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Innovation in Grocery Retail: Lessons From Leaders

For most consumers, the process of grocery shopping has remained largely the same over the last few decades. There are exceptions of course, like the implementation of card readers and self-checkout kiosks aimed at improving the point of sale or the introduction of mobile phone loyalty apps, but widespread advancements have been scarce.

While other consumer-facing industries have been swept up in waves of technological innovation, on the whole retail grocery has remained rather traditional and utilitarian. That is, until recently.

As companies like Amazon get into the grocery business and meal kit services emerged to deliver exactly what customers need straight to their door, a new frontier of competition is taking shape.

These disruptions are propelling the industry into transformation, which will require grocers to get creative, to make adjustments, and to embrace change.

We’re already seeing this play out for physical retail through the introduction of new services like online ordering, with curbside pickup or local delivery. But there is so much more that can be done to make the in-store experience compelling and attractive, and to give customers a reason to come inside their local store.

Growth and innovation are often uncomfortable and can be tricky. So, it’s helpful to look at organizations that are leading the charge — in this case, remaking the grocery experience — and take notes.

LESSON 1: DON’T JUST INNOVATE – INNOVATE WITH A PURPOSE

Let’s start with Target. While not a traditional grocer, it is a major retailer with a growing grocery business. Target has taken a goal that many believed would be cost prohibitive —reducing its carbon footprint — and used it to improve both its bottom line and the quality of customers’ lives. In 2017, Target introduced its Chemical Policy; a strategy which now encompasses its entire value chain, from operations to the products it carries.

Target now seeks to increase ingredient transparency and reduce unwanted chemicals in the foods and products used by millions of customers. In addition, Target has invested in putting more sustainable products across its shelves.

The company has continued to debut eco-friendly programs and initiatives at unprecedented scale. Freshwater stewardship, reduction of plastic waste, in-store recycling, using Energy Star products to keep groceries cold, installing LED lights in stores, installing solar roofs and much more. Target is also working with its partners to reduce its environmental impact from “source to shelf.” Boldly, Target has accomplished all of this by designing and implementing its own plans, policies and products, rather than just joining existing initiatives.

As an increasing amount of attention is paid to global warming and the state of the environment, Target has differentiated itself as a true leader that cares not only about the people who walk through its doors, but the larger planet around them. It has innovated with a purpose far beyond the walls of its stores.

LESSON 2: PROPEL YOUR CUSTOMERS’ PRIORITIES

Raley’s has identified and acted on ways to provide customers with options to help them lead healthier lives, including initiatives like revamping its private label — Purely Made and Knob Hill Trading Co. brands — to use healthier ingredients. These foods are now free of 101+ preservatives and artificial ingredients.

Raley’s also developed an unacceptable ingredients list to help customers make informed decisions about what they choose to eat and created a Shelf Guide labeling program to give customers a better understanding of what products contain right at the moment of product selection.

And Raley’s didn’t stop at the shelf. The check lane represents the final food frontier before leaving the store. It’s easy to grab a candy bar, a bag of chips, or a sugary soda. The Raley’s team understood this all-too-familiar temptation and reduced it, introducing “better for you” snack options to the checklane assortment. Similarly, it reimagined the cereal aisle, calling out when products contain added sugar.

Raley’s also developed its Raley’s Food for Families program, which has provided over 40 million meals to local families in need through a partnership with Feeding America. Raley’s has raised more than $36 million for the program (and absorbs all of its administrative costs) so that customers know that when they give to Raley’s Food for Families, 100% goes to help members of their local community.

Raley’s recognized that consumers were prioritizing living healthier lives, and innovated their product assortment, approach to ingredients, and store footprint to support their consumers in that pursuit.

LESSON 3: NO WAITING REQUIRED

In a comparison between the consumer experiences of online versus in-store grocery shopping, one significant strike against the physical store is the ‘waiting’; whether it’s in long checkout queues or crowded aisles. While retailers have made moves to minimize the in-store wait with technologies designed to make the checkout process faster, a Wegmans’ service is one that stands out from the pack.

This year, Wegmans launched Wegmans SCAN, a free mobile app customers can use to scan and bag their groceries while they shop. The app tracks a running total for the order, so consumers know how much they’re spending, and automatically applies any available coupons or discounts. When customers finish their shopping, they simply walk up to a kiosk or register to pay.

Wegman’s has always prioritized incredible service, and it was in this vein that it decided to invest in mobile technology to help customers save even more time and shop the way they want. In this dynamic digital age, it’s innovations like Wegman’s SCAN that will lead physical retail into the future.

LESSON 4: LEVERAGE LIABILITIES LIKE ASSETS

Perhaps no company has been pushed to innovate more than Walmart. Locked in stiff competition with Amazon, Walmart is persistently looking for ways to prove that shopping in-store can be just as efficient, and potentially more rewarding, than purchasing from an online retailer.

Through its Intelligent Retail Lab (IRL), Walmart is testing ways to digitize brick-and-mortar stores to provide a more enjoyable shopping experience for shoppers, while controlling costs for operators. As such, it is conducting one of the first explorations of AI applications in physical stores.

With sensors, cameras, and processors placed throughout its pilot store, teams can easily monitor product inventory and availability, and the overall state of the store. For example, associates can be notified as the stock level for a particular product begins to dip or when spills occur so that they can react quickly to customer needs. As machines handle some of the more mundane tasks, associates are freed up to spend more of their time helping customers or creating eye-catching displays.

Walmart hopes to roll out its new technologies to an increasing number of stores, putting physical store locations at the source of their advancements — instead of viewing them as anchors or liabilities in the innovation process.

THE NEXT STAGE

As demonstrated by these initiatives, incredible innovation is now taking place in the retail industry. As the landscape continues to evolve, and online and offline worlds converge, physical grocery retailers will need to do more to attract and retain customers.

But that’s where it gets exciting — real opportunity is open for retailers to elevate what it means to go grocery shopping, to be a food consumer, and to be a responsible consumer. With a little creativity, and a little more investment, retail grocery will not only transform; it will thrive.

Source: Progressive Grocer

Ocado wages a grocery war against Amazon, Walmart and Alibaba

His patter is honed by a career battling doubters (an analyst once put him down with the quip: “Ocado begins with an ‘oʼ, ends with an ‘oʼ, and is worth zero”). Sceptics still harbour deep reservations. Though Ocado has more than tripled in value in the past two years to £7.5bn ($9.6bn), its share price has plunged recently. But his insurgency shows how the battle to dominate online groceries remains wide open. Ocado has as good a chance as anyone.

Grocery is a sadomasochistic business. Sellers can count on stable revenues but have little margin for error on sourcing, price and waste. Shoppers suffer from a retail version of Stockholm syndrome. They are lured by grocers with the promise of savings, only to be fleeced. Shops make them do the work of picking the produce and bagging it. They set traps in the aisles—in the form of strategically placed celebrity magazines or freshly baked doughnuts—to slow shoppers down. Yet customers continue to return for more, despite having ever more options to order online and have groceries delivered to their doorstep. In China and America, online grocery shopping is a miserly 3.8% and 1.6% of the total, respectively.

Mr Steiner, a former Goldman Sachs bond trader, has pulled off the rare feat of making home-delivery both tolerable for shoppers and profitable for sellers. He knows how to squeeze the last farthing out of a tomato and has turned the sorting of groceries in warehouses into a science—specifically, clever robotics— which has kept costs competitive. Partly thanks to Ocado, Britain trails only South Korea and Japan in its embrace of online grocers.

Earlier this year Mr Steiner persuaded Marks & Spencer, a British retailer, to pay £750m for a half of Ocadoʼs domestic online-grocery business. The money is helping develop his firmʼs newer, more lucrative international venture, which licenses the know-how to build modular high-tech warehouses that can be scaled up as needed. The biggest deal, struck in 2018, has been with Kroger. The American supermarket chain aims to order 20 Ocado customer fulfilment centres (CFCs, or, as Kroger calls them, sheds) by 2021, far more than the four that Ocado has so far erected in Britain (the newest burned down this year). Despite their recent slide Ocadoʼs shares still trade like a software firmʼs, not a supermarketʼs.

Lawmakers Pushing To Regulate Grocery Delivery, Saying Consumers Are At Risk

As more Californians have their groceries and alcohol delivered, lawmakers are making a push to regulate how the food is stored, including training drivers on proper handling and temperatures.

Assembly Bill 1360 passed the full Assembly in May by a 44-25 vote (11 Assemblymembers did not vote.) It then passed several Senate Committees before being ordered to the inactive file in mid-September.

If it passes, food delivery platforms would be required to train drivers about maintaining foods at required temperatures, along with requirements relating to food spoilage and adulteration. Companies would also need to maintain liability insurance.

The bill specifically applies to app-based grocery delivery services, including Instacart and Shipt, which allow customers to select grocery items on an app and then, for a fee, a personal shopper goes to pick up the items. It does not apply to grocery chains offering their own home delivery, nor to food delivery services such as GrubHub or DoorDash.

Opponents to the bill raised concerns that the provisions don’t extend to restaurant deliveries.

The bill’s author, Asm. Phil Ting, wrote, “the rapid growth of online food and alcohol delivery services has the potential to expose customers to unsafe and unregulated delivery practices. This bill establishes basic safety standards for grocery delivery services, consistent with safety requirements imposed on brick and mortar grocery stores. A growing number of Californians order groceries online and have them delivered directly to their home. Food retail establishments are subject to strict regulations regarding the handling of food to protect consumer and employee health and safety. Delivery companies expose consumer goods to the same risks as may arise for the food retailer, yet they are not subject to regulatory oversight. This bill is to ensure that consumers who choose to use a delivery service receive uncontaminated, safe food and that platform workers receive the appropriate training and certification to perform their job duties.”

If the bill becomes law, those found violating the regulations would face a fine.

Source: Good Day Sacramento

Most Popular Grocery Store In Every State

There are over 36,000 grocery stores in the United States. While some are smaller, independent stores or specialty outlets that focus on groceries from a certain area, Americans tend to buy the bulk of their food at large regional or national chains. Regional chains like Hy-Vee, Albertsons, or Publix may be a staple in some parts of the country, but they are completely unknown in others.

To determine the most popular grocery store in every state, 24/7 Wall St. ranked grocery stores using a combination of data from business directory website Yelp and Google Trends. From Yelp, we determined the five grocery stores with the most reviews in each state and compared their Google search frequency from Nov. 12, 2018 to Nov. 12, 2019 using Google Trends. The grocery store with the highest search frequency on Google Trends in a given state was listed as the most popular grocery store in that state.

Shoppers want to go to a grocery store they trust, a store that offers high-quality products like meat, produce, and more at a fair price. Grocery stores can easily lose business if they stock substandard products. These can ruin a dinner or, worse, sicken consumers who eat contaminated products. These are some of the biggest food recalls in U.S. history.

Of course, grocery stores usually do provide quality food for their customers, but perhaps their shoppers simply don’t know how to identify produce at its peak. From avocados to zucchini, each fruit and vegetable has telltale signs that shoppers should look for. This is how to pick the best produce.

Click here to see the most popular grocery store in every state. 

Source: 24/7 Wall St.

Ralphs’ pharmacists reject contract offer, authorize a strike

Pharmacists at Ralphs’ supermarket locations across Southern California have rejected the company’s contract offer and authorized its leaders to call a strike.

A tentative agreement between Ralphs, Albertsons and Vons pharmacists represented by the United Food and Commercial Workers was reached Sept. 17 and was pending ratification by some 600 pharmacists at the three chains.

Last week, the website for UFCW Local 1167 stated pharmacists at Albertsons and Vons voted to accept the contract but about 200 members at Ralphs did not.

This means the six-month cycle of often-contentious negotiations — seemingly over in September after a deal was reached between the chains and some 60,000 Southern California grocery workers — will continue.

The strike authorization vote does not mean that a walkout is imminent, but it does give union leaders the authority to call a strike if settlement talks do not progress.

“We’re reaching out to the company to go back into negotiations,” said Joe Duffle, president of Local 1167, which represents Inland Empire workers. “We’re confident we will get a meeting, and we’ll try to take some pharmacists to the table so the store can hear what they have to say.”

Union members typically follow their leaders’ endorsements and vote to ratify tentative agreements. Pharmacists at Albertsons’ and Vons were firmly in favor of the contract, Duffle said.

The contract will raise hourly pay to $67 by the end of the three-year deal and includes provisions for improved health care and pension benefits.

Ralphs spokesman John Votava said via email the company was disappointed that the fully-recommended agreement, an identical agreement passed by Vons and Albertsons pharmacists, was not ratified.

“The agreement provided wage increases, reliable and affordable healthcare coverage and pension stability,” Votava said. “We look forward to the union getting the recommended agreement ratified.”

Duffle said the profession’s dynamics have changed in the last 10 years because a number of for-profit colleges now offer pharmaceutical training, which means there is a glut of people who work in this field.

“Now guys are feeling the pressure of not having bargaining power,” Duffle said. “And these are people who do great work and have great value.”

Source: Press Enterprise

Companies pitching their values better not forget to give workers this as well

Chipotle doesn’t serve burritos, it “provides food with integrity.” Facebook doesn’t sell advertisements, it “bring[s] the world closer together.” WeWork doesn’t sublease office spaces, it “elevates the world’s consciousness” (and it might not do that for much longer).

Why do these for-profit companies insist on selling themselves as such do-gooders? In part, they want to market themselves to potential consumers. But perhaps even more so, they want to motivate their workers.

In the latest CNBC|SurveyMonkey Workplace Happiness Survey, 69% of workers said it’s “very important” to them to work for a company with clearly stated values, and 35% said “feeling that your work is meaningful” was the most important factor in their overall happiness at work. Humans crave meaningful relationships, and businesses have learned to capitalize on that emotion. By encouraging employees to see their work as fulfilling a higher purpose, they can try to retain workers by paying them in good vibes rather than dollars.

But trying to rally employees into a feeling of higher purpose at work misses something more fundamental: At root, people want to be compensated well for the work they do. Businesses that create a puffed-up company ethos but skimp on their most basic responsibility of paying their workforce well will end up with unhappy employees no matter how grandiose their company mission statement.

Defining happiness at work

In these latest survey results, workers ranked “being paid well” a distant second (21%) to “finding that your work is meaningful” in terms of what factor most determines their overall happiness at work. Those top two choices are followed by “having opportunities to advance” and “having control over how you do your work” (tied at 16% each), and finally “having colleagues who value your work” (11%).

Each of these five factors is one component that makes up the CNBC|SurveyMonkey Workplace Happiness Index; for simplicity, we refer to them as meaning, pay, opportunity, autonomy and recognition.

Source: CNBC

Stop & Shop parent company: Impact of April strike still stings as some customers who drifted to competitors stayed away

But the strike seven months ago by 31,000 Stop & Shop workers continues to be a drag. Asked on a conference call with industry analysts if it’s “fair enough” to say the supermarket chain’s market share is flat or declining, Chief Executive Officer Frans Muller said, “Yeah, it has been going down, but that was, of course, partly strike-related” and began before the strike.

Farm Country Feeds America. But Just Try Buying Groceries There.

“Communities tell me: We don’t want to use the term co-op,” said Sean Park, a program manager for the Illinois Institute for Rural Affairs. He has helped guide rural towns through setting up their own markets. “It’s ironic because it was farmers who pioneered co-ops. They’re O.K. with ‘community store.’ They’re the same thing, but you’ve got to speak the language.”

After the grocery store closed down in the northern Florida town of Baldwin, the city itself started up its own market after chains like Piggly Wiggly and Winn-Dixie declined the city’s entreaties to fill the empty space, Mayor Sean Lynch said. In Moran, Kan., a nonprofit group took over the old Stub’s Market as a community project. On the plains of eastern Montana, farmers and ranchers have banded together to create a “food hub” to sell beef and vegetables.

Winchester’s new market, Great Scott! (named for the surrounding county), operates as a for-profit cooperative, financed by locals who got together in a church meeting hall last year to discuss the urgent need for a grocery store in their town.

“People around here haven’t spent a lot of time around co-ops in the city,” Mr. Coonrod said. “We just sold it from straight novelty. Our way was playing off local sentiment — this isn’t charity. This was self-responsibility. If you want a grocery store in town, you have to step up.”

Mr. Coonrod is a Republican running to become the local state’s attorney in a solidly red county, but he said the effort was basically just community organizing — not unlike what started Barack Obama’s career 250 miles to the north in Chicago. His mother volunteers making salsas and soups. A local heating and cooling business installed the ventilation system at a deep discount. Employees at a car dealership across the town square helped carry in the refrigerators and display cases.

The shelves are stocked with basics like canned soup, bread and cereal, but the local produce shines. White icicle radishes and bags of spinach are delivered from Mueller Family Farm. The milk is from a local dairy. The frozen beef is from a nearby ranch. The source of the eggs one week was identified as a local woman named Debbie Foster.

But the challenges of starting a small grocery store at a time of increasing consolidation in the food business are daunting. The Great Scott! market could not persuade any wholesalers to work with them, so they bought a van and make regular trips to buy basics at a small markup from another supermarket.

“I called all the major chains, and if they didn’t laugh in my face they hung up on me,” said Shaun Tyson, a farmer in Mount Pulaski, a town about an hour from Winchester that is working to start its own co-op market by the spring.

A few states including Alabama, Nevada and Oklahoma have begun to study rural food deserts. They offer tax credits and loans to help stores finance construction projects and move to underserved places. In March, a bipartisan cluster of lawmakers in Washington proposed a new tax credit for grocery stores in food deserts.

But mostly, the people setting up crowd-funding sites to buy vegetable coolers and negotiating wholesale rates with huge grocery chains say they are stumbling around with little assistance and no map.

“There is no funding for rural grocery stores,” said Nancy McCloud, who scraped together $200,000 in personal loans and crowd-funded contributions to buy and reopen a closed supermarket in Mountainair, N.M. “There was nothing to help.”

Ms. McCloud said that Mountainair lost its grocery store nearly overnight two years ago, leaving the town without any other grocers within 45 miles.

Ms. McCloud, a horse trainer and leather worker, said she had no idea how to run a supermarket, but she feared that Mountainair would wither without one. Rural towns have watched their hospitals close and schools consolidate in recent years, and residents say losing their grocery stores amounts to losing a de facto town square where they catch up on gossip and check on their neighbors.

“It’s more important than just my little grocery store,” Ms. McCloud said. “It adds to the destruction of rural America — not supporting rural farmers or rural people.”

She covered the walls of her B Street Market with local art and she stocked books by New Mexican authors. She found local produce from four nearby farms and contracted out for the rest. She installed a kitchen and started cooking New Mexican standards like breakfast burritos and green chile cheeseburgers, but also salmon in puff pastry and beef stroganoff. The profit margins were higher on meals, and it helped her use produce that was not selling.

She even went to the recently opened dollar store, notebook in hand, to compare prices.

In town after town, people said their greatest challenge was enticing their neighbors away from dollar stores or the Walmart four towns over. Ms. McCloud came up with a pitch: “Go over there and buy your paper goods. Come here and buy your real food.”

It is not clear how many shoppers are listening. In Illiopolis, Ill., a tiny town fringed by cornstalks and wind turbines, the only grocery store went out of business in 2017. Now people shop at the Dollar General down the street.

A spokeswoman for Dollar General, which wants to open 975 stores this year, said the chain had brought jobs, affordable food and economic growth to the rural markets where it is expanding. The company is also planning to introduce fresh produce to 650 stores by January.

But Deloris Rogers, who has lived in Illiopolis for 56 years, said she missed picking up meat and vegetables from Johnson’s Market, where cashiers would help older residents carry their groceries to the car before it closed in 2017. Nothing has taken its place, and Ms. Rogers says she feels a pang when she passes by the empty market: “It hurts.”

Source: The New York Times

Walmart’s Strategy When Wading Into Culture Wars: Offend Few

Walmart continues to use plastic bags in its checkout lines, while big competitors like Kroger are phasing them out. The company offers reusable bags at some registers, but some executives have expressed concerns that switching entirely out of plastic could delay moving customers through the checkout as quickly as possible and turn off shoppers who prefer the convenience of plastic, according to two people briefed on the discussions.

“My impression is that this is a company that does seem to care beyond the bottom line,” said Arun Sundararajan, a professor at New York University’s Stern School of Business. “But you also have to keep in mind it is still a highly efficient competitor.”

In the company’s last earnings report, for its fiscal second quarter, its revenue climbed 3 percent, lifted by a 37 percent jump in e-commerce sales. Its profit for the quarter was $5.6 billion, and its stock is up 26 percent since the start of the year.

It is perhaps no coincidence that Walmart’s public relations victories come as its rival Amazon is being battered by antitrust concerns and criticism about onerous working conditions, issues that the original big-box retailer has spent years trying to defuse, with some success.

Many credit Mr. McMillon with positioning Walmart as a socially responsible company, while also finding ways to increase sales in the United States for 20 consecutive quarters. Through a spokesman, Mr. McMillon declined to be interviewed for this article.

Publicly, he has said he wants to stay above the political fray. But when Walmart takes a stand, Mr. McMillon has tried to convey the company’s position without “spiking the football” and inflaming the other side, one executive said.

“Politics moves around,” Mr. McMillon said during an interview in 2017 in his wood-paneled, first-floor office in a converted, largely windowless warehouse in Bentonville, Ark., where the company’s top officials work. The company’s founder, Sam Walton, used to occupy the same office, and kept a rifle by the front door because he sometimes hunted after work.

“We are on our 11th administration, since Walmart was born,” Mr. McMillon added. “There will be a 12th. There will be a 13th.”

Mr. McMillon, 53, grew up in a small city in northeast Arkansas, but later moved to the northwest part of the state to Bentonville. His father was a dentist, and his mother stayed home taking care of the children. Mr. McMillon started working at Walmart in high school and went to the University of Arkansas. He worked his way up the company ladder running Sam’s Club and then the international division. Mr. McMillon was the favorite of Mr. Walton’s heirs, who own a large amount of Walmart’s stock and sit on the board.

Mr. McMillon voices Mr. Walton’s paternalistic view of Walmart as a benevolent employer and economic actor, whose size and scale can force change across the world.

“The world is a better place with Walmart in it,” Mr. McMillon told thousands of cheering employees at last year’s shareholder meeting. “The next generation needs this company.”

Mr. McMillon shared a similar lofty assessment of Walmart with the Obama administration, where some officials had a skeptical view of the big retailer.

Not long after taking over in 2014, Mr. McMillon spoke to Labor Secretary Tom Perez to say he supported stronger overtime rules that favored workers. The chief executive explained how improving the fortunes of low-wage workers would help Walmart’s bottom line by increasing the quality of service in its stores.

Many in the administration, which was also pushing for a higher federal minimum wage, appreciated Mr. McMillon’s support on the overtime rule. But some of the officials did not overlook that Walmart, which employs about 1.5 million people in the United States, remained resistant to unionizing its American stores.

The same year Walmart raised its starting wage, the company also eliminated health care coverage for tens of thousands of part-time employees. The company says it provides health insurance to 1.1 million workers and their families.

“Their strategy is to give a little here and there, but not provide the thing that is most valuable to workers, which is collective bargaining,” said Sharon Block, who ran the policy office at the Labor Department during the Obama administration and now teaches at Harvard Law School. “That is the only way Walmart workers are going to make any real gains.”

Helping shape Walmart’s public affairs strategy is Dan Bartlett, the head of communications for President George W. Bush. Mr. Bartlett is known for his pragmatism, his ability to work with both parties and his understanding of the Deep South, according to a former Walmart colleague. One of Mr. Bartlett’s top deputies was a speechwriter for Hillary Clinton during her 2008 presidential campaign.

Mr. McMillon, who earned about $23 million last year, has seen his profile grow nationally. In September, he was named the next chairman of the Business Roundtable, a lobbying group for large corporations that recently expressed the need for companies to benefit not just shareholders but also their employees and the environment.

It was the needs of Walmart employees, Mr. McMillon said, that prompted him to speak out after the racist-fueled violence in Charlottesville, Va., in August 2017. Walmart is considered the nation’s largest single private employer of Hispanics, and just as many African-American women shop at the retailer as rural white men.

Mr. McMillon, who was serving on a White House advisory board on manufacturing, publicly criticized President Trump for not condemning the white supremacists at the rally. Other executives on the advisory board stepped down, although Mr. McMillon stayed on until Mr. Trump disbanded the group amid the controversy.

“When something like that happens, we have to look at our own associates as leaders and feel good about how we are representing the company,” Mr. McMillon said in the 2017 interview.

This year, Mr. McMillon is again advising the Trump administration. In March, he and several other chief executives of large companies joined the White House’s American Workforce Policy Advisory Board, which is discussing issues around workers whose jobs are being displaced by technology.

Walmart did not issue a release about Mr. McMillon’s appointment to the board.

Source: The New York Times

Instacart delivery drivers are striking this week. Here’s why

Those five bags of groceries may take longer to get to you this week, if drivers for grocery delivery service Instacart succeed in mounting a three-day “strike” from November 3 to November 5 to demand better pay. The quotation marks are because the drivers, known as shoppers in Instacart parlance, are freelance gig workers. While there’s no job to strike from, many have vowed to not accept assignments in an effort to slow the system down.

Instacart says it has more than 130,000 shoppers in North America, so it’s a long shot that strike organizers will rally enough people to make a dent in its business. (They have not provided an estimate of how many people will participate.) But the strike draws attention to complaints that span the gig economy: As pay declines from the salad days when startups paid generously to attract talent, workers are relying more on tips to make up the difference. Meanwhile, seeing how delivery costs add up, customers are less inclined to leave good tips.

In an open letter addressed to Instacart’s CEO and founder Apoorva Mehta and signed by 212 shoppers, Instacart workers catalogue the ways their pay has changed and implore the CEO to listen to their grievances. But having fought a losing battle for better pay, Instacart shoppers are now fighting for better tips, demanding that the company change the default tip in the customer ordering app from 5% to 10% of the cost of the groceries. “You have demonstrated a pattern of behavior as CEO of eviscerating our pay and pirating our tips,” the workers write. “It would cost you, Apoorva, absolutely nothing to restore our previous tip defaults to at least 10%.”

Of course, customers would still be free to change the tip to any amount they want, including zero. And Instacart states clearly in its app that “Tips are always optional.” Shoppers are merely demanding the possibility to make a little more money.

WHY TIPS MATTER

Tips have been a topic of contention since Instacart changed the pay formula in late 2018, which workers say left them getting less money for the same work. Earlier this year, shoppers protested the company’s practice of counting tips toward its guaranteed minimum payment of $10 per assignment. In one extreme case, a shopper was paid $10.80, $10 of which was tip—meaning that Instacart only contributed 80 cents.

Stinging from bad press, Instacart introduced a new pay model with guaranteed minimums, regardless of tips, ranging from $5 to $10, based on the assignment. Minimum-payment orders typically come in at $7, based on dozens I’ve reviewed, and can require a lot of work for the money. One typical $7 order I saw required the shopper to pick out, check out, and deliver 47 products.

Instacart sweetens the deal by tacking on a default tip of 5% the value of the groceries, or $2, whichever is higher. Shoppers often use this estimated tip amount when they decide whether an assignment is worth taking.

The shopper would have to pick out and check out 47 products for a $7 fee, and no tip.

But customers can change the tip anytime from the moment they place the order until three days after delivery. The customer set a zero tip on the $7 assignment I mentioned above. And as I reported last month, customers often reduce or even eliminate tips after they get the order.

Some tips may be cut for poor service; but consider a comparison to waitstaff. How awful would the service in a restaurant or bar have to be to not tip a server? And they have a safety net: If waitstaff’s base pay plus tips does not at least equal the legal minimum wage, the restaurant has to kick in the difference (that’s because they’re salaried workers).

Minimum wage laws don’t apply to freelance workers like Instacart shoppers. For most of the year, labor rights group Working Washington has been fighting for Instacart and other gig companies (like DoorDash) to pay a guaranteed minimum of $15 per hour, plus reimbursement for miles driven.

Gig companies balked, until California passed a new law that would force them to make their contractors into employees, subject to minimum wage law and many other protections. Instacart has now joined DoorDash, Lyft, and Uber to propose a ballot initiative that would exempt them from the law in exchange for concessions including a guaranteed minimum hourly wage.

One way or another, workers in California may get more reliable income and the ability to earn tips on top of that for great service. But for gig workers at Instacart, DoorDash, and other companies in the rest of the country, tips are essentially an integral part of their pay.

Without a decent tip, many of these assignments may not pay enough to incentivize drivers to take them on. So whether or not the strike works, low pay and low tips for drivers mean you may still be waiting longer for your delivery orders in the future.

Source: Fast Company