Dive Brief:

• Instacart plans to lay off approximately 1,877 workers who pick and pack grocery orders as it continues to reduce the number of its shoppers classified as employees, according to a Jan. 19 letter sent by an attorney representing the e-commerce provider to Local 1546 of the United Food and Commercial Workers International Union (UFCW), which represents grocery workers in Chicago.
• The layoffs, first reported by Bloomberg, include Instacart’s only unionized workers, who serve as in-store shoppers at a Mariano’s store in the Chicago suburb of Skokie, Illinois.
• Instacart is changing its approach to handling the online grocery services it offers consumers amid a broader push by retailers to make e-commerce services more efficient.

Dive Insight:

Instacart’s decision to scale back its use of employees to fulfill online grocery orders, called "in-store shoppers," comes as a growing number of retailers opt to use their own workers to fulfill pickup orders while still relying on Instacart's click-and-collect technology. 

The e-commerce provider said this service model, which it calls "Partner Pick," reflects the evolving needs of retailers at a time when online sales have rapidly increased. Store pickup has proven to be especially popular with shoppers during the pandemic, and retailers are trying to improve order margins. 

Instacart, which offers pickup services from more than 3,300 stores in 30 states, is currently testing a program that will allow contract shoppers who typically handle delivery orders to pick, pack and stage orders for pickup, the company said in a blog post outlining the changes it's making.

"For all of these retailers, Instacart full-service shoppers will also continue to be available to pick and deliver groceries and goods for delivery customers," the company wrote.

Regarding its laid-off employees, Instacart plans to transfer some of these shoppers to other locations where it will still offer those positions and encourage retailers to hire shoppers if they have roles to fill, the company said. The company will provide severance payments ranging from $250 to $750 to workers it is letting go, with the amount varying based on the time the staff member has worked for Instacart, according to the letter from its attorney.

The UFCW decried Instacart’s move to reduce its reliance on employee labor, which it called a “ruthless attempt to eliminate jobs of essential workers” during the pandemic, and called on the company to reverse its decision.

“Instacart firing the only unionized workers at the company and destroying the jobs of nearly 2,000 dedicated frontline workers in the middle of this public health crisis, is simply wrong,” UFCW International President Marc Perrone said in a statement. 

The cutbacks include approximately 366 in-store shoppers who work at Mariano’s, where Instacart has 10 UFCW-represented shoppers, and other Kroger-owned grocery stores. Instacart is also cutting about 1,500 in-store shoppers at other grocery chains, which the company declined to identify. Instacart plans to end the positions between mid-March and the end of June, according to the letter sent to the UFCW.

“Kroger has been made aware of Instacart’s plan and is in accord with this transition,” the letter said. A Kroger spokesperson did not respond to a request for comment before this article was published.

Instacart has concluded that using in-store shoppers makes deliveries more expensive in some cases than relying entirely on contractors to handle these services. Using contractors is also more efficient because they can be deployed to various locations in response to customer demand, its attorney said in the letter. Instacart has more than 500,000 of these contractors, known as full-service shoppers, who handle deliveries in addition to picking orders in stores. 

The company’s attorney said Instacart has been cutting the number of in-store shoppers since 2018, when it began eliminating the positions in areas such as Los Angeles, Seattle, Minneapolis, San Diego and parts of Texas. Instacart currently has fewer than 10,000 in-store shoppers on its payroll, according to the letter. 

Instacart announcement that it will reduce the number of employees on its payroll follows the November approval by California voters of a ballot measure that exempts third-party delivery platforms from a state law that requires companies to classify workers as employees and provide them with certain benefits. Instacart supported the measure, called Proposition 22.

Instacart’s disclosure that it is adjusting its labor model follows a decision by Albertsons to stop using store staff to handle deliveries in a number of locations starting in February. The grocer plans to shift that work to third-party contractors, although an industry source familiar with the changes Albertsons is making said they are not related to the passage of Proposition 22.