Dive Brief:

• Instacart charged some of its customers for a service fee they had waived and failed to deliver tips to some of its workers due to a recent system glitch, CEO Apoorva Mehta acknowledged in a blog post Friday. The bug was related to product updates made at the end of last year, and impacted less than 1% of customers.
• Mehta noted that impacted shoppers will have their money refunded, and that workers will be awarded their missed tips. “We sincerely apologize for this and we are committed to doing better going forward,” he wrote.
• Instacart has had issues with its workers in the past over the handling of tips. In 2016, the company removed online tipping, then reinstated it after workers demanded its return. Last year, Instacart paid a $4.6 million settlement related to improper handling of tips, neglecting to pay business expenses and 16 other charges.

Dive Insight:

Instacart has grown immensely over the past year as a key ally for grocers in the fight against Amazon. But the company’s worker relations remain a thorn in its side.

Instacart’s tipping policies have long been a point of contention. Back in 2016, the company replaced its tipping function with a “service fee.” It claimed this would provide workers with more reliable wages, but workers signaled their displeasure with the move and Instacart reinstituted tipping early last year. However, the tool isn’t obvious to customers, shoppers point out, and is often thought to be included in the service fee customers are charged.

Workers have also taken issue with the other fees Instacart pays them. In addition to the class action lawsuit settled last year, a group of workers in the fall staged a “no delivery day” to protest the company’s wages and policies. The walkout grabbed headlines but didn’t impact Instacart’s business, according to a company rep.

In the wake of Amazon’s acquisition of Whole Foods last summer, numerous grocers teamed up with Instacart. The e-commerce provider offers a cost-effective way to get up and running with online shopping and delivery. Instacart is now active in nearly 200 markets, and has partnered with six of the seven top grocers in North America.

But competitors are turning up the pressure. Target now owns Shipt and is quickly rolling the service out to its more than 1,800 stores. Amazon just began offering Prime Now delivery from Whole Foods stores in select markets, with plans to expand nationwide over the coming months. Other services are elbowing their way in, too, like Austin, Texas-based Favor, which got snapped up by H-E-B earlier this month.

Right now, Instacart is the biggest name in grocery e-commerce. As the competition heats up, though, workers and customers will have more options to choose from. This means negative press and a bad reputation stemming from worker relations could have an amplified effect. Instacart is no doubt monitoring this area, and may need to implement new policies if it hopes to claim the mantel of workforce leader as well as market leader.