Apps put 'servants' a click away

Startups connect users with grocery shoppers, drivers

ATLANTA -- Marcus Amison pushes his grocery cart through a cavernous Costco aisle stocked with bulk cleaning supplies and faces the typical shopper's problem -- he can't find what he's looking for.

But Amison isn't a typical shopper. He wears the green, branded T-shirt of Instacart, a San Francisco-based grocery service that arrived in Atlanta last month and promises home delivery in as little as an hour.

Instacart is part of a growing "share economy," in which people provide personal services, unused items or rooms in their homes for profit. Even as this emerging marketplace blossoms into what Forbes predicts will pass $3.5 billion this year, economists debate the effectiveness of an industry that creates thousands of jobs that pay little and offer no benefits.

Like Uber with car rides and Washio with laundry, Instacart uses mobile technology to connect buyers with people who will do their shopping and deliver the goods. Orders are made online or through smartphones and relayed to shoppers. The customers save a trip to the store, shoppers get flexible jobs and Instacart takes a cut for setting up the transaction.

Amison picks up a shrink-wrapped pack of kosher chicken thighs and scans the bar code with his smartphone. He uses a company-issued credit card to finish the purchase that includes 12 1-gallon jugs of milk, which he loads into the back of his 2000 Dodge Intrepid.

"Might as well make some extra money when I can," said Amison, who works as a full-time chef at the Marriott Marquis but makes $15 to $20 an hour working 20 hours per week for Instacart.

The company was founded in 2012 by Apoorva Mehta, a former Amazon executive. It is now in 12 cities and announced in June that it had received $44 million in financing from investors.

It is going to have to compete with a growing field of grocery-delivery businesses, including Grab a Buggy and ColdLife Organics, which both deliver in metro Atlanta. Also on the horizon, Amazon Fresh and Walmart To Go are piloting similar programs on the West Coast. At stake is the $586 billion of total retail grocery sales last year, of which online orders represented less than 1 percent.

Instacart hopes to bypass competitors with the flexibility of an independent-contractor fleet and speedy turnaround times.

The company profits by charging a small shipping fee ($3.99 for two-hour delivery) and by marking up the prices on certain goods by as much as 20 percent to 30 percent.

Instacart doesn't own any warehouses or delivery cars, in contrast to the previous face of grocery home-delivery, Webvan, which crashed in 2001 after spending $1 billion on warehouses and infrastructure. Its foray into the Atlanta market in 2000 was marked as the beginning of the end.

"There was the supply chain, real-estate issue, spoilage, and then add logistics and delivery to that," said Matt O'Connor, an Instacart "city launcher" who set up the startup's operations in Atlanta. "Having one company do all of that is a little bit of a fool's errand."

O'Connor, a recent University of Notre Dame graduate, joined the staff in January and has already helped start operations in Boston, Washington D.C., New York and Austin, Texas, since January.

O'Connor said he expects "hundreds" of Instacart personal shoppers to be at work in Atlanta by the end of the year.

As companies like Instacart rapidly expand, they create a new type of service employee. The companies require workers, who are independent contractors responsible for paying their taxes from earnings and obtaining their own insurance, to own a smartphone and a vehicle.

Jeff Faux, founder of the Economic Policy Institute and author of The Servant Economy, said he worries that an increase in insecure, relatively low-wage jobs perpetuates a growing economic problem in the United States.

"It's another strong piece of evidence in the direction that we are moving toward the servant economy," Faux said, "where the gap of the shrinking number of haves and larger number of have-nots is growing."

But while Uber, a taxilike service, and AirBnB, which lets people rent out rooms or homes like a hotel, take business away from traditional companies that may offer superior pay and benefits, some say Instacart seems to have tapped into an underutilized market.

Andrew McAfee, a member of the Massachusetts Institute of Technology's Sloan School of Management specializing in the digital economy, said new income avenues should be encouraged.

"This is putting labor dollars back into the market," McAfee said. "This seems like an unambiguous win."

Like Amison, workers tend to skew young and tech-savvy.

Amison has been searching for part-time work since November, but he couldn't find anything that complemented his odd hours as a chef. Now, he plans on using his new paycheck to visit his scattered family.

He's seen a wide range of customers using Instacart, often people with limited time or disabilities. Jim Voris, an information technology director for Builders Insurance, uses the service for fresh produce and to buy Costco products for which he would otherwise need a membership. Kent Cook, 48, has multiple sclerosis and used Webvan in the past.

"If you're willing to pay a little more to have it delivered, it shouldn't be a problem," Cook said. "I've used them twice since they started a week ago. So far, so good."

Business on 07/09/2014

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