Instacart, Uber Deal 'Makes More Sense Now,' Analyst Says: Here's Why

As the gig economy continues to evolve, one analyst believes that a deal between Instacart (CART) and Uber (UBER) makes more sense now than ever before. In a recent research note, Deepak Mathivanan from Wolfe Research suggested that the two companies should consider merging due to rising competitive risks and the potential for synergies.

Instacart, the leading online grocery delivery service in the US, has a 29% market share and partnerships with over 1,500 national, regional, and local retail banners across more than 85,000 stores. Meanwhile, Uber, the ride-sharing giant, has been expanding its grocery delivery services through Uber Eats. A merger between the two companies would create a formidable competitor in the online grocery delivery market.

Mathivanan argues that grocery is a critical category for Uber to sustain bookings growth in the long term. By acquiring Instacart, Uber would gain a strong position in this market and compete more effectively with other players like Amazon (AMZN) and DoorDash (DASH). Additionally, the merger would help Uber close the product gap with Instacart and maintain its competitive edge in the grocery delivery space.



The analyst also points out that a merger between Instacart and Uber would improve the customer experience by integrating Instacart's grocery delivery services with Uber Eats. This would allow customers to order both groceries and restaurant meals from a single app, creating a more seamless and convenient experience.

Moreover, the partnership would create more earnings opportunities for gig workers, as they would be able to deliver both grocery and restaurant orders. This would not only benefit the workers but also contribute to the overall growth and success of the combined entity.

Mathivanan estimates that Uber could achieve $1 billion in synergies by cutting administrative expenses and half of operating and sales spending. This would further enhance the combined entity's profitability and make the transaction accretive to Uber's earnings.

In conclusion, a merger between Instacart and Uber makes strategic sense for both companies. By combining their strengths in online grocery delivery and ride-sharing, they would create a powerful competitor in the market. The synergies and improved customer experience would contribute to the overall growth and success of the combined entity. As the gig economy continues to evolve, it will be interesting to see if this deal materializes and how it shapes the future of online grocery delivery.