Amazon still dominant, but competitors gaining ground

Nielsen reported recently that Amazon's e-commerce lead is shrinking as major brick-and-mortar retailers like Target, Walmart and Kroger - along with e-grocery company Instacart - have outpaced Amazon in percentage growth of online consumer packaged good (CPG) purchases.

In the two-year period beginning in January 2017, the number of e-commerce buyers of grocery and other CPG products for Amazon rose 29%. However, the growth for Instacart (256%), Walmart (207%), Kroger (172%) and Target (122%) was far greater.

According to Nielsen, Amazon competitors gained ground in the last couple years by rapidly ramping up their online grocery fulfillment capabilities for home delivery and for store pickup.

Despite big gains by competitors, Amazon still enjoys a healthy lead. Its reach among U.S. online purchasers is approximately ten times more than any other retailer.

Whole Foods and Instacart end partnership, 56 workers let go

Whole Foods and Instacart announced earlier this month that the two companies have "mutually agreed" to end their delivery services partnership, effective May 15. As a result, 56 Philadelphia-area workers have been laid off.

The end of the Whole Foods - Instacart relationship did not come as a surprise to industry analysts, many of whom predicted the change since Amazon purchased Whole Foods in 2017. Whole Foods currently offers Prime Now, a one- and two-hour delivery service in more than 60 U.S. cities, including Philadelphia.

Instacart remains a strong presence in the Philadelphia market, as it has relationships with Reading Terminal Market, CVS, Aldi, Sprouts Farmers Market, Sam's Club, Wegmans, Acme, and Costco. Overall, the company is in 5,500 cities and delivers from nearly 20,000 stores.

"The U.S. is nearly a $1 trillion grocery market, and last year we saw almost every major grocer in North America bring their delivery business online in a significant way," said Instacart CEO Apoorva Mehta in a statement last year. "We believe we're in the early stages of a massive shift in the way people buy groceries, and we expect that one in five Americans will be shopping for their groceries online in the next five years."

Instacart and Whole Foods to end partnership

Instacart said earlier this month that it will "wind down" its nearly five-year old partnership with Whole Foods. Instacart plans to lay off 243 of its 1,415 Whole Foods personal shoppers. However, the company said it expects to place more than 75% of its affected personal shoppers in similar jobs at other retailers in their area.

Industry experts had anticipated this move ever since Amazon purchased Whole Foods in 2017. As of June 2018, all Whole Foods stores in the U.S. were connected to Amazon Prime, and Prime Now delivery is currently available at Whole Foods stores in 63 cities.  In addition, Prime Now Pickup is offered at stores in 22 markets.

Despite losing the Whole Foods account, Instacart continues to expand, and currently works with more than 300 retailers. The click-and-collect Instacart Pickup program is expected to rollout soon to nearly 200 grocery stores in 25 metro markets.

Instacart raises money to fuel expansion, add employees

Instacart announced last month that it received $350 million in financing from Coatue Management, a technology-focused hedge fund, and noted that it has raised more than $1 billion since 2012, with most of it still in the bank.

According to the company, the additional funding will be used to double its employee count, fuel expansion, and invest in new products and services.

Instacart is now used by North America's eight largest grocery retailers - Kroger, Albertsons, Publix, Costco, Ahold Delhaize, H-E-B, Loblaw and Sam's Clubs, not to mention regional grocers like Wegmans.

BJ's expands Instacart partnership

BJ's Wholesale Club, which has been marketing heavily to Sam's Club customers since the Walmart-owned company closed several stores, has expanded its same-day delivery agreement with Instacart and will soon offer the service from all 215 stores.

Instacart also recently expanded its partnership with Costco, Kroger and Aldi. According to Kroger, two-thirds of its customers now have access to delivery and/or curbside pickup.

Amazon introduces home delivery from Whole Foods

On Thursday Amazon introduced free two-hour delivery of certain Whole Foods Market items between the hours of 8am and 10pm in select zip codes in Austin, Cincinnati, Dallas and Virginia Beach. Orders can be made via primenow.com or the Prime Now app.

Amazon expects to expand the service across the U.S. later this year.

According to Amazon, Prime customers can shop for thousands of Whole Foods items, including produce, bakery, dairy, meat, seafood, floral and everyday groceries. Select alcohol is also available for delivery. Prime members receive two-hour delivery for free, and "ultra-fast" delivery within one hour for $7.99 on orders of $35 or more.

Many traditional supermarkets already offer home delivery services. Ahold (Giant, Stop & Shop) was one of the originators with Peapod, ShopRite offers delivery provided by individual stores, and Acme partnered with Instacart earlier this year to delivery orders "in as little as two hours."

Costco announces new online grocery program

Last week Costco announced an expanded relationship with Instacart, and a new online shopping service called CostcoGrocery.

Instacart, which is currently offered at 376 U.S. Costco stores, will gradually expand to additional locations over the next year. CostcoGrocery is a service that includes about 500 nonperishable dry grocery items and provides free delivery on orders over $75.

Despite the new and expanded offerings, Costco CEO Richard Galanti admitted in a conference call with analysts that the company still prefers when shoppers visit the store, since baskets are typically much larger. 

Net sales for the 17-week fourth quarter, which ended on September 3, were $41.4 billion, a 15.8% increase over the 16-week fourth quarter from fiscal 2016. 

Instacart to service PriceRite stores in PA's Lehigh Valley

PriceRite Supermarkets announced yesterday that it is expanding its partnership with Instacart to include the Lehigh Valley, where the grocer has two stores - one each in Allentown and Bethlehem. Instacart already operates in the Lehigh Valley, where about 206,000 households can shop online at Wegmans, Whole Foods and Costco, and have their purchases delivered to them for a fee.

Instacart is already offered at many PriceRite locations in Connecticut, Maryland, Massachusetts, New York, Rhode Island and Virginia.

Aldi to add Instacart online shopping in select markets

Aldi announced Monday that it would begin offering online ordering and delivery later this month via Instacart in Atlanta, Dallas and Los Angeles, with "potential for future expansion."

Instacart currently serves nearly 40 markets in 25 states, and provides online ordering and delivery for companies like Whole Foods, Wegmans, Giant, and others.

The impact of the Amazon - Whole Foods deal may be far-reaching

Several media outlets and industry experts have weighed in recently with their thoughts on Amazon's planned $13.7 billion purchase of Whole Foods, including The Washington Post, in which its "On Leadership" column cited several "telling comments" made by Whole Foods CEO John Mackey. Sample comments include the following.

• Mackey admitted that Whole Foods may be too employee-focused, and although he didn't back down from the importance of treating employees well, he said that Amazon is "more customer-centric than we are... we're gonna become as customer-centric as Amazon."
• In a sharp contrast from when Zappos was purchased by Amazon and pledged to remain independent, Mackey said that "when this deal closes, we're all Amazon people."
• Mackey acknowledged that his company has been a little behind in technology as compared to Amazon, and pledged that "we'll go to the front of the class, eventually, in the grocery business."

A subsequent article in The Washington Post  reported on the deal's potential impact on small farmers and food producers, who are worried that Amazon will use its market power to further centralize production and boost larger, industrialized organic operations. In addition, industry activists and farmers advocates are fearful of the pressure Amazon may put on producers for price concessions, which could cause them to compromise on environmental and formulation standards.

According to an article written by CNBC's Chantel McGee, a data scientist claims that the merger is less about stores and more about data. Specifically, Boston College Professor Kenneth Sanford said that one of Amazon's goals should be to combine the data it already collects online and via Echo and Alexa, with Whole Foods' customer transaction data.

The data collected would enable the company to predict what customers need and automatically send it to them. "Amazon will know what's in your refrigerator already and be able to deliver extra turmeric when you need it," said Sanford.

Grocery e-commerce retailer Instacart is already working towards this goal. According to Jeremy Stanley, the company's vice president of data science, Instacart uses customer behavioral data and search activity to anticipate what a customer wants or might like.

"One of the wonderful things about groceries is that compared to other e-commerce purchases, groceries are habitual and frequent," Stanley said. "Groceries are really personal... and I think data can really change the way people buy food."

Supermarket News reported on the deal's potential impact on competitors, including Instacart, whose service generates more than $200 million in sales annually for Whole Foods. Should Amazon decide to pull out of the deal in favor of its own delivery service, it could harm Instacart, and perhaps Instacart's other customers as well. Furthermore, rather than replacing Instacart, Amazon could attempt to purchase it.

Sprouts Farmers Market has been competing successfully against Whole Foods in certain markets, and has made plans to partner with Amazon Prime Now for e-commerce. Perhaps the Amazon - Whole Foods deal could kill this partnership, or even make Sprouts an attractive Amazon target. Having Whole Foods and Sprouts under the same ownership could save Whole Foods from spending on its 365 format since Sprouts could fulfill the small format need.

Walmart's success integrating physical and digital assets, which has led to strong sales results in recent years, has not gone unnoticed by Amazon. And grocery, which generates frequent and habitual trips, has been central to Walmart's strategy, not to mention the company's expanded offerings in grocery pickup and delivery strategies. As the Supermarket News article points out, Amazon and Walmart are gunning for each other.

Lastly, natural and organic food consumers have seen big retailers like Costco and Kroger catch on to the trend that Whole Foods pioneered, and these retailers have hurt Whole Foods on price. With Amazon's buying power, that price advantage may eventually disappear - or at least lesson - resulting in Whole Foods recapturing sales at the expense of others.

Instacart partners with Giant, Wegmans

Instacart announced that it has joined forces with Giant and Wegmans to bring online shopping and delivery to customers in select areas for the two food retailers. Giant's partnership will benefit Philadelphia-area customers, and the service for Wegmans will be available in Northern Virginia and Maryland.

With Instacart, customers in the service areas can order groceries online from Giant or Wegmans for a small fee, and have them delivered within the same day,  often within one hour.

Giant already offers Peapod, a similar service to Instacart, but Peapod only guarantees delivery for the next day.

Instacart has served Philadelphia customers since 2014, when it signed on with Whole Foods and Reading Terminal Market.

For Wegmans, the Instacart deal represents the first online ordering and delivery offering from the company. It is expected that additional markets will be added in the near future.

FreshDirect leads grocery delivery race in sales, Peapod wins per basket

A report released by 1010data compared the performances of grocery delivery companies FreshDirect, Peapod, Amazon Fresh and Instacart through the first 10 months of 2016. The report's findings included the following:

• FreshDirect leads in sales, and has more than twice the share of Peapod, the next largest company in the study.
• Instacart and Amazon Fresh are growing at a much faster pace than FreshDirect and Peapod. Year-over-year growth for each company is 72% (Instacart), 43% (Amazon Fresh), and 7% (FreshDirect and Peapod).
• Peapod shoppers spent the most per basket ($147 per trip) compared to FreshDirect ($105), Instacart ($98) and Amazon Fresh ($84). 1010data believes this is in part due to Peapod's lower delivery fees for orders above $100.
• Shoppers order more frequently from Amazon Fresh and FreshDirect (once every two weeks) than they do from Instacart (once every 20 days).

So, you decide who's winning!

H Mart partners with Instacart

H Mart announced recently that it would partner with Instacart to deliver products to its customers, and an H Mart store in Upper Darby (near the Philadelphia border) would be the first store to activate the program.

H Mart is a national Asian-American supermarket chain that has 51 stores nationwide, including three in PA and eight in New Jersey.

Instacart is an online delivery service that currently services 18 metropolitan areas in the U.S.

Online grocery shopping getting better and easier

It's no secret that online grocery shopping is a real thing, and many people are doing it. However, it has its drawbacks, mostly that the customer can only choose from items sold at one specific store, and often the online assortment is smaller than the assortment offered in the store.

Enter Instacart and Google. With services offered by these two companies, customers can now shop online from multiple stores and wait for one delivery that includes all of the items purchased. All of the sudden the traditional supermarket is serving as a distribution warehouse.

An article I read envisions a day when no one visits supermarkets anymore, but I think that's far fetched. Remember when analysts were saying that online sales would prevent people from visiting bricks and mortar retail stores? In a few short years we have learned that online channels and the in-store experience complement each other, and both mediums will most likely be around for quite some time.

So, I think people - including me - will still visit supermarkets. But there's plenty of room in the industry for online sales, and for whatever the Googles and Instacarts of the world think of next.

Whole Foods reaches records sales in first quarter

Whole Foods announced last month that it had a record first quarter, with sales reaching $4.7 billion. That sales figure amounts to average weekly sales per store of $724,000, or sales per gross square foot of nearly $1,000.

Co-CEO Walter Robb said the strong numbers were due to its customers' positive response to the company's strategic initiatives along with improving consumer confidence. The strategic initiatives cited include the "values matter" television and print campaign, the 15-city partnership with Instacart, digital technologies like Apple Pay, and a test of lower pricing in select markets.

Whole Foods also said it expects to open between 38 and 42 stores this year, including relocations.

Whole Foods embracing technology via Instacart and Apple partnerships

Whole Foods announced earlier this month it would partner with Instacart to offer customers one-hour delivery service, as well as an option to place orders through Instacart for in-store pick-up.

The delivery service will start in the 15 cities Instacart currently operates in, including Philadelphia. The in-store pick-up service will start in select Austin, TX and Boston, MA stores before expanding to all cities serviced by Instacart in the coming months.

For the delivery service, customers at Instacart.com or via the company's app select their zip code, add items to their virtual cart, choose a delivery window and check out. "Personal Shoppers" working on commission and tips shop for the items and make the deliveries.

Customers' first orders are free, and thereafter will cost $3.99 for two-hour delivery or $5.99 for one-hour delivery. With a $99 annual membership, all orders over $35 are free.

In unrelated Whole Foods news, the company announced earlier this month it would be among the first retailers to let customers make purchases using Apple Pay, a new mobile payment system for the iPhone 6 and Apple Watch.