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Walmart, Google-backed Deliv end online grocery partnership

Walmart Inc and logistics firm Deliv pulled the plug on a key same-day grocery delivery partnership, dealing a setback in the retailer’s race against rival Amazon.com Inc to deliver groceries to customers’ homes.

The world’s largest retailer began bolstering its partnerships with third-party courier firms to reach consumers in 100 U.S. cities last year, after failing to use Uber and Lyft to deliver groceries, and struggling in its attempt to use its own employees to deliver goods.

Deliv, which was one of Walmart’s earliest partners with pilot programs in Miami and San Jose, served the retailer with a 90-day termination notice, and the two companies stopped working with each other in late January, according to two people familiar with the situation.

Walmart confirmed the previously unreported decision, and said it still partners with seven delivery firms, including DoorDash and Postmates, four of which it signed up in January.

People familiar with the Walmart partnership with Deliv said the Deliv drivers had to frequently wait 40 minutes or more to collect grocery orders when they showed up at the store. One reason for that, they said, is because Walmart gives a priority to customers over delivery drivers during regular hours, which complicated the partnership.

The store operations at Walmart “were a huge problem,” said one of the people with direct knowledge of the matter, adding the retailer could not “process online grocery orders fast enough.”

Deliv declined to comment. Walmart spokeswoman Molly Blakeman told Reuters the retailer and Deliv mutually decided to end the partnership. “As with any pilot, the intent is to learn. And we ultimately came to the conclusion with Deliv that while their platform is a good delivery option, it was not the best fit for our program at this time.”

Blakeman said same-day grocery delivery is currently available in 800 of its more than 5,000 U.S. stores and warehouse clubs, and the retailer plans to add 800 more this year.

Deliv offers scheduled same-day deliveries through gig drivers, a model which can work well with faster order processing and a better ability to predict demand and robust volumes. Walmart is now working mostly with restaurant delivery firms that deliver an order as and when it is generated, one of the sources said.

Both sources said order volumes were low in many markets, and one source said orders had to be delivered over large distances, resulting in both Deliv and Walmart losing money.

“When the partnership with Deliv was struck, the hope was that demand will be stronger than it is now,” one of the sources said.

Deliv operates in 1,400 U.S. cities, tapping into networks of local freelance drivers to deliver packages same-day for a fee for a range of retailers, from Home Depot Inc to Kohl’s Corp.

In October, it raised $40 million in a new round of financing from investors, including Alphabet Inc’s Google and United Parcel Service. In December, it signed up 20 new U.S. retailers including Nike Inc and Nordstrom.

Deliv can process and deliver thousands of orders in an hour. Walmart in San Jose was sometimes generating only a hundred orders a week, and there were problems processing that volume through stores, one of the sources said. Walmart is working to fix the problems at its stores to process orders faster, the source added.

Blakeman said there were no problems with order volume in the market.

The sources also told Reuters that Walmart has ended a separate grocery delivery test from 2017, in which it partnered with smart security company August Home and Deliv for keyless entries to shoppers homes, to deliver groceries directly to their refrigerator.

Source: Reuters

whole foods

Amazon Slashed Prices at Whole Foods. Now They’re Climbing Back Up.

Whole Foods is raising prices again, bowing to pressure from some consumer-product makers to cover rising packaging, ingredient and transportation costs on hundreds of products.

Internal communications reviewed by The Wall Street Journal show the natural grocer raised prices from 10 cents to several dollars as suppliers have boosted their prices in the face of growing costs. Retailers across the spectrum are starting to pass along similar price increases in response to the growing signs of inflation. Amazon.com Inc. cut prices after acquiring Whole Foods in 2017 to try to counter the grocer’s high-cost reputation that earned it the nickname Whole Paycheck. But even the e-commerce giant has limits as to price increases pushed by suppliers.

Whole Foods increased prices this month on dozens of items from Dr. Bronner’s soaps to Häagen-Dazs ice cream, according to an email viewed by the Journal. A separate company email in December listed 550 additional price increases on products including crackers, olives and cookies.

Whole Foods said in the December email that suppliers were charging more for those products due to inflation. The separate price increases this month followed the expiration of annual contracts to sell about 700 goods at low prices, Whole Foods said. Those contracts won’t be renewed, the chain said, and the increases add up to hundreds of thousands of dollars a week in additional revenue.

Several consumer-goods companies, including Procter & Gamble Co. and Clorox Co. , have recently raised prices or pledged to do so, to offset the higher costs of raw materials and boost profits. Nearly half of 52 consumer-goods manufacturers surveyed recently by consulting firm Acosta raised prices last year.

Mondelez International and Hershey Co. last month said they would raise prices this year.

Price increases have now started to spill into natural-brands, some of which source expensive ingredients with limited supplies.

The inflation-based increases at Whole Foods range from 10 cents to several dollars, a price list reviewed by the Journal shows. Soaps, detergent, oils and nut butters have some of the highest increases. The average increase was 66 cents, according to the list.

Supermarkets have resisted passing along the price increases amid intensifying competition in their industry. Some are starting to relent. California-based Smart & Final Stores Inc., a warehouse-style grocer, has received requests from hundreds of suppliers to raise prices and expects costs to continue to rise this year.

Some supermarkets are also agreeing to stock new brands and sizes that bring food makers more profits. Others, such as Kroger Co. , are stocking more store-brands to try to help keep prices low overall.

At Whole Foods, a basket of 40 select items purchased from their stores cost $191 last month, according to the Telsey Advisory Group, up more than 3% from what the same basket of goods cost last fall.

A Whole Foods spokeswoman said on Monday that some of the grocer’s suppliers have raised prices due to higher material, labor and freight costs. Whole Foods has passed along part of those increased costs and absorbed the rest, the spokeswoman said. The chain stopped selling nearly half of 700 products with expiring contracts and instituted new deals on 100 more, she said. Prices increased on about 50 of the 700 items, she said, adding that Whole Foods is now putting more items on sale, based on customer purchasing habits.

“We also offer hundreds to thousands of sale items daily and we’re continuing to lower prices for all shoppers and Prime members,” Whole Foods said on Monday, referring to Amazon’s subscription program.

The e-commerce giant began adding discounts at Whole Foods and free, rapid delivery from its stores for Prime members last year. Amazon raised Prime membership fees 20% to $119 in April 2018.

Whole Foods updates the discounts for Prime subscribers each week. New discounts for all customers are introduced less frequently, records show.

Some customers said they have noticed higher prices at Whole Foods this year and feel discounts exclusively for Prime members are unfair.

“I am no longer likely to go to my local Whole Foods,” said Will Armstrong, a 37-year-old software developer from San Francisco, who is not a Prime member.

Other shoppers like the membership discounts. Prime promotions were the top reason 1,168 shoppers surveyed by data firm Numerator last fall gave for visiting Whole Foods more often.

Whole Foods has raised prices on nine of Hain Celestial Inc.’s plant-based Dream beverages. Hain, a major supplier of natural and organic products to Whole Foods, said Thursday that higher costs contributed to its unexpected loss in its latest quarter.

Michael Bronner, president of California-based Dr. Bronner’s, said the natural-products company is increasing the price of soaps it sells to Whole Foods, Target Corp. , Costco Corp. , Walmart Inc. and other retailers by 3%. Prices for the organic, fair-trade coconuts used to make those products have risen recently, Mr. Bronner said, motivating him to pass the higher costs to customers.

“People may opt for smaller sizes but they usually come back,” Mr. Bronner said.

Whole Foods is raising prices on 18 Dr. Bronner’s soaps by up to several dollars per item, the grocer’s communications show. Prices for some Nature’s Way coconut oils are also rising by several dollars. A spokeswoman for Nestlé SA, Häagen-Dazs’s parent company, said list prices haven’t increased at Whole Foods, and the company doesn’t oversee any price increases made by retailers.

Source: The Wall Street Journal

After Uproar, Instacart Backs Off Controversial Tipping Policy

The gig economy’s work force is fighting back, and in some cases, it’s winning.

On Wednesday, Instacart, the Silicon Valley upstart that delivers groceries and other household items to customers through an app, reversed a tipping policy that had outraged workers, who accused the $7 billion company of cheating them out of rightfully earned wages.

“We heard loud and clear the frustration when your compensation didn’t match the effort you put forth,” Apoorva Mehta, Instacart’s chief executive, wrote in an open letter to Instacart’s contract workers, known as shoppers.

Instacart’s workers had taken to Reddit forums and private Facebook groups to express their anger with the policy, which counted tips toward the guaranteed minimum payments the company offered to shoppers. In some cases, the more customers tipped, the less Instacart paid them.

“It’s offensive, it’s unethical, and in this climate it’s a very dumb thing to do,” Matthew Telles, an Instacart courier in Chicago, said this week before the reversal.

In the letter to shoppers, Mr. Mehta apologized for the tipping policy, which he called “misguided.” He said that from now on, Instacart would calculate tips separately from base pay. He also said the company was putting new minimum payments into effect: at least $5 for orders that require only delivering an item, and $7 to $10 for orders that involve picking items off supermarket shelves.

In addition, Instacart said it would retroactively compensate workers who had lost base pay as a result of the old tipping system.

The victory at Instacart, which will ultimately affect thousands of workers, is just the latest in a string of successful pressure campaigns by workers for gig economy platforms. Drivers for Uber and Lyft in New York successfully agitated for a citywide minimum wage that went into effect this week. Postmates, another high-flying start-up, recently settled a class-action suit with thousands of delivery workers who contested the way the company classified them as contract workers.

It’s no secret that many modern gig workers exist in a state of permanent precarity, with few legal protections, unstable working conditions and pay that varies based on who’s flush with venture capital money that week. Most gig economy workers are still classified as contract workers, meaning that they aren’t covered by federal minimum wage laws and other labor protections.

Still, by organizing en masse and expressing vocal opposition to exploitative policies, they have managed to wring some concessions out of the billion-dollar corporations whose labor they provide.

For Instacart, the drama began late last year when it changed its method for paying its contract workers.

Until then, Instacart’s shopper pay was determined by an algorithm that factored in a fixed base payment for each order, along with a per-item bonus and extra payments for certain tasks, such as delivering over long distances. After the change late last year, Instacart presented shoppers with a single, itemized “earnings estimate,” and guaranteed them a $10 minimum payment for each batch they accepted.

But Instacart shoppers began to notice that for some orders, the tips that customers had added during checkout were being counted toward their $10 minimum, rather than being paid out on top of them.

Angry shoppers collected shocking examples of low pay, like a receipt submitted by an Instacart shopper who appeared to have been paid a total of $10.80 after a $10 tip. (Instacart claimed that the payment was an “edge case,” and that it was putting new policies in place to prevent similar incidents.)

In another example, two identical Instacart batches paid out $10 — the guaranteed minimum — even though one delivery earned a $2 tip and the other a $6 tip. In the case of the $2 tip, Instacart’s “batch payment” came to $8; in the case of the $6 tip, Instacart paid only $4.

“We started to notice customers who said they tipped, but a lot of times we wouldn’t see the tips,” said Kaylania Chapman, a worker in Orlando, Fla., who delivers orders for both Instacart and DoorDash, a rival delivery app with a similar tipping policy.

The workers’ complaints started to be picked up by news outlets including Fast Company and NBC. And they caught the attention of Working Washington, a union-backed labor group in Seattle, which collected more than 1,500 signatures of Instacart shoppers who objected to the company’s pay practices. Some began asking for cash tips outside the app, while others encouraged customers to leave 22-cent tips — a nominal amount meant to show solidarity with workers — through the app and then adjust the tips higher after a delivery was made.

On Wednesday, after the announcement that Instacart was changing its policies, a representative from Working Washington, Sage Wilson, said, “In the space of two weeks, Instacart workers came together, sparked a national media sensation and transformed the entire pay model of a $7 billion corporation.”

DoorDash, which is valued by investors at $4 billion, has not announced plans to change its tipping policy, which dates to 2017.

“DoorDash’s pay model provides transparency, consistency and predictability,” a company spokeswoman said on Tuesday. “Since implementing this pay model more than a year ago, we’ve seen a significant increase in dasher retention, percentage of on-time orders and dasher satisfaction.”

After Instacart’s announcement on Wednesday, the DoorDash spokeswoman declined to comment.

Many Instacart shoppers were thrilled by the company’s about-face. In a private Facebook group, some celebrated their successful campaign to get the company to change its tipping policy and make them whole on previous payments.

“I can’t believe it! Back pay!” one shopper wrote.

“THIS is why you stand up for yourself against corruption,” wrote another.

“I’m very excited that we got Instacart to listen to our complaints,” said Ashley Knudson, an Instacart shopper in Seattle. “I feel like we have some work to do, and we’re not going to back down until we get the consistency that we need in our batch payments. We consider this a small victory, for acknowledging their mistreatment, but we look forward to pushing onward and having our voices be heard.”

Many gig economy workers still face economic insecurity and exploitative platform policies, of course, and lawmakers may ultimately need to come to their rescue. (On Tuesday, Representative Ro Khanna, a Democrat who represents parts of Silicon Valley, told BuzzFeed News that Instacart’s now-defunct tipping policy was a “deceptive business practice that should end.”)

But ultimately, it may be up to customers to demand more accountability and worker-friendly policies.

Elizabeth Haslam, a DoorDash customer in California who has spent more than three years placing orders from the delivery service, said on Tuesday that she was “shocked” to learn about the company’s tipping policies.

“It made me really angry that I was contributing to a company that would do that,” she said. “And it makes me wonder how many other services are doing the same thing.”

Source: The New York Times

Why People Still Don’t Buy Groceries Online

Nearly 30 years ago, when just 15 percent of Americans had a computer, and even fewer had internet access, Thomas Parkinson set up a rack of modems on a Crate and Barrel wine rack and started accepting orders for the internet’s first grocery-delivery company, Peapod, which he founded with his brother Andrew.

Back then, ordering groceries online was complicated—most customers had dial-up, and Peapod’s web graphics were so rudimentary that customers couldn’t see images of what they were buying. Delivery was complicated, too: The Parkinsons drove to grocery stores in the Chicago area, bought what customers had ordered, and then delivered the goods from the backseat of their beat-up Honda Civic. When people wanted to stock up on certain goods—strawberry yogurt or bottles of Diet Coke—the Parkinsons would deplete whole sections of local grocery stores.

Peapod is still around today. But convincing customers to order groceries online is still nearly as difficult now as it was in 1989. Twenty-two percent of apparel sales and 30 percent of computer and electronics sales happen online today, but the same can be said for only 3 percent of grocery sales, according to a report from Deutsche Bank Securities. “My dream was for it to be ubiquitous, but getting that first order can be a bit of a hurdle,” Parkinson told me from Peapod’s headquarters in downtown Chicago. (He is now Peapod’s chief technology officer; his brother has since left the company.)

Until online grocery-delivery companies are delivering to hundreds of homes in the same neighborhood, it will be very hard for them to make a profit. Though it is an $800 billion business, grocery is famously low-margin; most grocery stores are barely profitable as it is. Add on the labor, equipment, and gas costs of bringing food to people’s doors quickly and cheaply, and you have a business that seems all but guaranteed to fail. “No one has made any great amount of money selling groceries online,” Sucharita Kodali, an analyst with Forrester Research, told me. “In fact, there have been a lot more people losing money.”

This is not true in every country. In South Korea, 20 percent of consumers buy groceries online, and both in the United Kingdom and Japan, 7.5 percent of consumers do, according to Kantar Consulting. But those are countries with just a few large population centers, which makes it easier for delivery companies to set up shop in just a few big cities and access a huge amount of purchasing power. In the United States, by contrast, people are spread out around rural, urban, and suburban areas, making it hard to reach a majority of shoppers from just a few physical locations. In South Korea and Japan, customers are also more comfortable with shopping on their phones than consumers are in countries like the United States.

Still, companies are still trying to make online grocery delivery work in the United States. Today, Peapod is one of dozens of companies offering grocery delivery to customers in certain metro areas. In June 2017, Amazon bought Whole Foods for $13.4 billion and started rolling out grocery delivery for Prime members in cities across the country; analysts predicted at the time that the company’s logistics know-how would allow it to leverage Whole Foods stores to dominate grocery delivery. Also in 2017, Walmart acquired Parcel, a same-day, last-mile delivery company. Two months after that, Target said it was buying Shipt, a same-day delivery service. Kroger announced last May that it was partnering with Ocado, a British online grocer, to speed up delivery with robotically operated warehouses. Companies like ALDI, Food Lion, and Publix have started working with Instacart to deliver groceries from their stores. FreshDirect recently opened a highly automated 400,000-square-foot delivery center and says it plans to expand to regions beyond New York, New Jersey, and Washington, D.C., in the coming year.

The story of Peapod, which has had 30 years to perfect the art of online grocery delivery, suggests that making money will be a challenge for even deep-pocketed retailers like Amazon. Peapod has more experience than any other online grocery-delivery company. It outlasted Webvan, which raised $800 million before crashing in 2001, and beat out other big bets of the dot-com boom such as Kozmo, Home Grocer, and ShopLink.

Peapod itself nearly failed in 2000 before being rescued by the Dutch conglomerate Royal Ahold NV, which bought first a controlling interest and then the entire company. (After a recent merger, Peapod’s parent company is now called Ahold Delhaize—it owns supermarket chains like Food Lion, Hannaford, and Stop & Shop.) In 2016, Peapod was only in the black in three markets, a Peapod executive told The Wall Street Journal that year. The company has not been able to get enough people to buy groceries online to lower the costs of delivering them. If a company with 30 years of experience in grocery delivery can’t make it work, can anyone?

Compared to groceries, clothes and electronics and dog food are incredibly simple to deliver. A company like Amazon keeps those products stored in a warehouse, packs them in a box, and sends them on their way through the mail or through its delivery contractors.

Groceries, though, can’t just be packed in a box and entrusted to mail carriers. Imagine fulfilling an order that includes popsicles, avocados, a case of Coke, and tortilla chips. The popsicles have to be kept cold; the avocados have to be chosen carefully, the Coke is heavy, and the tortilla chips can’t be crushed. Now consider that the average Peapod order has 52 items.

Because of these factors, it will always be cheaper for grocery stores to have customers come to them, and do all the work of shopping themselves, than it will be for the stores to bring the groceries to the customers, said Kodali, the Forrester analyst. “In the best case, you only make the same as what you would make in stores,” Kodali said. “It’s not like it’s a more profitable distribution channel.” One of Amazon’s big innovations in delivering packages was that it could cut out the middleman (the store) and sell things directly to consumers, saving the cost of overhead. But consumer packaged-goods companies can’t cut out the stores, since they don’t have the infrastructure in place to get their products, whether it be ice cream or avocados, directly to consumers.

Peapod has tried to lower its overhead in a few ways. In some markets, it keeps groceries in vast warehouses outside of town, which saves money because the company doesn’t have to buy or rent retail space in city centers. Peapod has figured out how to make the shopping part of online grocery delivery relatively fast, which means one employee can process dozens of orders in just a few hours. In “warerooms,” which are essentially smaller stores on top of grocery stores, aisles are much narrower than they are in regular grocery stores. Employees wear devices on their wrists that tell them on what aisle and shelf a product is located, and they load food into baskets efficiently, scanning bar codes. Workers get intimately familiar with where various items are located, allowing them to shop quickly.

Despite Peapod’s innovations, the whole process is very labor-intensive. Peapod’s workers still have to scan the groceries packed into orders with a temperature gun to make sure meat hasn’t gotten too warm; they also have to audit the totes to make sure that items aren’t broken and that nothing is missing. (Ahold, Peapod’s parent company, is already using robots to speed some parts of packing customers’ orders.)

Delivery can be slow-going, too. I tagged along with one Peapod driver, Ricardo Bernard, on a Friday afternoon as he brought groceries to consumers’ doorsteps in a wealthy neighborhood of Chicago. We were assigned 19 stops in Chicago’s South Loop, which was heavily congested and included a number of apartment buildings; Bernard kept having to park the truck in narrow spots, get out, unload the totes of groceries onto a dolly, call the tenant from an intercom (or get let in by a doorman), wait for an elevator, ride the elevator, and then wait for tenants to open their door so he could unpack the totes onto their kitchen counter, a process than can take more than 10 minutes for each delivery.

The most efficient grocery-delivery companies are really logistics companies. Employees at Peapod’s headquarters tinker with routes and monitor weather and traffic in real time so they can make changes if a storm is coming or a concert is causing congestion, all to shave seconds or minutes off delivery routes. The company times how long drivers are sitting in traffic; how long they go between deliveries; how much time they spend with customers. It rewards drivers who get deliveries completed faster than average but who maintain high scores from customers.

Grocery companies may have to spend more money opening more brick-and-mortar stores to make logistics easier and to lessen the amount of time delivery drivers have to be on the road. A D.A. Davidson analyst, Tom Forte, recently wrote that he thought Amazon should acquire thousands of gas stations to “advance its delivery efforts.” (Amazon declined to comment on the specifics of its grocery-delivery business, but said that it has expanded to deliver groceries in 60 metros since it bought Whole Foods last February.)

Even though it’s spent years shaving seconds off deliveries, Peapod struggles to make the financials work. The company charges a delivery fee that ranges from $6.95 to $9.95 per order. That might seem steep to people accustomed to getting everything delivered for free, but it does not come close to covering the costs associated with bringing groceries to customers’ doors. “Getting costs down is a work in progress,” Ken Fanaro, Peapod’s senior director of transportation planning and development, told me. Online grocery delivery is really only cost-efficient when companies can spend the bulk of their time bringing groceries into homes from trucks, rather than driving miles and then bringing groceries into homes. “In a perfect world, we’d be like a mailman, going down the street, delivering at every home,” he told me.

Peapod pays handsomely for workers’ time. Bernard, like all Peapod workers, is a full-time employee, who receives health care and other benefits; the company has thus far eschewed the contractor model employed by delivery services like Instacart and Uber Eats.

Today, the markets where Peapod is profitable are the densest ones, like New York City. Even Amazon struggles in suburban markets, announcing last year that it was suspending its Amazon Fresh delivery service in regions of New Jersey, Pennsylvania, and Maryland, while maintaining service in cities like New York, Chicago, and Boston.

Grocery stores are stuck in a tough place right now. They’re facing challenges from big retailers like Walmart and Target, which have started offering produce and fresh food, and from discount chains like Aldi and Lidl, which recently started adding stores in the United States. Now, as Amazon enters more markets, it’s forcing grocery stores to offer delivery, too, even though they’ll lose money on it. If they don’t, customers may go somewhere else. Amazon is using its deep pockets to undercut its competitors on price, taking a page from other tech start-ups like Uber who tried to corner the market first and then make money after.

Some supermarkets have experimented with offering ways that are not as expensive as grocery delivery to make shopping easier for consumers. Walmart, Kroger, Safeway, and a number of other stores offer “click and collect,” for example, which allows consumers to order their groceries online and then drive to the store and pick them up. Click-and-collect represents nearly half of online grocery sales, according to Nielsen data, up from 18 percent in 2016. Amazon is covering both of these bases: In addition to its delivery options, the company has launched Go stores in Seattle, Chicago, and San Francisco that allow customers to walk in, select items, and walk out without waiting in line to pay.

But ubiquity remains the holy grail of grocery delivery, and all the stores know it. So they’re offering discounts and deals to get customers to sign up for delivery services, making thin margins even thinner. Most online grocery delivery services offer free delivery on a customer’s first order, for example. According to Elley Symmes, a senior analyst on Kantar Consulting’s grocery team, the number-one reason many customers got groceries delivered was that they received an incentive to do so. But when those promotions go away, so do the customers. “Delivery costs continue to be a barrier to entry,” Symmes told me.

To be able to offer those incentives without going bankrupt, some supermarkets are partnering with brands to get the cost of delivery subsidized. Colgate may offer free delivery if a customer buys a certain number of Colgate products, for instance.

Cost might not be the only reason customers aren’t flocking to grocery delivery. I asked a few shoppers in a Massachusetts Stop & Shop why they weren’t getting their groceries delivered; they were pushing carts through aisles as Peapod workers packed crates upstairs for delivery. Most said they liked picking out their own meat and produce, and that they don’t like planning their shopping ahead of time. Mike Kolodziej, 37, told me he actually likes going to the grocery store. “It’s my quiet time,” he said. He has five kids at home.

And besides, unlike being a customer in other industries tech has disrupted—going to the post office, taking cabs in certain cities—going grocery shopping isn’t all that unpleasant. In the suburbs, people get in their cars and drive to spacious stores where they can pick out the produce they like and also find out about new products on the shelves, said David J. Livingston, a supermarket analyst for DJL Research. Some stores offer other services, like prescription pick-up or wine bars, that make them an experience people enjoy—they’re faced with the daunting task of making stores more appealing to people while also making delivery appealing too.

Still, analysts say that now is the time to convert more customers to online grocery delivery. About 41 percent of consumers neither like nor dislike shopping for products like beverages and perishable goods in grocery stores, according to a Deloitte survey. Deloitte argues that there are many consumers “who are not emotionally attached to the physical shopping process and might consider online-shopping options if they were offered.” They include Jim Winnfield, who recently got his first online grocery-delivery order; he used to live in the Chicago suburbs, but recently moved downtown, and decided to give Peapod a try. “I’m lazy enough that I want people to do as much for me as possible,” he told me. Winnfield’s first delivery was free.

However they get customers to sign up, supermarkets are likely going to have to spend a lot of money in promotions and deals as they try to make delivery more popular among consumers. This, of course, advantages Amazon, which has deep pockets and has long been able to convince shareholders that spending upfront on getting customers in the door has long-term dividends. This has never been Peapod’s strategy—it outlasted competitors like Webvan because it never spent a lot of money it didn’t have, Parkinson told me.

But even Peapod is now getting into the battle for customer share. In January 2019 alone, Ahold Delhaize said it was launching self-driving grocery-delivery vehicles in Boston and acquired a Long Island chain of supermarkets, expanding the company’s reach. Peapod is currently offering $20 off groceries and no delivery fees for the first 60 days a customer uses the service. It outlasted its competitors over the past few decades by being careful with money, Parkinson told me. Today, though, even Peapod is coming around to the fact that customers are cheap, and whichever company makes its services the cheapest just might win.

Source: The Atlantic

Hy-Vee tests grocery shopping app to reduce food waste

Hy-Vee Inc. has begun piloting a mobile shopping app that helps grocery retailers cut back on food waste.

Called Flashfood, and developed by a Toronto company of the same name, the app enables consumers to browse and buy food items nearing their “best before” date at “significantly reduced” prices, Hy-Vee said Friday.

The West Des Moines, Iowa-based grocer said the Flashfood App pilot is now under way in Wisconsin at both of its Madison locations and its store in Fitchburg.

“At Hy-Vee, we know it’s important that we do our part as grocers to reduce food waste. In 2018 alone, our food waste diversion programs at all our Hy-Vee stores have kept more than 25 million pounds of food waste out of landfills,” Jessica Ringena, vice president of innovation and business development the supermarket chain, said in a statement. “This partnership with Flashfood is just one more way we can further increase our sustainability efforts.”

To use Flashfood, customers download the free app (available in iOS and Android versions) and then start shopping deals on items such as meat, dairy, bread and snacks. Purchases are then made directly from their smartphone and picked up at any time from the Flashfood Zone shelves or refrigerators in the store.

The program gives consumers a way to lower their grocery bill and help the environment by reducing unnecessary food waste, according to Flashfood.

“We’re thrilled Hy-Vee has chosen to participate in reducing their food waste through the Flashfood platform,” said Josh Domingues, founder and CEO of Flashfood, which launched in 2016. “They have a brand synonymous with innovation, and we are excited to offer their products from their Madison and Fitchburg locations to our community.”

Hy-Vee marks the first U.S. supermarket chain to use Flashfood. Besides the three Hy-Vee stores, the app is currently available at three Loblaw Cos. grocery stores in Ontario: two Real Canadian Superstores (in London and Oakville) and one No Frills store (in London).

Thus far, Flashfood has partnered with five grocery retailers — including pilots with Target Corp. (at two stores in St. Cloud and one in Monticello, Minn.) and with Canadian chains Farm Boy and Longo’s — to divert more than 100,000 units of food. The company said it expects to make its app available through more U.S. stores over the next year.

Source: Supermarket News

Shoppers prefer grocery delivery over in-store pickup

  • Same-day grocery delivery offerings from major retailers grew by 500% in 2018, according to a new report from grocery e-commerce startup CommonSense Robotics. The report, based on an analysis of retailer data, also says that click and collect locations among major grocers grew by 230% in 2018, and that the service is now available at 45% of Walmart stores, 58% of Kroger stores and 30% of Ahold Delhaize stores.
  • Findings show that consumers prefer same-day delivery over in-store pickup by a 4:1 margin, but most retailers have focused their resources on click and collect, according to polling by CommonSense and other research firms. CommonSense says Target is the only brick-and-mortar retailer making same-day grocery delivery its primary focus.
  • Major retailers invested more than $28 billion in grocery e-commerce last year, CommonSense found, and the company predicts that growth in grocery e-commerce will continue to gain momentum. CommonSense estimates that year-over-year online grocery growth from 2017 to 2018 was about 35%, which brings 2018 online grocery sales to an estimated $24 billion — about 3% of the total grocery market. The report says that online grocery penetration is on track to reach 10% within five years, and could even reach 15% to 20%.
As shoppers become more accustomed to having e-commerce as a grocery shopping option, both click and collect and same-day delivery can fulfill different needs. Grocery delivery is attractive to consumers for several reasons, primarily because it either saves a shopper from having to make a trip or makes it possible for shoppers without vehicles to place a large grocery order without the hassle of transporting it. Click and collect, on the other hand, makes sense for people who are already active and out, but look to cut down on the time they spend in store.

Using its own survey findings, as well as research from Nielsen and MoffatNathanson, the CommonSense report says that shoppers have a much stronger preference for grocery delivery than they do for store pickup. According to research from Nielsen and the Food Marketing Institute, about 69% of shoppers prefer delivery, however the reason could be that delivery services have been around longer than click and collect models. Nielsen also says that click and collect is gaining steam, with millennials preferring the option over delivery. While existing findings show that consumers prefer delivery, ongoing research will be needed to evaluate consumer preferences as both options become more sophisticated and accessible.

The rapid rise in grocery delivery can be traced back to Instacart, according to CommonSense. Instacart’s partnerships with more than 300 U.S. grocers has made grocery delivery widely available, and the company doesn’t show signs of slowing down — especially with its recently reduced fees. The presence of Instacart is also fueling healthy competition in the industry as many retailers try to design their own grocery delivery services, which is contributing to further expansion.

Recent research from Brick Meets Click supports the CommonSense report when it comes to consumer preference for delivery or in-store pickup. Brick Meets Click reports that nearly three-quarters of shoppers would choose delivery over pickup, if given the choice, however the firm believes that click and collect will continue to play a large role in grocery e-commerce because of the significant benefits it offers to both retailers and shoppers.

For one, pickup utilizes existing store space and ends up costing the customer less money, while delivery often includes a fee. Click and collect also offers shoppers the flexibility to go into the store if they need to supplement their purchase, pick up a prescription or need to get something they can’t order online. Finally, click and collect offers the benefit of personal connection and customer service for shoppers.

Retailers across the U.S. are investing in both grocery delivery and in-store pickup. Walmart is making strides in both services, with click and collect available at more than 2,000 locations and plans to double grocery delivery capabilities this year. Ahold Delhaize is betting on the growth of Peapod to increase its e-commerce business and has begun integrating e-commerce capabilities into brick-and-mortar stores such as its new Giant Heirloom market. Instacart is also entering the click and collect business, helping many of its partners expand their capabilities, and Amazon is making in-store pickup easier for Whole Foods shoppers with Prime Now. Through Shipt, Target now offers same-day grocery delivery in 250 markets, with expansion plans this year.

CommonSense would argue that retailers should keep their focus on expanding same-day delivery capabilities, especially as fees and last-mile costs drop and demand grows, while Brick Meets Click seems to suggest that click and collect is the smarter investment. Ultimately, the investment will come down to which service generates more revenue (and costs less) for retailers and keeps customers coming back.

Source: Grocery Dive

Aldi’s gains in customer satisfaction challenge Walmart, supermarkets

  • A new Retail Feedback Group study finds a mixed bag for supermarkets when it comes to customer satisfaction. Supermarkets have the strongest overall satisfaction rating (4.31 out of 5) when compared to Aldi (4.27) and Walmart (3.93), but when it comes to value Aldi receives the top score and the highest overall satisfaction (4.30) during peak hours of 3 p.m. to 7 p.m. versus supermarkets (4.27) and Walmart (3.98).
  • The 2019 U.S. Supermarket Experience Study also shows Aldi continues to be tough competition for supermarkets. Aldi shoppers are more likely to recommend the store and 42% of those who shopped there say they plan to shop there more in the next 12 months, versus 22% for supermarkets and 28% for Walmart. Aldi has also moved into a tie with supermarkets on quality and freshness (56% highly satisfied), well above Walmart (46%).
  • Traditional grocery stores retain an advantage when it comes to quality/freshness of the food (4.44), cleanliness of the store (4.42) and variety (4.38), but across the industry customer service could be improved.
Aldi is in the midst of an aggressive growth plan, with the goal of being a major player in the grocery industry. This new report shows Aldi already has an advantage over traditional supermarkets when it comes to value and is gaining in quality and freshness, positioning the company well for its expansion.

With its roots as a family-owned store in Germany, the company now has more than 1,800 locations in the U.S. and plans to spend billions to remodel and build new stores to hit the 2,500-store mark in two years.

Last year, Aldi expanded its fresh produce assortment by 40%, added organic meats, gourmet items and private label products.  When its new product rollout is complete later this year, 20% of the items on Aldi’s shelves will be new. Additionally, they’ve updated existing stores with wider aisles and redesigned signage, enhancing the customer experience and increasing convenience.

And then there’s the price factor. Aldi is, at heart, a discount grocer and that has put its competition —​ particularly Walmart — on the defensive. Traditional grocers score lower than both companies on value but Aldi and Walmart offer similar prices on staple items, even when it comes to organic products. However, the RFG report found that consumers give Aldi the edge for value. Specials and deals are still important and give traditional stores a boost in the value category, though this runs along generational lines. Boomers still like to review a printed store circular (62% compared to millennials at 40%), but digital coupons have fans across all age groups. Grocers will need to pay attention to what channels are best to reach their customer base in order to stay relevant. Focusing solely on millennials might not be a smart strategy — it’s still the boomers that score supermarkets higher across the board.

Overall the study shows that all stores have room for improvement whether it is training staff to provide better, faster customer service, increasing the variety and freshness of products or helping customers find ways to save. Even though Aldi continues to build momentum, the store may have to re-evaluate its growth plan to be sure quality isn’t pushed aside for quantity.

Source: Grocery Dive

Unionizing Weed Workers Are Reigniting the Labor Movement

Victoria Arana started working at a cannabis dispensary in Los Angeles when she was 18 years old. She and most of her young, all-female coworkers worked ten- to 15-hour shifts, five to seven days a week. They weren’t allowed to keep their tips, weren’t paid for their last hour of work (in which they did the clean-up), and were subject to sexual harassment and wanton disrespect from the male owners, she recalled.

“We would cry, like, every morning before going to work,” Arana told VICE. “Getting paid was one of the scariest things ever because you’d be alone with the boss in a room.”

Management was constantly crossing boundaries, she added, even trying to kiss coworkers on multiple occasions. Exacerbating the situation was the fact that the defunct shop—located in the now-gentrified Silver Lake neighborhood—was locked down like a prison by virtue of its dubious legal status in the era preceding full legalization.

“You’re secured through gates,” Arana said. “There’s no windows in the entire shop. You’re being watched constantly.”

According to interviews done over the past few years with veterans of the cannabis industry, Arana’s working conditions were not uncommon. The question is whether and to what extent they will linger as businesses across the country transition from an unlicensed or gray market to a regulated, legal one.

That’s where the labor movement comes in.

As full pot legalization spreads, labor organizations like the United Food and Commercial Workers Union (UFCW)—which represents 1.3 million people across multiple fields, from grocery store workers to meatpackers—are seizing on the nascent industry. The UFCW already claims tens of thousands of cannabis workers across the US: In August of last year, Seattle-based dispensary chain Have a Heart inked the state’s first collective bargaining agreement between a recreational cannabis shop and the union. In 2017 in Minnesota, a cannabis production facility and chain of dispensaries struck a deal with the local UFCW. And in New York in 2016, the first union agreement for medical marijuana businesses was established in advance of the seemingly inevitable legalization of recreational use by adults in the state.

Other labor organizations, such as the Teamsters, have made inroads to the industry as well. Although it might not seem like it fits squarely in the union’s purview, there are segments of the supply chain—such as cultivation, which has its own legacy of poor working conditions, especially for women—Teamsters have been vying for, beginning in 2010 when their Oakland, California, local organized the country’s first group of marijuana cultivators. The United Farm Workers of America (UFW) is also considering tapping into the newly legal industry: While the union doesn’t have any cannabis members yet, it was “engaging workers in a number of key cultivation regions” given that a bulk of the licensed grow sites in California are in regions where UFW already has a strong presence and deep history, Jamie Padilla, UFW cannabis campaign coordinator, said in an email.

All of which is to say that as an increasing number of states legalize medical and recreational cannabis, the potential for unionization has grown with the volume of pot sold—and could usher in a sea-change in the way the cannabis industry does business. But experts said it could also help bolster the strength of the labor movement as a whole even as it faces historic headwinds under a hostile Supreme Court.

Unionizing cannabis workers will help improve working conditions for those in it, but also help grow an industry that provides an alternative living to the increasingly popular “gig economy” and jobs like driving for Uber, argued Rigo Valdez, vice president and director of organizing for UFCW 770 in Southern California.

“Most of the jobs that we’re creating under the union are full-time jobs. Most of the jobs have medical benefits,” he said. “That’s very different than what’s happening in other up-and-coming industries that are really based on robbing workers from the ability to make a living wage.”

UFCW 770 has been working with select medical marijuana shops in Los Angeles and beyond since before recreational weed was legalized, but the local union—which also represents cosmetologists, pharmacists, and more—significantly ramped up efforts in 2018. Methodically making their way through the Southern California cannabis supply chain, organizers said, they’ve worked with retail, cultivation, manufacturing, and delivery workers to amass approximately 700 cannabis union members from Santa Barbara through the South Bay.

Jonathan Fabro is one such card-carrying member, currently working as a bud-tender at LA Wonderland Caregivers dispensary, a union shop. He secured his first job in the industry at the age of 20 when a spot he frequented announced they were hiring, he recalled. But after working there less than a year, the store was taken over by new ownership; Fabro was kept on to train the new staff, he said, only to be fired soon after.

When he got hired at Wonderland and learned it was a union gig, “I was like, ‘Union, what’s that?’” he told me, in what seemed like a perfect encapsulation of the decline of organized labor in the popular imagination.

Fabro quickly learned of its benefits though, like the easing of the “constant backdrop of anxiety” that had seemed endemic to his work. He no longer felt like he had to do everything “above and beyond” his job description in order to avoid getting fired, and said he viewed the union as a security net that safeguards him from working for free or under dangerous conditions.

UFCW 770 has focused much of their initial efforts on larger pot shops, such as cannabis company MedMen, which has eight dispensary locations in California alone. It’s these substantial operations that have a bit more stability and capacity to provide living wages, Valdez argued . They also help set a strong precedent for other shops to follow suit and can impact wide swaths of workers in one fell swoop. Current priorities for the UFCW include ensuring cannabis workers operate in safe conditions, have a sense of job security, and are paid a fair wage, organizers said.

In fact, many longtime employees have often not been paid at all—instead, they got compensated with weed.

“You can’t pay your rent in marijuana,” Valdez said. “If you’re being paid in product and you need to pay your rent, what are you going to do? Well, you’re going to sell it on the street to pay your rent.”

Meanwhile, as a growing number of both medical and recreational cannabis shops unionize across the country, organizers and experts touted benefits not-only for members but for the strength of organized labor as a force in culture and politics. “There’s some evidence that success breeds success,” David Zonderman, a professor of history at North Carolina State University, said.

If a major organizing campaign takes off within the cannabis industry, he explained, its success could encourage other industries to organize as well. However, the difficulty of organizing—even in liberal states where unions are strong—remains real.

“Right now organizing is a real big challenge,” Zonderman said. “To be honest, it doesn’t cost much to violate labor law.”

There’s been no shortage of inspiration from highly publicized acts of resistance, however. Take the strike this month by the United Teachers Los Angeles (UTLA): This was only the third time in the union’s 50-year-history that teachers struck, the most recent demonstration prior having been in 1989. The teachers prevailed on both occasions, and this year, secured improvements such as salary increases, reductions in class sizes and obtaining a full-time nurse in every school.

One of the biggest deciding factors in how far organizing goes in the cannabis industry—and its ripple effects—will, of course, come down to how employers respond. Despite the perception that cannabis business owners might be cool, easygoing hippies that would obviously be on board, a number of industry players have corporate investors who might be determined to keep labor costs down. (This dissonance may be familiar to tech or media workers at outwardly progressive companies whose bosses often seem to resist unionization.)

When it came to weed specifically, Zonderman did not expect immediate willingness to get on board with union shops. “I wouldn’t bet my house on it,” he said. “They’ve all drunk from the capitalist-model Kool-Aid.”

In LA, at least, unions do have a little support from the city’s cannabis ordinance, which stipulates that any business with ten or more employees is required to sign a labor peace agreement. This effectively means the employer will allow a union rep to come in and consult with workers on the possibility of organizing. There’s also been a few notable wins for the UFCW so far, like the establishment of a health insurance trust that can provide cannabis employees with medical coverage, according to Robert Chlala, policy researcher for the UFCW in LA.

In addition, some employers do seem to genuinely want to act responsibly, and have even welcomed structured guidance from unions on best practices, organizers said. For decades, there was no formal hierarchy within cannabis collectives, blurring distinctions between employees, managers, and everyone in between, according to Chlala. There was almost a paternalistic relationship in some cases, he noted, in which bosses would engage in unorthodox behavior, like loaning workers their cars or bailing them out of jail.

“It’s a very small work environment that you’re dealing with and often there’s really tight relationships between employers and employees that were built during this period of living… under the shadow of the threat of the police,” Chlala told VICE.

For Victoria Arana, now 22, being a union member has already reaped benefits. After her prior employer was shuttered, she moved on to work at the longstanding California Caregivers Alliance, also in Silver Lake. Her wages are contracted through the UFCW, she said, providing scheduled raises and a flexible work schedule that allow her go to to school and secure days off when necessary. The union is also poised to serve as a key lever of institutional support for workers like her against the possibility of harassment and other workplace violence.

“Absolutely every dispensary that has their license should be unionized,” she said. “Every industry should have representation.”

Source: Vice

Trader Joe’s is killing grocery delivery program even as Walmart, Whole Foods and Kroger spend billions to win the online grocery wars

Trader Joe’s is ending its New York-area grocery delivery service, and the company has no plans to roll out delivery in other markets.

The grocery chain offered delivery in New York for 10 years. Trader Joe’s is ending the program on March 1, in part because it was too costly, the company told Business Insider.

“Instead of passing along unsustainable cost increases to our customers, removing delivery will allow us to continue offering outstanding values — quality products for great everyday prices, and to make better use of valuable space in our stores,” Trader Joe’s representative Kenya Friend-Daniel said.

“This was not a decision we made lightly. We value our customers and all that they do to come shop with us.”

The company’s decision to end its limited delivery program comes at a time when many other major grocery chains are investing heavily in online grocery.

Online grocery sales in the US are outpacing the overall grocery market and are expected to reach $60 billion in 2023 — up from $24 billion in 2018, according to data from the Institute of Grocery Distribution cited by Internet Retailer.

Walmart is expected to offer grocery delivery from 1,600 locations and curbside pickup from 3,100 locations by the end of fiscal 2020. Amazon recently started rolling out same-day delivery and pickup from Whole Foods stores across the US.

Dozens of other grocery chains have partnered with third-party services like Instacart to offer delivery, as well, including Kroger, Costco, Publix, Wegmans, Aldi, and more.

Trader Joe’s offers some non-perishable goods, like its famous cookie butter, on Amazon. But for everything else, shoppers — for now at least — must continue trekking to Trader Joe’s stores, filling their own carts, and waiting in check-out lines.

Source: Business Insider

Downtown Phoenix’s first grocery store will be a first for Fry’s, too

This week marked a major milestone for one of Phoenix’s most awaited developments as construction “topped off” on Block 23 — the future home of downtown’s only full-service grocery store.

The development will include a 230,000-square-foot office building, 330 apartments, retail, restaurants and a Fry’s Food Store. The project is slated to open in October.

Phoenix has committed $18.3 million in development incentives as well as a long-term property tax break on the land.

“The grocery store is the one thing that has everyone universally excited,” said Mike Ebert, partner of RED Development, the company behind the project.

RED Development is also responsible for CityScape, the $500 million mixed-use, high-rise project just west of Block 23. It is home to more than a dozen restaurants and shops, along with Kimpton Hotel Palomar and CityScape Residences.

Fry’s promises innovation and quality

Fry’s President Monica Garnes said the grocery store will be unlike anything her team has done.

“We’re really excited because this is our first store in a downtown environment here at Fry’s and it’s really going to have an urban feel,” she said.

The store will have all of the amenities of a typical Fry’s, including its online ordering and pick-up system, made-to-order sushi and a deli, Garnes said.

Garnes said Fry’s has been working on bringing the store downtown for about five years. She said she believes the store will be the final component that will allow people to live downtown while still maintaining all of the amenities of the suburbs.

“The growth of the city has just been spectacular and we’re thrilled to be a part of really anchoring everything together,” Garnes said.

Office space designed for tech companies

The office space in Block 23 will be different from most offices downtown, Ebert said.

“What we found is downtown is pretty healthy from an office standpoint but what it lacked (was) office space for a new generation of users,” Ebert said.

Each of the nine floors of the office building will be larger and taller than a traditional office — amenities that are alluring to technology companies, he said.

Ebert said he thinks downtown is losing some technology companies to Tempe because of their more appealing office designs. He hopes Block 23 will funnel the companies into the center city.

So far, financial giant Ernst & Young has committed to 20,000 square feet of office space. Ebert said he expects to fill the rest of the space by the end of the year.

He said RED Development is also working to secure restaurants. So far, Blanco Tacos & Tequila has committed.

Apartments will start at $1,500

Apartment leasing will begin in July, according to Greg Nadeau, director of development of StreetLights Residential, the developer of the residential portion of the project.

The apartment complex, dubbed The Ryan, will have 330 units ranging in size from studios to two-bedrooms. The monthly rent will start at $1,500, Nadeau said.

He said the biggest amenity that will set The Ryan apart from other apartments in downtown Phoenix is its access to the new Fry’s.

“We saw that grocery store as really being a game-changer for downtown and truly creating that live, work and play environment,” Nadeau said.

Source: Arizona Republic