Instacart's grocery delivery business is profitable - but only under these circumstances
But the profitability claim is subject to a number of caveats.
The first is that Instacart is only "unit economic profitable" in a few select markets. That means that it makes money on average orders. Also, they're only unit profitable in 10 of their 19 markets; in nearly 50% of their markets they're either breaking even or losing money.
Overall, Instacart says it is now gross margin positive - but that's a measure of profitability that doesn't include costs such as R&D and marketing.
Instacart has apparently achieved its gross margin profit by driving up efficiency and the "items per minute" that its shoppers can load into a cart every 60 seconds. They've done this by sending specific shoppers to stores whose layout they're already familiar with. This method has increased their fulfillment efficiency by 15% according to Stanley. This has led to fewer "lost deliveries", a new metric implemented to show how many customers aren't able to put orders in due to delivery constraints.
But we still don't know anything about Instacart's topline. The company told Fortune its annualized revenue run rate has increased by 6X since January 2015, when media reports pegged its revenue at $100 million.
Two of Instacart's three primary revenue streams involve retailers, the only source of revenue from customers is the customer subscription fee.
If Instacart wants to truly prove that its business model has legs, it will need to show that it can crank up its revenue and not just turn a profit by squeezing more efficiency out of its process.