San Francisco startup Instacart is launching same-day grocery delivery in Chicago, allowing residents in 13 city neighborhoods to get items from Trader Joe's and other stores brought to their doorsteps.



Chicago represents one of 10 cities where Instacart is planning to set up operations by the end of next year. Founded last summer by Apoorva Mehta, a former supply chain engineer at Amazon, the company has raised $8.5 million in venture capital to expand beyond its home base of San Francisco. Mehta said he liked that Chicagoans are already well-versed in using grocery delivery services, thanks to incumbents such as Skokie-based Web grocer Peapod, which was founded in 1989 and is now a unit of Dutch supermarket company Ahold.



"One of the main reasons why we launched in Chicago was because there was so much competition," said Mehta, Instacart's chief executive. "Competition, to us, is a huge indicator that there is demand for a service like this…We saw this as a positive signal."



Instacart customers go on the company's website and select groceries. They can then choose from several delivery windows, with the fastest option at under one hour. The company uses what it calls a "crowd-sourced labor force" of personal shoppers -- people with their own vehicles who are vetted beforehand -- to pick up the groceries and deliver them. These personal shoppers also act as inventory trackers, allowing Instacart to keep its website updated with the price and availability of items at stores.



Delivery under an hour costs $14.99. For orders of at least $35 delivered under two hours, the price drops to $3.99. In Chicago, Instacart will operate between 9 am and 10 pm. It will kick off local service with Trader Joe's and plans to add Dominick's, Whole Foods and Costco "in the coming weeks," the company said. Customers can combine items from different stores into a single order.



Mehta said Instacart is also looking to add more personal shoppers in Chicago. They are hired as independent contractors and set their own hours, and they are paid by the number of items they gather and the number of deliveries they make. Instacart's personal shoppers in San Francisco make an average of $20 an hour, with the typical contractor working between 25 and 30 hours a week, Mehta said.



Same-day delivery is shaping up to be a fiercely competitive industry, with many startups and established companies pitching technology platforms to help local businesses with delivery logistics. Grocery delivery is a crucial sub-category, with both Google and Amazon testing out services in selected West Coast markets. Peapod operates in 24 U.S. markets and its fastest delivery time is next-day, although it offers same-day pickup in a few suburban locations.



Instacart's local service area covers the Loop and surrounding neighborhoods, stretching north to Lakeview, west to Logan Square, and south to parts of McKinley Park, Bridgeport and Douglas.



Mehta said Instacart doesn't have any formal partnerships in place with grocery stores, although the company is in talks with some operators about potentially working together.



wawong@tribune.com | Twitter @VelocityWong

