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Local grocery stores hope to establish home delivery patterns ahead of Amazon

Local grocery stores hope to establish home delivery patterns ahead of Amazon

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Senior citizens, millennials, new parents and those experiencing chronic illnesses are driving the burgeoning grocery home-delivery marketplace locally.

“In many instances, it’s about people willing to pay a grocery delivery fee to gain back 1½ to 2 hours of their life,” said Athena Smith, a personal shopper for online vendor Instacart.

“I’ve even picked up an order from a couple calling from an airport taxiway coming home from a trip. By the time they got home, I was there with their order.”

Instacart debuted its Triad home-delivery service Thursday at Publix. It already has Costco (no membership needed), Harris Teeter, Petco and Whole Foods as clients. It is negotiating to expand services with Food Lion, CVS and Total Wine & More into the Triad.

Meanwhile, Harris Teeter, Lowes Foods and Whole Foods Market offer local home-delivery services through online vendor Shipt. For Lowes Foods, Shipt represents another option from its current click-and-collect service.

Depending on the size of the order, both vendors say they can make deliveries within an hour, but typically commit to a two-hour delivery window.

Walter Robb, chief executive of Whole Foods, said his company pursued home delivery in part to make its groceries more readily available in markets, such as Winston-Salem and Greensboro, where it has just one store.

“(Home delivery) makes it extremely easy for our customers to buy Whole Foods Market products and have them quickly delivered, whether buying fresh ingredients for dinner tonight or sending healthy foods to loved ones in another city,” Robb said.

How it works

Instacart serves 29 Triad zip codes, breaking them down into what it calls heat maps that measure where it and clients have the most consumer demand.

Shoppers for Instacart and Shipt go through background checks before being hired. They wear clothing identifying them as employees, along with carrying a photo ID.

The service begins each day at 8 a.m. and runs through 10 p.m., “so for those wanting a beer run need to get their orders in ahead of time,” Smith said.

Shipt spokeswoman Julie Coop said that if the client store “is open for our shoppers to shop, we can deliver.”

Customers can place orders on the grocer’s website or on the Instacart and Shipt apps, with a conditional hold placed on billing their order until the delivery is made.

The websites and apps offer estimates on the cost of produce and meats. If an item is out of stock or if there has been a price change, the personalized shopper will send a notice to the customer to ask whether they still want the item. If the customer hasn’t responded by checkout time, the shopper can give them a call to verify their choice.

The shopper takes a smartphone photograph of each item’s identification bar to verify the right item has been selected.

“I choose produce that can be eaten that day, but is still good for three to five more days,” Smith said. “Customers can list preferences on their order, such as they prefer soft avocados or hard apples.”

Customers can list their loyalty card numbers with their account so it can be accessed at checkout. Digital coupons are available on the websites. Shipt offers occasional “buy one, get one free” specials that mirror client sales.

Smith said that once she has completed shopping an order through the app, she is notified where the customer lives. The grocery exchange is conducted at the door for safety concerns for both parties.

Smith said she typically makes one to two deliveries per hour, depending on how close the orders are. Her typical compensation as an independent contractor is between $7 and $7.50 per order, plus 40 cents per item shopped, and tips.

“Some customers make up for the delivery cost with coupons, while others say they save money through eliminating impulse buying,” Smith said.

Amazon’s impact

Although Instacart and Shipt have been in business for a few years, they received a competitive jolt when Amazon announced plans June 23 to spend $13.7 billion to buy Whole Foods. That deal requires regulatory and shareholder approval.

Analysts see the Amazon-Whole Foods combination as having a mixed impact on online grocery delivery vendors.

The potential negative is facing a deep-pocketed rival in the marketplace going beyond nonperishable grocery deliveries.

The potential positive is Amazon’s entrance raising awareness of grocery home delivery. According to The Associated Press, online orders are estimated currently to account for just 1 percent to 2 percent of grocery sales.

Bill Smith, founder and chief executive of Shipt, said in a statement that “Amazon’s planned acquisition of Whole Foods Market is further validation that the grocery industry is moving online.”

“Shipt’s goal from the beginning has been to work alongside leading national and regional grocers, including Whole Foods Market, to create the best member experience possible.”

Instacart said in a statement that the potential Amazon-Whole Foods combination “validates that grocery e-commerce is here to stay.”

“This news represents a great opportunity for Instacart to help grocers quickly launch an e-commerce solution that works. Every time Amazon comes to town, we hear from retailers who want help competing. Instacart is ready, willing and able to help.”

Klaus Werner, Lowes Foods’ head of e-commerce and chief information officer, said that providing additional convenience to shoppers, such as through home deliveries, will help brick-and-mortar grocers take on the Amazon-Whole Foods challenge.

“Partnering with Shipt provides an additional online shopping option and flexibility to our loyal Lowes Foods guests,” Werner said.

“We’ve been in the online space for 15 years and seen a variety of competitors comes to our marketplace.

“We’re constantly talking to customers about their needs as part of our overall approach to loyal customers with high-level service and quality of products,” Werner said.

Roger Beahm, executive director of the Center for Retail Innovation at Wake Forest University, said grocery consumers “tend to be loyal to just a few grocery chains, partly out of habit, partly because of location, and partly because of it’s the store they shopped at growing up.”

“That loyalty is likely to continue among people who want home delivery once their preferred banner offers that service.

“If grocery chains move quickly enough into home delivery, they’ll be able to keep the Amazon-Whole Foods competition from capturing that share of wallet.”

Synergy opportunities

Analysts are exploring the potential synergies of having Amazon delivering Whole Foods branded items.

Amazon already is making headway with its two-hour Prime Now delivery service in 32 cities nationwide, including Charlotte and Raleigh. It delivers more than 25,000 items in 25 categories, primarily grocery staples such as canned goods and non-perishables.

Coop said Shipt will continue to serve Whole Foods customers.

According to research group 1010data, 81 percent of regular Whole Foods shoppers also are Amazon customers, with 51 percent being Prime members.

Where the synergy opportunities are is that just 29 percent of Amazon customers also are Whole Foods customers.

The group also determined that 10 percent of Whole Foods customers have used an online grocery delivery services in the past year.

Kenneth Sanford, an adjunct professor of Masters of Applied Economics at Boston College, said the Amazon-Whole Foods deal represents “algorithms meeting avocados.”

“Whole Foods has built a brand that evokes trust and engenders loyalty,” Sanford said.

“The new Amazon-Whole Foods will bridge a massive brick-and-mortar retailer with arguably the most advanced retail data science company in the world.”


Business consultant Robbie Kellman Baxter, author of “The Membership Economy,” said Amazon’s decision to target lower-income households on government assistance with a reduced subscription price for Prime puts discount grocery chains Walmart, Aldi and Lidl in play in terms of competition with the Whole Foods combination.

“Amazon and other like-minded brands clearly care about the needs of low-income consumers,” Baxter said.

“But their effort to attract these price-conscious shoppers is also a brilliant business strategy. They clearly saw an untapped market and took action to entice them with a membership subscription that was too good to pass up.”

Baxter cited for example that Amazon Prime “is able to deliver much-needed goods to food and retail deserts.”

“Local stores usually have higher prices. Quick marts and mom-and-pop stores can’t compete with Amazon’s low prices.”

“Prime also solves the transportation issue for car-less shoppers.

Baxter said that although “Walmart has an internal goal of offering the lowest available price on 80 percent of all SKUs, they haven’t been nearly as proactive and membership-minded toward this group as Amazon.”

Trust factor

Beahm said the Amazon-Whole Foods deal accelerates the push toward one retail environment.

“Shoppers don’t compare the difference between shopping in a brick-and-mortar and online anymore,” Beahm said. “Retailers are getting out of that mindset, too

“Companies like Amazon will acquire specialty retailers like Whole Foods to meet consumer needs.”

Beahm said one potential negative for Whole Foods is that it is “sharply positioned in people’s minds around natural and organic ... and is known for high prices.”

“While it’s true this positioning has helped them build a successful business in the marketplace, it also holds them back when shoppers don’t want, or don’t care about, products outside of that positioning.

“When shoppers want home delivery and most of the products on their shopping list fall outside of the natural and organic category, those shoppers will likely consider another grocery chain first if that grocery chain home delivers.”

Beahm said Amazon has a trust factor with consumers that Instacart and Shipt haven’t established yet.

“For a brand like Amazon to expand its portfolio means a lot more than a niche company that doesn’t have a lot of equity, that people aren’t using nearly as much,” Beahm said.

“Amazon, as the leader in home-delivery today, can and will continue to innovate, looking for new and better ways to improve on this service. They have the financial resources, the experience, and the motivation.”

“If they apply that learning to Whole Foods, other grocery chains will most likely always be chasing and never leading in that area,” Beahm said. 336-727-7376 @rcraverWSJ


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