Instacart Parent’s Stock Drops as Amazon Tests ‘Ultra-Fast’ Deliveries

An Instacart employee shopping for two customers at a ShopRite on January 08, 2022 in Clark, New Jersey. (Michael Loccisano/Getty Images)

Key Points

• Amazon is testing “Amazon Now,” an ultra-fast delivery service for household essentials and groceries in Seattle and Philadelphia.
• Prime members pay $3.99 per order for the new service, while non-Prime members are charged $13.99.
• Shares of Instacart parent Maplebear dropped 3.7% following Amazon’s announcement of its expanded delivery services.

Shares of Instacart parent Maplebear were falling Tuesday after e-commerce giant Amazon.com announced that it will be launching “ultra-fast” delivery services in two cities.

Amazon said in a news release Monday night that it is testing 30 minute or less delivery on thousands of different household essential items and groceries in parts of Seattle and Philadelphia through what has been dubbed “Amazon Now.”

Prime members will pay $3.99 per ultrafast order, while non Prime members will be charged $13.99.

“While this offering is in early test mode, we think Amazon Now is potentially an important step toward Amazon matching or even surpassing the immediacy benefit of in-store purchasing,” BofA Securities analyst Justin Post wrote in a note on Tuesday. He rates Amazon as a Buy with a $303 price target.

Amazon stock was trading up 0.4% to $234.87 on Tuesday afternoon.

The expansion of Amazon’s same-day delivery, especially with food and grocery items, puts competitive pressure on companies like Instacart. Shares of Maplebear—the parent of Instacart—dropped 3.7% to $41.19 on Tuesday.

Amazon is known for getting packages to customers quickly, but the company has been looking to make its delivery process even quicker.

Amazon launched its Prime Now same day service in 2014, but then integrated that service into the Amazon app and website in 2021. Amazon has also launched delivery drones that are designed to deliver packages weighing five pounds or less in under 60 minutes.

The company recently expanded its same-day perishable grocery delivery services, and said in August that it planned on expanding that capability to over 2,300 areas across the U.S. by the end of 2025.

“We view Monday’s announcement as a pivotal step forward in Amazon’s broader strategy to capture incremental share in the category,” Wedbush analyst Scott Devitt wrote in a note on Monday.

“The introduction of a more competitive grocery delivery offering could diminish the appeal of intermediaries and pressure Instacart’s business,” Devitt added. He rates Mapelbear as Underperform with a $36 price target.

Write to Angela Palumbo at angela.palumbo@dowjones.com