Under pressure from shoppers complaining about losing the ability to receive tips last month as the company looked to smooth out the earnings curve, Instacart said it is re-introducing customer tipping.
“After announcing this change, we heard a lot of feedback from our shopper community,” the company said in a blog post. “While our shoppers liked most of the changes, they did not like the fact that we were removing tips from our online platform. Taking that feedback into account, we have decided to continue to accept tips as part of this change.”
CEO Apoorva Mehta stressed that the decision came from customers looking to continue tipping, rather than complaints from shoppers, which he called a small group that was “very vocal” about the change. However, following removing tips, Instacart received some backlash from shoppers who said they were losing significant portions of their earnings. The backlash went so far as to inspire a boycott among some shoppers, though again Mehta said that this was not the primary cause for returning tipping.
“We have tens of thousands of shoppers,” Mehta said. “I think that a lot of times it’s the most vocal ones you hear from. A lot of times what ends up happening is that frankly we were over-communicative, we communicated for weeks before the chain before it happened. Genuinely, I think there’s always going to be the case that we can always do better, this is one of those cases where we can definitely do better. I hope the next time changes we carry out, we hope that we’re better at it now than we were before.”
Originally, the company sought to raise the overall earnings payout per delivery while removing tips, which was an attempt to make earnings more reliable instead of burst-y as a result of tips. Top shoppers, however, accustomed to getting larger tips because of their performance were concerned that they would lose a significant portion of their earnings. The vocal minority, it seems, was loud enough — and perhaps so was the customer base — that Instacart had to reverse course.
Despite all this, Mehta said the company was clearly communicating with the shopper base what the change would be. But he also said that Instacart, with the change, was “getting in the way” of customers tipping their shoppers, which would have to then rely on cash in order to give a tip for a good customer experience. One original argument for the change was that 20% of customers didn’t tip, but that other 80% comprised a significant portion of its shopper base’s income.
Instacart has to remain competitive among other on-demand services that are looking to scoop up the same potential shopper base. In that sense, Instacart has to ensure that it provides a positive shopper experience as well as a customer experience, and changing a long-accustomed to model can incite a lot of backlash. In this case, it appears that the shopper base was content with the old model, and it certainly seems like the model was working well for shoppers despite more chaotic income rates.
And as Instacart continues to expand, it’s going to have to not only rely on a good shopper experience and marketing, but also positive word of mouth from shoppers. If even a “vocal minority” ends up fighting back against changes, that’s going to cause a potential optics issue for the company’s attempts to attract new shoppers.
“What we look at, from the shopper’s perspective, there is a market-clearing wage that we have for shoppers,” Mehta said. “What we benchmark is with other on-demand services and other jobs that are similar. We need to make sure we are paying competitive to those. That’s better than anyone else, this is a competitive market, if shoppers are not able to earn a competitive wage on Instacart they will defect to other platforms.”
Customers will still pay a service fee at checkout. “This payment will be used to guarantee a higher commission to all shoppers,” the company said in a blog post. “Shoppers will no longer need to depend on tips for the majority of their compensation. This also means that customers no longer need to feel obligated to tip. However, if a customer wishes to recognize exceptional service, they will have the ability to tip their shopper directly on the Instacart platform.”
This update launches on October 17 in Washington D.C., and the change comes to San Francisco and Instacart’s other markets on October 24.
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