair, a car so horrible that it inspires the book "Unsafe at Any Speed" by Ralph Nader.
Even though nothing about the product or the labor used to produce it changes, your product loses value immediately because people don't want to buy a dangerous car. Your hypothetical multiplier turns negative overnight, even though your car is just as unsafe before the book as it was afterward. If the labor and your intelligence were the source of the labor, the value of the car should not change just because Ralph Nader says it's dangerous.
Of course, but when the decision of where the workers pay is on that scale is taken out of the hands of the workers, it tends towards table scraps then full value.
The two inputs to production are capital and labor. You need to make profit by paying below market rate for capital (like a bank borrowing from the Fed) or by paying less than the value created by labor.
I think this argument takes a relatively small set of companies a generalizes their exploits across the larger economy. Isn't it the case that most service companies in the west do not exploit it's labor?
The people involved in customizing your car configuration prior to it being delivered to the dealership are not, to my knowledge, exploited. Most laundromats in my area do bag service, those workers don't seem to be exploited. I feel sure that the list goes on.
There are some common threads amongst companies that are exploiting their workers:
1. They are b2c companies.
2. Most seem to be venture backed.
3. The worker they employ are mostly unskilled.
4. The law doesn't seem view the current treatment of these employees as illegal in any way.
#1 seems most significant to me, the price that a critical mass of consumers are willing to pay for the value that unskilled workers can provide seems to be too low to build a large business on the back of.
> Price that a critical mass of consumers are willing to pay
Sure, but Instacart is demolishing a very worker-popular tipping feature. That suggests that actually, there is a critical mass of consumers willing to pay more.
The question is, why does it matter to Instacart so much that some consumers pay less than what they're willing to pay?
> Sure, but Instacart is demolishing a very worker-popular tipping feature. That suggests that actually, there is a critical mass of consumers willing to pay more.
Nothing about this article says that to me. Nothing.
At least one worker has given this information to someone who tweeted the information whose tweet was picked up by recode. We don't know if tipping is "very worker-popular" we know that some workers asked the company to change it back and they half capitulated.
I'm personally a fan of charging higher fees and paying all workers the same living wage. That's effectively what a static service charge does.
> The question is, why does it matter to Instacart so much that some consumers pay less than what they're willing to pay?
We also don't know that. Do you know what the average tip was on instacart before this change? So you know that a 10% static service fee is lower than the average tip before now? Do you know if brown workers were tipped less than white workers? Men more than women, the inverse?
We don't have the information required in order to make the judgements that you've decided to make.
If the process is entirely automated and consistently deliverable? Sure. But then that's not really exploiting labor.
For me, if I wouldn't be comfortable asking a neighbor who was less well off than me if they'd mind dropping off my laundry for $10 a month, I'm not going to do it via a shiny website.
I didn't realize your comment exclusively pertained to venture owners. Even so a venture owner could sell the company to the employees and move on to their next big thing.
You're right that it's something a venture owner could do.
But then, you'd be surprised at how many highly-compensated programmers never bother to exercise their options. The same ones who then go on Hacker News and complain about bad treatment of workers, and how if only they owned the companies.
I not only complain about how workers are treated, I'm also active in the political process to effect social change for workers. I've also exercised all of the options I've vested at the startup where I'm employed.
> But then, you'd be surprised at how many highly-compensated programmers never bother to exercise their options. The same ones who then go on Hacker News and complain about bad treatment of workers, and how if only they owned the companies.
This reads like an oddly specific claim -- do you have examples?
Not a US citizen but I find the whole tipping experience rather stressful and an additional item to worry about. I like it that Uber has it built into the service and there's only one thing to pay. I'd rather pay a flat increase on the menu and expect higher staff salaries than to have the delivery boy/waiter be at my mercy of tipping.
I am a US citizen and I completely agree. I'm used to it in restaurants, but other situations have me searching online to see what's expected, and worrying that I got it wrong. I'd really like to see the whole concept die.
I'm with you on that. The whole tipping business is out of control in the US! I only tip outside the US if I feel like incredible service has been provided, else expect my fees to cover the cost of the service.
I've never tipped in hundreds of Uber rides and I have like a 4.9 last I checked. Because I'm not a special snowflake I would think that most people have a good rating. But if you don't and there are options of who you can pick up, you gotta think that someone with a 4.5 would be picked up over a 3.5.
I think Instacart's other justification for this is that multiple people are now involved in procuring your groceries. One person shops and another delivers. If you tip in cash, the shopper gets nothing.
Can't speak to if this is their real motive, but does seem to be in line with other criticisms of tipping (e.g. waitresses making much more than kitchen staff).
When are we as a society going to tire of company executives feigning stupidity and ignorance when it comes to these very deliberate actions? All these executives--and likely all the developers, too--know exactly why these business model and app changes were made. The reasons given in the article are completely accurate.
I have been reading a lot about Russia and China recently, and I'm struck by just how much more realistic their citizenry is compared to America.
I think it ultimately boils down to how real power operates in the countries. The average Russian or Chinese citizen is way less powerful than the average American citizen. If they have a grievance to make, whether it's against a local or national policy, Russians and Chinese have way way fewer options.
Whereas Americans, if they feel aggrieved at the state of their world, can turn to any one of many many many political organizations that exist solely to collect and distribute that outrage and drive results. We may not be completely 100% satisfied with those results, but it's better than relying on the legal process.
This network of civic participation has mostly replaced the usual role of electoral politics and Americans believe in their system, secure in the realization that if some bullshit is going down, outrage will be generated and justice will be served.
The last election threw that whole system into critical disarray. It got yoked into the service of Donald Trump and the Republicans because liberal Americans trusted the system enough to stop looking to see how it was being used. Trump realized he could game the system to get elected and did exactly that.
The critical insight here is that Americans are not stupid, and they are not ignorant, they just believe in the power of systems and institutions and want to just be able to rely on them to drive better results over time. We shift public attention gradually away from everything, and slowly onto the parts of the system that aren't working.
In Russia and China, public arms of policy-making are non-existent. Citizens must therefore be extremely careful about picking their battles.
> Trump is the personification of the outrage over illegal immigration, crime, bad trade deals, and the Neocon (globalist) wing of the Republican party.
Exactly, it's the system working for the other side of the country. They didn't have nearly as good of a grassroots outreach mechanism, they finally built one.
The two sides cannot agree on what justice means. That's ultimately a national question and so it had to be settled in the election. It's the Republicans now that get to decide what justice means, and liberals get to lick their wounds and retrench.
The direction the world is moving in is liberalism. So this can only be a minor setback.
> Umm, what? For over a year, liberal Americans were aghast at the rise of Literally Hitler and made no bones about sharing their opinion on the matter.
Right, they pressed the outrage button thinking it was going to fix the problem, like it usually does. It didn't because Trump outmaneuvered them.
Ultimately it's because of the Internet. Sharing of ideas, remixing them, iterating on them, that's all the province of liberalism. Holding on to tradition, resisting modernization, that's conservatism. Liberalism is the rising tide raising all boats. It's always happening, everywhere, behind the scenes, in people's minds. Even the most conservative person has liberal ideas.
Liberalism is imperative, conservatism only impairs. You can have individuals, groups, communities, industries, cities, provinces, countries, even whole blocs of countries espousing conservatism, but the natural trend is towards idea evolution and that's liberalism. It might take a long, circuitous route to get there, but when you take the totality of the whole world, and the logic of ideation, that's where it's going.
Well, no, I'm talking about how things evolve. There's this big myth in history about technological, economic and social decline. That it's been up and down for 2000 years, fits and starts. It's not the case, things slowly and continuously evolve, you just only notice it happening in fits and starts. Also the mind is designed to focus on negative things, so we assign more weight to the negative than we would if we were being more rational.
The dark ages are a myth. This is becoming more accepted amongst historians. It's an artifact of our imaginations, not a valid narrative. Athens and Rome are only two of countless agrarian kingdoms / empires of the day. When Rome fell, the rest of Europe mostly just went on without imperial control. More wars were fought but warfare of the day was exceedingly resource-constrained and not like the total wars we see today. Kingdoms and empires rose and fall all the time, we just focus on those two because their culture survived while the other ones' didn't.
The terminology "dark ages" more refers to the loss of Christian leadership than it does of technological or economic loss. Christians love to frame things apocalyptically and that's what's responsible for the common pejorative view of that time period.
A more valid comparison would be the Napoleanic wars, but there too, you can see that really the wars were only possible because economic advancement allowed nations much more resources to devote to war. Europe had to learn how to civilize warfare three times. Each time happened after massive economic advancements.
Interesting, but it seems you're coming from the position of having already concluded what the answer is, and then going back and fitting everything to that precondition.
Reassessing historical narratives you grew up with has that effect. I'm coming to find out that nothing is as it was taught. The information you gain today should be prioritized over the information you learned yesterday, just because it comes from a better and more informed perspective.
I've been spending lots of time on Quora, I eventually learned that not a single way of thinking about events I had when I was younger was anywhere close to truth. Ignorance is the norm rather than the exception. You have to reify past events to fit current conclusions because you have no past understanding of those events that's reliable.
I'd call it "post-history" but if anything history is more important.
Definitely, but that doesn't change the simple logic that if you have a conclusion, it's very easy to lose the truth of a historical situation by instead selecting an explanation that you want.
Let's say there is a historical event, and you know of 3 different possible explanations. Explanation 1 is what you learned as a child and it's clearly wrong now because of new evidence. Explanation 2 and 3 both fit all known facts and either one could be correct -- but only explanation 2 fits with your conclusion that the world is always heading towards liberalism (or conservatism or whatever you believe).
Do you pick explanation 2? Human nature says you do, and it's something we need to be aware of.
> You have to reify past events to fit current conclusions because you have no past understanding of those events that's reliable.
Think about it. You have an understanding of history. You can't not have an understanding of history, unless you live under a rock. As you study history more and more, you realize that all of your prior understandings of history are wrong.
What do you do then? You don't have a past anymore. The only thing that's making sense is the present. So you re-examine the past in light of the present. That's reifying. It's your only option. You're reifying today, you're going to reify again tomorrow. Because the thing doing the understanding is changing every day, so you need new understandings. You're not building, you're constantly demolishing.
Logic is only as good as your premises. If your premises can't be trusted, you need to go back to the drawing board.
Following that line, what use is history at all anymore? It's now just a hammer we can use to propagate whatever new idea we currently have. I don't really see the value in such a history.
No, blame management. Not until programmers have a union masquerading as a professional association that backs us up, like the AMA or the ABA, and we enjoy much greater autonomy and a much stronger position from which to say "no," should we be made to shoulder the blame along side management.
Wait a minute... wait. Those service fees I've been opting to pay haven't been going to the shoppers/drivers who are processing my order? On my last order I asked the shopper to specifically go out of her way to check on an out of stock item. I did this with the assumption that my 7 dollar service fee was going directly to her, and that she would therefore be happy to go out of her way. When the delivery person (I think the same as the shopper) came by and I smiled at her, I thought that was a "we're square", not a "sorry for not tipping you" smile.
I'm livid. It's on instacart to pay fair wages with the delivery fees if they think it's a problem. Their misleading double fee system is unfair to both me and (more importantly) the people who are directly providing me with service. I'm sick of the uber-ish "on-demand" service culture abusing their non-employees under my dime.
edit: funny thing is, I just watched the infamous episode of Kitchen Nightmares about Amy's Baking Company. In the episode, Gordon Ramsay becomes furious when he finds out that the customers' tips aren't going to the servers. He goes into the restaurant and asks the patrons if they would have tipped if they knew this and everyone agrees no. The owner meekly explains in a follow-up episode that he does this so he can pay the waiters a "fair fee". https://en.wikipedia.org/wiki/Amy's_Baking_Company. This episode utterly destroyed Amy and her husband's company. Instacart, I love your service. It's changed the way I grocery shop and I planned on being a regular, high-value customer. Please don't make me question my decision on this.
The shoppers are not the same as the delivery people. I know this because I have worked as a shopper. While I was working for Instacart, the model of how the drivers/shoppers were tipped or paid was in flux, so I'm not sure what the current model is.
It would be okay if it was split between the driver and the shopper, but Instacart is basically just tricking people into thinking that they are tipping the people serving them when they are actually just giving money to Instacart.
I think DoorDash does similar thing. You pay Tip, Service Fee, and Tax. It would still be ok if the food was being delivered from far off, but most of the time it is within a 2-5 mile radius. A $20 order easily becomes a $40 order.
And didn't DoorDash just bump their fees recently? Could be just my area, but man I swear the delivery charges increased substantially in the last couple of weeks. Lots of places with $5.99 and $7.99 delivery charges attached to them.
It's varied over time. Sometimes I've talked to them on the phone as they shopped and it was indeed the same person that delivered to my door. Then for a while it wasn't, then it was again.
From conversations with the shoppers, it also varies by store chain. Different chains have different deals with Instacart as to how the shoppers can perform their jobs, including if it's the same person delivering.
My impression is that when they get what they want, Instacart has shoppers that stay in the store shopping and drivers that deliver.
I'm unclear why I would tip my Instacart delivery person. I order A, B, and C; my expectation is that A, B, and C show up, because that is what I paid for. How can a particular delivery person do that "better" enough to deserve a tip?
First, note that for each of your Instacart orders, a shopper picks out the food, and a driver delivers it to you. Two people.
To your point, I have noticed that Instacart users fall into two groups, those that care about specific replacements when an item is out of stock, and those that just want the shopper to use their best judgment. If you care about replacements, then you want your shopper to be responsive and well-mannered in working with you to resolve the shortfall.
It is hard to evaluate if the delivery person did the best they could with what the store had or just grabbed random produce. So now we are ripping drivers because the grocery store for a fresh produce delivery?
I'm not saying the lack of tips doesn't hurt drivers, but I agree that I have no idea how I could determine when a tip is justified.
It's the same story as with other similarly modelled startups like Deliveroo and UberEATs (and maybe Uber itself), both of which have slashed their groundworker's pay significantly
Hmmm...I'm confused. This is from their "How It Works" section on their website:
"Yup, that’s right. The only thing you pay for is your new device. How is it possible? Well, we spend our money on training awesome Experts instead of on building stores. So, you get an amazing experience instead of just a device."
That doesn't explain how it works at all. I'm guessing they have partnerships with the supplier so the customer pays the same price as retail and Enjoy gets a piece of the revenue. My understanding though is that these new hardware items usually have very thin margins. I would love to hear how they actually make money.
AFAICT, you buy from their site so they are probably getting some kind of commission. But they only have 20 products in total that you can buy from their site. Plus they have someone spend up to an hour training you on the product.
I went through the first part of their checkout process and they suggest accessories to purchase with the item so maybe it's an upsell thing? Maybe the in-person "expert" is really just an incentivized sales person that you've invited into your home that will try to push other accessories that you "need" for the product you've purchased.
I imagine the kind of people that would need this service would be people that are not technically adept and could probably be easily manipulated into purchasing things that they don't really need.
Somebody should be able to. It's very likely a task for a big company, but it ought to be a problem that has a solution, as a lot of companies do "solve" it in an ad-hock fashion that seems to cost much more than it should.
Coming from a place where tipping is nonexistent this whole debate feels extremely ancient. I don't understand why a modern country won't just kill off tipping culture.
This is great for everyone! Hopefully they will get a higher salary and I guess the company will pay more in taxes and social benefits (or whatever it is called in English). I don't get how tipping can be legal, or do you actually pay taxes on tips in the US?
Yes, they are taxed the same as wages. For tips done via credit/debit card, that will even be reported and have taxes withheld by the employer. For cash tips, the recipient is supposed to report them on their own, though of course, it's fairly common not to report the full amount because it's hard for the government to track.
Instacart wants to fix grocery shopping by eliminating the drive the store.
Amazon wants to fix grocery shopping by eliminating checkout.[0]
The friction with grocery shopping for me is in a completely different area, and also easily solvable.
If I could go to a store that was basically a Kiva[1] fueled warehouse, enter an order on a tablet, and have it brought to my car (or order in the morning and do curbside pickup on my drive home from work), I would save the hassle of searching store shelves while playing demolition derby with a bunch of other carts.
Walmart has toyed with free curbside pickup.[2] It should actually make groceries cheaper though. If they had a warehouse logistics backend, without customers wandering around through their inventory, they could do amazing things.
With apologies to Clarence Saunders, yeah, basically I want to end self-service.[3] Customers were more efficient than the clerk for that job, so that model won. But robots are much more efficient than customers now, so I'm ready for the next revolution.
All big stores are doing it now in France (in large cities at least). It's called "<store>-drive" (like you would have a "Walmart-drive" in the USA).
Some are doing it next to the shop, others try new warehouses at different locations (because one of the incentives is to avoid traffic too).
It's far from perfect; but at least you don't have to walk the store for hours.
Also, no tip culture in France, but workers seem to run against the clock, so I suppose they have incentives to deliver fast.
It doesn't use robots but Hannaford has a curbside pickup option. Anecdotally doesn't seem to be used much though and for me seems to satisfy a pretty narrow use case--people who can easily drive to the store but can't or don't want to wheel a shopping cart around.
It's possible that pretty much any so-called "gig-economy" platform is inexorably pressed towards first wooing, then commoditizing and finally squeezing its workers.
"To get to the tip option, customers would have to click on a small arrow to the right of the service fee that doesn’t give any indication where it leads. Even if someone knew to click on that arrow (but honestly, why would they?)"
Seriously?? Has this guy never seen a mobile app before? There is a line reading "Service (10%)" with an actual dollar figure and an arrow pointing to the right. Find me a mobile user who doesn't know what that arrow means. This whole article reads the same way, like the author is just trying to stir up outrage and get page views.
Disclaimer: I have never used Instacart and have no connection with it. Not familiar with Recode either but I am less likely to read anything from them again.
Once upon a time I made a UI where there were several things. One of them was a gigantic text box with the title "Biography" and another a 2 character wide box with a title "years of experience." We had to change that to a drop down. Why? Read on...
We got a lot of complaints. People couldn't see their resume in the "years of experience" box. Worse they kept getting error messages saying their resume was too long. It was restricted to 2 characters! These same people had glossed over the "biography" box.
So, yes, your ability to reason about a UI and the requisite UX has nothing to do with how others will reason about it. You'll get to learn the hard way like I did.
Yes, thanks, but I am already quite familiar with the idea that users will break and misunderstand any UI in creative and unexpected ways. That's why we do testing of any new UI designs. That's totally unrelated to my point.
My point is that the author writes as if something that is perfectly familiar to any mobile app user--and is literally the standard way to present a default option that can be changed--is something that has never been seen before. As I said, find me a mobile user who doesn't know what that arrow means in the screenshot in his article. He gave up all credibility with me at that point in the article. It may be that there's a story here, but either way this is just terrible journalism.
The way I read the article, the author is pointing out the sneakiness of 1. conflating service with tipping, and 2. hiding an option people assume isn't adjustable (who would think you could waive a service fee, and what normal person would want to pay a ~higher~ service fee? note that service fee vs. tipping has different connotations) behind a nav.
There certainly is a understanding problem here, even if the individual components are all familiar, because it's not at all clear what tapping a chevron on a "service fee" would do anyway, and it's certainly far from default to assume that that's how you would tip, especially if you were unfamiliar with Instacart, and didn't realize tipping is a thing.
If you have actually used the app, you'd understand that the author's point is valid. It is certainly misleading that the "Tip" section (which defaults to 0%) is hidden entirely under the "Service (10%)" line item at checkout, which used to have an arrow but now has a button which says "Edit". Why would you click on a button next to "Service 10%" to find out how to tip, or even know whether tipping is a part of this service model?
It's also unclear how the "Service" fee is distributed. There is an explanation which states that "Unlike a tip, which can only go to the shopper delivering your order, a service amount allows us to pay all shoppers (including those, for example, that also pick out ordered items at the store)".
This implies that it's a "Shared Tips" model as in some restaurants, where tips are distributed evenly amongst the staff that worked that shift. But could also be interpreted that they just collect these "optional" service fees centrally in order to pay all nationwide workers, which simply amounts to corporate revenue unless they are actually distributing 100% of the service fee to Instacart contract employees.
Instacart, as with all "sharing economy" apps, seems to be making quite a bit of corporate revenue on the backs of workers by misleading users.
> If you have actually used the app, you'd understand that the author's point is valid.
That may be true, and I'll take your word for it. However, if I have to have used the app to understand the author's point, it's a poorly written article. Catching this kind of thing is why newspapers have editors. It's bad writing and it weakened whatever point the author had.
Agreed about the ambiguous wording and whether this goes to the company or directly into worker pay is unclear.
You are not your user
You are not your user
You are not your user
~~
Beyond just that, putting things behind a chevron dramatically decreases actual usage. It's why things like hamburger menus are so bad--significantly reduces discoverability, -even when users understand the pattern-. A chevron is even worse, because it generally indicates "details", "settings", or "advanced". Nobody wants to do that.
Because you would then assume that the tip is going to the person that served you. In this case, the service charge is essentially a tip to the Instacart company.
It shows how the "Hospitality Included" program removed tips from their restaurants. I guess its not always the idea, but also how you implement it. Instacart tried to do the same thing but appear to have totally botched it up
I can understand wanting predictability in your business model, but if your supply chain shakes when you add consistency, your business model probably doesn't work.
Yeah, this is one thing I will never understand when apps do this. Especially ones that FORCE a min % of tip when you make the order (most GrubHub/Seamless restaurants). Just call it a fee if you're going to force me to do it before I can even evaluate the service and tip accordingly, let alone if there is a min tip %. It's incredibly frustrating, and ironically makes me tip less than if I would if I could just tip after the fact. I don't want to risk an up-front tip, so I tend to stay on the lower end, but since the service of these places is usually pretty good, if I got to tip after, I would actually be tipping more. But they screw up just enough times that makes me not want to take that gamble.
With Instacart specifically, this creates a confusing dilemma by giving me the option to tip before any service is done. Mainly because Instacart DOES allow me to modify the tip after the order is complete, which is good, but here is the dilemma...
A) Do I not tip when placing the order (with intention of tipping when the order is complete and I can evaluate the service to give a fair tip), but also risk that the shopper knows I didn't tip when I placed the order thus thinks I won't tip at all making them not care as much and do a poor job because they think I'm cheap.
B) Do I tip ahead of time when placing the order and risk that they think just because they already got the tip there isn't much I can do, so they could care less either way, and then I'm stuck paying a tip for service that wasn't up to par.
Either way it's a lose-lose and a terrible experience. And I'm PRETTY sure the shopper doesn't seem the tip when they get the order so maybe that makes both A & B irrelevant, but it's not like the UX of the app tells me that so I'm stuck in this awkward dilemma during checkout making me hesitate my conversion. It's a terrible and very confusing flow/checkout/experience every time I use Instacart.
Seems like they're learning a hard lesson on unit economics. We're somehow at a point where companies are burning cash to provide low service fees, and now they need to become profitable.
When there's nothing left to optimize, the way to become profitable is to either pay drivers less or charge customers more, and customers are not down to pay more.
Pooling tips is quite common place in the restaurant industry, this isn't exactly a new way to f* over workers. While this move will reduce the pay for some shoppers, it will help many shoppers that earn less in tips for structural reasons. Ie. servicing low-income neighborhoods, racism & sexism from the tipper, etc
I agree with you, but while the tip pool is sacred (employers shouldn't touch it), a "service fee" is not. Describing it as a service fee allows Instacart to keep a portion of it rather than distributing it all back to employees on the ground.
Ah right on - didn't realize Instacart would be taking a portion of it... and it looks like it would be taxed, effectively making every dollar into a $0.70 tip...
Is Instacart paying significantly lower via this new system (aside from the UX advantage like Uber)? Assuming they have a reasonable proportion of couriers:orders and the pay change here is substantial, this seems like it could backfire if many couriers stop delivering / delivering as often, given how easy it is to switch to GrubHub, DoorDash, Postmates, et cetera.
Instacart apparently has a surge-like system called "busy pricing." It'll be interesting to see whether that'll now occur more or whether they can actually retain their couriers (assuming they don't have an excess).
This feels like communism. It does not matter how hard you work, you will all get paid the same. Why should someone that worked better be rewarded the same as someone who did not work so hard?
Leave the things as they were initially. Let customer decide the performance part of the pay, you just take care of the base portion.
Unless, all they really want is the 10% for themselves.
I'm a customer of Instacart and a big fan of the service. It has saved me so many hours.
The contract between a customer and Instacart is very simple: The customer picks out groceries and they show up at the door an hour or so later.
Uber's decision to remove tipping was brilliant. Why impose additional uncertainty and friction into the work flow? Star ratings allow Uber to compensate top performers without creating an inconvenient friction point for users.
Instacart's initial approach to tipping was to default it to 10% and force the user to change it. This was very bad UX. It not only takes extra time, but it was included during the checkout flow before you even know how good the service was.
Star ratings (such as used by Uber) are way more powerful. People feel an archaic obligation to tip as is clear from the shaming tone of the linked article. But with ratings, customers have an incentive to be honest about the service, and the company gets to incentivize whatever qualities are most important to customer satisfaction.
I've found that in restaurant tipping, most people are reluctant to tip below 10% even if the service was really bad. This creates a bad incentive. Most service problems in restaurants are due to waitstaff being over-stretched and not having time to stop by tables often enough, etc. If a waitperson realizes that adding another worker would reduce tables/tips by 30% (for example) he/she would have to make up for that via a higher tipping percentage for it to be worthwhile. Meanwhile, customers are tipping mostly out of obligation and the restaurant owner may not realize the extent of bad service that is going on, even though it slows through-put and gives customers an inferior value.
Why we'd want to carry this sort of system over to a modern service like Instacart is beyond me.
I have written to Instacart support/management suggesting that they create a financial incentive for shoppers to be available at peak times, even if that results in something more like surge pricing. On Superbowl Sunday all deliveries were taken by around noon, and I could really have used some more tortilla chips, beer, etc. Shoppers willing to work during those times should make enough money that they are willing to miss the game themselves, etc.
I think that if Uber were competing in this space, there would be no tips and also no service fee (still not sure what it is, but it seems to be Instacart's way of charging a baseline tip for all orders).
I think the most important thing during the growth phase for Instacart is to gain market share and to deliver a service level that creates a disincentive for stores like Whole Foods to start their own delivery service (or an incentive to white-label Instacart's).
I think Instacart should be raising enough money that it can really think long term about its strategy. It's doing so many things right. The shopping experience and app experience are superb, the shoppers are conscientious and friendly.
Uber was able to grow rapidly by subsidizing rides significantly. It seems Instacart wishes to avoid this. I very much like the free delivery subscription level, but the service fee is annoying, as are the price mark-ups at some stores.
Getting this right is likely very difficult for companies that generally follow in Uber's wake but who have more challenging labor relations. I was quite disappointed to get a tip solicitation flyer like the one shown in the article. As an Instacart customer who just paid a service fee and an annual fee, I don't want an ugly reminder of Instacart's labor relations problems arriving along with my groceries.
No. They stay on the platform. Just as software developer consultants who don't yell at clients stay at their agency.
Almost every other country tips restaurant servers <1%. Tips aren't required for adequate compensation. This should be covered by a competitive base wage.
Does Uber make efforts to increase star ratings for drivers or is it all up to the driver? I was a quality manager for a call center and bad ratings can happen to even the best people. We always worked with them to improve for the future. We also did not rely exclusively on customer ratings and used internal QA. Does Uber have internal QA for drivers?
As a previous shopper who was intensely driven by high tips, I can guarantee this will have a big effect on the levels of motivation the shoppers will have.
However, it's important to note that the tips while I worked varied immensely - and tended to be MUCH higher when completing order at Whole Foods, as opposed to HEB.
What problem was Instacart trying to solve here? I use Amazon Prime Now and Google Express, but don't really factor in the tip when I think how much Prime costs me. I don't make that many orders though, so maybe people feel it as an additional cost over time.
The positive spin would be that it reduces friction involved in ordering and delivery payment. The original change didn't offer the ability to change the service fee. Under that model they offer one less decision point for their customers.
The negative spin is that they wanted to capture some percentage of the tip money.
How is this legal? They've been lying to customers in print about a service charge being a tip (as well as lying about the cost of the service to begin with by adding the charge to begin with) and basically stealing these people's tips.
Ugh tipping culture. Pay should be predictable and not guilted on the customer. If the predictable pay is too low people can try to find better work, but at least tension is removed from the time of transaction.
As a sidenote, returning something bought via Instacart is a pain, as I learned. Target refused to accept a defective light-bulb without the original receipt, but did exchange it for store credit fortunately.
So does this mean that if I have sensitive information and travel that I should just purchase computers in both inside and outside the US and never travel across the border with any electronics?
Pretty sure the day stores create their own delivery channel, instacart will be done. Easier to pay Krogers or Costco for quick delivery than a service like instacart.
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Cultural norms about tipping waiters in restaurants actually are homogeneous within the United States. In the very few cases where there are exceptions restaurants make sure to indicate this on menus.
Of course people do. It's more your reaction to it. Like you are financially invested in people who don't make food but people who bring food a couple feet to the left.
Taxes. People are supposed to pay taxes on tips, but one of the things that lets people live on sub-minimum wages is not reporting tips. Tipping is BS, and I wish it would go away, but this is unfortunately how the US economy works.
If I could take a guess, I'd say this is more related to the user experience. I hate tipping. I'd rather just attach a 10-20% fee instead of needlessly evaluating someone else's performance with every delivery.
Or better yet, I'd rather just use a company that adequately pays its own employees instead of attempting to offload a portion of that cost on its customers.