Okay, so I think in the interest of time, we're gonna get going on our next session. It's my pleasure to welcome the team from Instacart here to the conference this year. I'm gonna be conducting a fireside chat with Fidji Simo, CEO. I'm gonna read a safe harbor, and then Fidji and I are gonna get right into a wide-ranging conversation. So before we begin, I'm gonna note that Fidji might make forward-looking statements about Cart's performance and expectations, which are subject to risks detailed in Cart's latest Form 10-Q. Fidji may also refer to non-GAAP financial metrics with reconciliations on Cart's investor relations site. So with the safe harbor behind us, we were just talking about how it was about a year ago that you went public.
I remember coming away from this conference last year, and your IPO launched, and we were going through that whole process. But for those who are less familiar with the story, even though you've been on this journey over the last year as a public company, why don't you talk a little bit about Instacart's business model as an online delivery platform and a retail enablement company, and the opportunity ahead for the company looking into the future?
Absolutely. Well, thank you for having me, first and foremost. So the vision we have for Instacart is to build the technologies that power every single grocery transaction, and we partner with 1,500 retail banners to help them grow their business and bring their businesses online. We are the largest grocery online marketplace. We have the leading share, and in particular, leading share in large baskets, with 70% + share among digital-first players. And we do that by providing the absolute best service for people and families who want to get their groceries delivered. We do that with the best selection, fastest speed, best quality, and best affordability. The strategy is working. We have delivered two quarters of double-digit growth, and we have double-digit growth at the high end of our Q3 guide. We are net income profitable.
We continue to expand our EBITDA. And what that does is that it gives us the ability to reinvest in our future. And what I look for in our future is, one, accelerating online grocery adoption. It's a market that has a giant TAM of a trillion-dollar, but online adoption is still only 13%, which is really lagging other categories of commerce, and I see it as our job as a category leader to really accelerate that. And then second, invest in bringing the digital transformation that we've helped retailers with online, bringing that to the store. Because when you look at the total market, 87% of the market is still offline, and customers don't want to pick between online and in-store.
Retailers want an omnichannel experience, and we want to be the technology partner that helps them across their entire business, so that we can capture the entire trillion-dollar TAM.
Okay. I want to talk a little bit about exclusivity and grocer selection. So you built up the best selection of grocers, if you look over the last 12 years. As more retailers become non-exclusive, how do you think retailers moving to non-exclusive from exclusivity might impact the competitive positioning of the company?
Yeah, so I'm actually really glad you're asking, because I think that's a big misconception about our business. There's this notion out there that, you know, the loss of exclusivity is a big headwind, but the reality is that the majority of our GTV is already non-exclusive, and yet we're still thriving. In fact, if you look at the top 20 partners, the non-exclusive partners are growing faster than the exclusive ones. And that might sound really counterintuitive to you guys, but the reason for that is because the best predictor of growth is actually not exclusivity. It's the depth of integration we have with grocers. And so if you look at the top 50 partners this time, about half of them have launched one new big service, one new big integration with us in the last year.
When I'm saying, like, big new service, I'm talking about things like SNAP, like, virtual convenience, pickup, us powering their enterprise business, like, these kind of big initiatives. And if you are one of these grocers that has launched at least one new service with us in the last year, you are growing twice as fast as the grocers that haven't launched an incremental integration. And so that explains to you why, like, if you want to understand our business and if you want to understand what drives our growth, integration with retailers, the depth of this integration is really where it's at. That also explains why competitors, despite having attracted some retailers on their marketplace, haven't made more of a dent, because their integration with retailers is very shallow. Retailers have put their inventory on competitive platforms, but that's it.
They haven't integrated with SNAP. These platforms are not powering their enterprise business, are not integrated with their loyalty system, the list goes on. And that's why these competitors end up stuck in, I would say, what's a, a small basket use case? About 95% of the new activation that these competitors drive into the market are in small baskets, and they convert low single-digit percentage of these small basket users into large basket users. And so they're really stuck in this small basket use case of people who come fundamentally for restaurant delivery, get absorbed to add a couple of grocery items to their cart, but are not really building a weekly grocery habit, a weekly grocery intent, which is what they do with us.
So I want to build on that topic, Fidji. We've talked about this on public earnings calls. I've asked you about this, this concept between large baskets and small baskets. Talk a little bit about what you've built in terms of advantages around sustained growth with large baskets, and why haven't folks been able to crack that code yet, when you think about it competitively?
... Yeah, I think people have assumed in the past that it would be easier, right? And the reality is that delivering a large basket of items to consumers with speed, high quality and accuracy, great affordability, is actually really hard, and that's why others haven't been able to crack it. The things you need to do that is one, you need massive scale. Second, you need a ton of data that we have amassed over a billion lifetime orders, and third, you need, again, depth of retailer integration. Let me give you two examples, concrete examples of how that comes to life. One is on quality and accuracy of the order. If you are ordering 20+ items, you really want 20+ items to show up at your door.
We need to be the absolute expert at predicting what's going to be on the shelves, having shoppers find it when it's on the shelf, and if it's not on the shelf, having a suitable replacement. How do you do that? First, on predicting what's on the shelf, you need massive amounts of data to understand inventory patterns better than retailers understand them themselves. In fact, we have some of our retailers ask us for our real-time data about what's on the shelf at this particular moment in time, so that they can optimize their operations. Because they might know what's in the back room, but they often don't know what's on the shelf, whereas with our data, we do know that. Deep, deep data to figure that out. To find the items, you need deep integration with retailers.
In fact, 75% of our GTV comes from stores that have planograms, where we can really tell the shopper, "Oh, you can go to this specific location in the store to find that particular item." You combine that with the fact that shopper tenure is at an all-time high for us, so our shoppers are very experienced at figuring out exactly where that particular item is. Then finally, if it's not on the shelf, if the retailer is out of stock, we do 80 million replacement a quarter with 95% satisfaction. So that gives you a sense of, like, massive data needed to really deliver a good experience, which is absolutely critical, because if the items don't arrive, this customer is gonna have lower retention, you're gonna need more appeasement and refunds to keep them happy, more incentives to keep them coming back.
So really critical for us to have done all of that over 12 years and something that competitors don't have. The second example that's very telling is affordability. If you are ordering a large basket, you want to really know that you're getting a good deal. For us, thanks to our retailer integration, we are fully integrated with our loyalty system. We have integrated with all of their complex offers, like buy one, get one free. We optimize their pricing, thanks to our algorithm with Eversight. We have integrated with SNAP, so that their customers who are on the food assistance program can use these dollars to buy things at that retailers. We have done all of this integration, and then they've resulted in $4.75 of savings per order for customers.
If you're a new entrant to this market, and you don't have 12 years of this deep integration, you're just gonna be more expensive, and therefore, customers are not gonna wanna buy from you. So I hope that gives you a sense of, like, why we really think that these competitors are kind of selling grocery items, but really not building a grocery, weekly grocery use case with large baskets, which is a key advantage we have.
Yeah, very clear. As we continue to sort of tick through key investor debates, I think another two-part one we hear a fair bit would be, number one, you know, how do you see the role of Amazon and Walmart in terms of impacting the industry writ large from a competitive standpoint? And how would you address the issue of a broader array of retailers trying to disintermediate what you do by doing it themselves?
Yeah, so let me tackle Amazon and Walmart first. First off, we have huge respect for what they do and their partners on our marketplace. You know, we have Walmart, Sam's Club on our marketplace. We have Whole Foods in Canada, so huge respect for what they do. But, you know, the thing to understand about grocery is that people like selections. On average, the Instacart customers shop from five different retailers. And if you're an Instacart + members, you shop at twice the number of retailers of a non-Instacart member. So selection matters enormously, and we have 1,500 retailers on the platform compared to, you know, a couple for these players. And so we think that, you know, they're gonna gain their fair share for, like, the customers that are very loyal to them.
But we also see that there are tons of customers that are very loyal to our grocers, and that's why we're getting our fair share of this market as well. The other thing that's at play when you talk about Amazon and Walmart is that I think it's the foray into grocery is making grocers realize that they really need a tech ally to compete against the giant, and we are able to provide that for them. And to your point on, could they do it themselves? The answer is no. Like, when you look at what it takes to win in this business, scale is super important. It took us close to a 100 million orders to get to positive unit economics, and since then, now we're at a billion lifetime orders.
We are able to get such fulfillment efficiency through our scale that we can offer these fulfillment services to grocers at incredibly attractive prices that they would never be able to achieve on their own at their scale. So they would have to offer a more expensive service, which would drive less growth for them, and so why would they do that? Of course, they partner with us. By the way, the same thing apply to R&D investment. No single grocer can invest in R&D technology as much as we do because we get to amortize that over 1,500 grocers. So again, very deep advantages in working with us to get a cheaper service, a higher quality service, more availability, because we have 600,000 shoppers, and better technology.
Okay. One of the other debates that's been happening over the first two days of the conference is the current state of the economy. So maybe you can talk a little bit about what you're seeing in the macro environment, what impacts that might be having on growth, and away from the macro environment, how do you think about aligning investments against the long-term opportunity as opposed to whatever the shorter -term opportunity is?
... So we continue to see a very strong Instacart consumer, and that's not surprising because the number one reason people come to Instacart is convenience, and we all know their strength in the convenience buyer, and we're really an essential service for families. We help them get life done, we help them save time, and so we are continuing to see that strength, so for us, a big priority is to take the 25 million people who have ordered from Instacart in the last year and continue to habituate them and get them to become more and more regular users of Instacart, but in addition to that, I am also thinking about how to attract the next 25 million users, and for them, I think what's gonna be critical is continuing our investments in affordability.
We have a really great market where we have customers that value convenience over price. We wanna continue also developing products that attract people that value price over convenience. That's why, in addition to the affordability efforts I mentioned earlier, you are also seeing us release new service options where you can schedule a delivery, which is a little bit less convenient, but as a result, you can get that delivery entirely for free, and that allows us to tap into that other part of the market, while still monetizing very well the people who really want, like, very fast delivery and are ready to pay for that. So that's really kind of the big opportunity for us. I am personally very proud that the demographic split of Instacart, in terms of income, closely matches U.S. population.
That wasn't the case four years ago, and we have made such progress that we now can really address the whole TAM, but we wanna continue making it more and more affordable for everyone.
Okay. Maybe we can pivot to a recent, a more recent announcement, which is, Uber Eats. You announced a partnership that brings restaurant delivery from Uber Eats into your ecosystem. Can you talk a little bit about how that effort came about, and how it's been scaling?
Yeah. So we really think about how can we help families get life done? And, you know, families were telling us that they were coming to us for grocery for the week, but sometimes they also need dinner fully prepared for tonight, and that's why having a restaurant selection can be very complementary. And we have had an absolutely wonderful partnership with Uber on restaurants that we're really excited about. It has really exceeded our expectations. And in fact, we're seeing that we are driving adoption of restaurants among our user base much faster than restaurant delivery platform, we're able to drive adoption of grocery inside their user base. And so we're really excited about that.
The thesis really is playing out, like my thesis getting into this partnership was that we were gonna be able to attract incremental Instacart customers, we are gonna be able to increase order frequency for existing customers, and we were gonna be able to make the Instacart Plus membership so much more valuable by having the best grocery selection and really competitive restaurant selection. All of that has played out, and so the goal is not just to have a good restaurant business, it's really to create a flywheel, where the restaurant selection actually makes the entire service more valuable, the membership more valuable, and therefore allows us to provide just a better service for families.
Okay. So with a nod to what is up on stage with us, I wanna ask next about Caper Carts. How is the rollout going, especially relative to your expectation? What has been the feedback so far from retail partners? And can you talk about the business model of what you're trying to ... build, about the marriage of the relationships and the retailers, and putting technology hardware like this in the store?
Yeah. So, you know, when I joined the company, a couple of things became really obvious to me. One is, our key competitive advantage, as I've said, is this deep, deep retailer integrations, and we were already the technology ally for their online business. We were already, like, embedded with them in their IT roadmap. We had already done loyalty integrations, point-of-sale integration, all of these things. So it was very easy to imagine that we had a right to win at also helping them with technologies inside the store. And then in addition to that, it was very clear to me that retailers would want an omnichannel customer more than just an online one or just an in-store one, and we really wanted to align our needs with them.
It was also very obvious to me that this is an industry that has been slow to move online. So online penetration is only 13%. I believe we can double or triple that, but even then, that means that 70% of the market will still be offline. So really, the question I asked myself was, like, "How do we go and create a product that is really suited for, like, transforming the store experience, bringing the best of online, which is interactivity, personalization, measurement, but bring that inside the aisles of a grocery store?" And so when I found Caper, we made the acquisition of Caper literally within a couple of weeks of me joining as CEO.
I was very excited because it's a technology that really allows you to not just skip checkout, which is, you know, how a lot of these technologies have been described, but actually have a screen that follows you around the grocery store and recommends products based on what's in your cart, based on what you've purchased in the past with your loyalty card, based on where you're at in the store. When you look at that, you're like, "That's kind of the holy grail of advertising," when you can combine all of these things. So you ask how it's going, it's going really well. We have hundreds of carts deployed. We're going to thousands of carts deployed in the next several months. But the thing I look at the most is the strength of product market fit.
What we're hearing from consumers is that they love the experience. We have a net promoter score of higher than 70. We are seeing consumers buy more when they use Caper Cart. And that results in retailers being very happy, because very few things drive average basket sizes up in retail. So when we deploy Caper and this increase in average basket size, that's a really, really big part of the business case, and they're very excited about that. And then you ladder up on top of that, the fact that we can build one of the best advertising models in this device and share some of that revenue with retailers, and now you have a really, really compelling entry into the 87% of the market that sell offline. Very, very excited, as you can tell, about what we're seeing.
We're still at the early stage. The next year is gonna be really critical to go from being deployed at Kroger, Schnucks, Wakefern, Geissler's, a couple more, to really like scaling with these guys and being deployed at more retailers. We also are seeing traction internationally. We launched with Aldi in Austria, and so it's really something that, you know, I'm spending a lot of my time on because I actually really think it can define the future of what grocery retail can look like.
Okay, thanks for that. Maybe pivoting next, can you give us an update on Instacart for Business? We saw you mention that over 1 million business customers placed an Instacart order in the last year. How do we think about, against that benchmark, where the long-term opportunity sits?
Yeah. So I said at the very beginning of this talk, that our vision was to power, to build the technologies that power every grocery transaction. And if you think about it, we have built really incredible technologies to power retail. And in fact, many of our large partners in the medium size are using our storefront technology to sell to their customers without, you know, separate from our marketplace. And so we started thinking that, you know, we could, in the future, extend that to distributors at some point. And we had our first example of that, where last quarter we launched the first storefront with a distributor called Order that's part of Gordon Food Service.
And the idea behind it is really connecting SMBs, businesses that want to buy daily essentials, from, you know, any source really, and connecting them with the best selection. And that can be our retailers for, like, you know, rapid needs, but that can also be distributors in the future, for, you know, more planned needs. And it's been really interesting to see that we already have a million business customers already ordering from Instacart without us having done much to help the business customers. In fact, a lot of what happened is that these business customers started as consumers. They were just ordering Instacart for themselves, and then they realized, "Oh, I can use that for my business as well, and it's so much more convenient." So they started ordering, but we didn't really have any business functionality.
It's just really in the last year that we started launching things like tax invoicing, like business profiles, lots of like business features to really align to the needs of these businesses. So we think that there's still a massive opportunity to attract more businesses, but also to increase selection by bringing distributors into the ecosystem. Again, it is a long-term opportunity, but one we're excited about.
Okay. Maybe we could turn to the advertising landscape. So if you think about it, you built one of the larger advertising businesses that reach customers both on Instacart and off Instacart. What stage are we at in terms of the broader advertising opportunity? And maybe thinking through the lens of CPG advertisers, how they spend their money, and what some of the opportunity set is there for a company like yourself.
Yeah. So I think we're at a really interesting time in CPG advertising because what we're seeing when we talk to our advertisers is that we are at a time where retail media has gotten so much traction that it's at a point where the CPG companies are thinking about merging these retail media teams with their bigger, like, digital budget teams. But in order to do that, you need really excellent measurements to prove that, you know, this is the way to deploy budgets across the CMO and the Chief Commercial Officer. And so that's why you have seen us lean so heavily into measurements, because we think that's fundamentally how we help companies make the case that these budgets need to continue being bigger. And I saw a very similar transition happen when I was at Meta.
I built the ads platform there, and it was kind of a similar journey. We started with, like, social media ads budget, and then over time, like, that became part of digital budget, and really Facebook became, like, a very large part of the digital budget, and I'm seeing a very similar trend happen for retail media. The thing that brands are also telling us is that they really want scale. They don't want to deal with 25 different retail media networks popping up left and right. They want a one-stop shop that can address all of their needs, and so for us, what we're building is really the ability to, for brands to come to us and not only get access to ads on the Instacart app, but also ads that we power on our retailers' websites. We do that with a hundred retailers.
This morning, in fact, we announced that we are doing that with Thrive Market as well. Come to us and place their ads on a Caper cart, so that now they can come to us and we're not just online, but also omnichannel and in-store, and then leverage all of the data about these consumers on Instacart to also make ads on Facebook, Google, NBCU, Roku, The Trade Desk, even better performance-wise. So, we're really working hard to be that one-stop shop for brands so that they can really deploy their dollars in the most effective way at scale across all of these channels.
... Maybe building on that answer, Fidji, you know, when you think about where you want to bring your advertising business longer term, you've talked about the advertising investment rate, and we talk about that on earnings calls. In terms of some of the levers and product development, and what will take you from where you are now to where you want to be medium to long term, maybe talk a little bit about the things you're working on, the things that are most interesting to you in terms of improving that advertising investment rate.
So we have a goal of hitting advertising as being 4%-5% of GTV. And we are very confident in our ability to get there. The way to get there is first by looking at the core business, so advertising on Instacart, and continuing to release these measurement capabilities to prove to brands that we are the best place for them to spend their money. But the other thing is that we also want to diversify towards the smaller brands, who currently are growing much faster than the big ones. And the reason for that is that when we started, you know, we were very, like every platform, very concentrated in the big guys. But as a result, we're a little too dependent on them.
So when something happen in their business, even like independent of Instacart, and they might pull back advertising dollars, we are still too dependent on that, whereas if we had a more diversified business, that would allow us to handle these kind of changes much better. So that's why you're seeing us invest a lot in emerging brands, and that's both on the product side, by releasing products that are really suited for them, like for example, having an optimization engine so that emerging brands can target only new-to-brand customers, because they really care about that. Also investing in our sales team, it's a different sales motion to sell to emerging brands than to sell to large brands. And so all of that will create a more diversified ad business, and that's why you're seeing us make progress on that.
We recently announced that we have 6,000 brands on the platform. And that's also why, you know, back to the deal with Thrive that I mentioned, that's why, a big part of why Thrive decided to pick us as a partner, because they have a ton of emerging brands on Thrive Market, and we can be the best partner to actually get these brands to become advertisers. So that's kind of on the core. And then in addition to that, are all of the other levels I mentioned. Extending the ads business beyond just the Instacart app to more and more external websites. We do that for Costco, Publix, Schnucks, Sprouts, now Thrive, the list goes on.
But we want to continue aggregating the market and really, providing the, you know, the best platform to buy across all of these retail sites, expanding to Caper Carts , as I mentioned, and then powering ads on other advertising platforms. And, you know, all of these levels would definitely get us there.
Okay, so we only have a few minutes left. I think we always like to end with a forward-looking question. We're at a technology conference. What do you think will be the biggest surprise in the delivery industry over the next year? And what are you most excited about for Instacart over the next three to five years?
Ooh, so many things. So I would say on the biggest surprise, I would say, you know, I still think people misunderstand how difficult it is to do grocery delivery extremely well at a high level of quality, at scale, with high retention, and have a really sustainable business, and I think that's gonna become more clear in the next year. Now, when you talk about the future and kind of what I'm excited about, I think the omnichannel nature of the business is critical. I think that, the players that are gonna win are not just gonna be focused on online deliveries. They're gonna help address all of the needs of the customers, which does include in-store, all of the needs of the retailers, which are omnichannel.
And the incredible advantage we have is that because we have already solved all of the foundational problems of online, we get to invent the future of grocery with our grocery partners. Whereas our competitors are still kind of stuck fixing problems that we addressed five years ago. And so I'm really excited to build that future. And then the last thing I'll add is that, you know, I'd be remiss if I didn't at least mention and namecheck AI at a conference where I think no CEO can walk on such a stage without having namechecked AI. But I will, more seriously, I think we're at a very interesting time in the industry, where we now have technologies, finally, that can create a truly personalized experience.
I think families should be able to come to us and tell us, "I have three kids, one of them is lactose intolerant. I have this particular budget. The entire family is trying to eat healthier." Like, ingredients should show up at the door with clear recipes that they can cook, and that should be as easy. It hasn't been as easy to date, and I believe that in order to move the industry more online, we need to leverage these technologies to really embrace the truly personalized experience that we need to deliver for families, and that families deserve. I'm really, really excited about the future, as you can tell, and we're putting our money where our mouth is by buying back a lot of our stock. We've bought back 15% of the company in our first year as a public company, and so we're very excited about where we're headed.
Fidji, really appreciate the opportunity to have the conversation. Please join me in thanking Instacart for being part of the conference this year.
Thank you, everyone. Thank you so much, Harry.