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Why suburban moms are delivering your groceries

At 6:30 a.m., four of five Gordon family members are roaming around their suburban Sacramento house — if you count only the humans. There are also four dogs, a bunny, a tortoise, chickens, ducks, goats and a not-so-miniature miniature pig named Squiggy.

Hilary Gordon is discussing the day’s schedule with her husband in the middle of wrapping a breakfast sandwich for their 14-year-old, checking on cereal for their 17-year-old and staring down their 11-year-old, who just realized he forgot to finish today’s math homework.

Having time like this with her family is a major reason that Gordon, 47, works as a shopper for the grocery delivery app Instacart in a suburb of Sacramento, Calif. “I find it fun. It gives me something to do. I’m not out spending money. And I love the flexibility,” she says.

Instacart is one of a slew of similar apps — DoorDash, Postmates, Shipt — paying tens of thousands of workers like Gordon to deliver packages, food or groceries to strangers. Similar to those who drive for ride-share apps Uber and Lyft, delivery workers can choose when to work. But they don’t have to invite strangers into their cars.

This draws women — often in their 40s and 50s — who now make up more than half the contractors working for major food delivery apps.

Instacart told NPR that more than 50% of people who shop for the app are women. DoorDash said women make up more than 50% of its “dashers” in rural and suburban areas and more than 60% in urban areas. Target’s Shipt declined to share this statistic. Postmates said an April survey of its workers showed 48% were female and 38% had a child at home.

Gordon and a half-dozen other women shared with NPR details of working for delivery apps, which painted a picture of the epitome of gig work: accessible but high intensity, with pay that’s quick but unpredictable and hours that are flexible but unreliable.

‘I will not work for free’

After splitting up school drop-offs with her husband, Gordon parks her Subaru SUV in a grocery store parking lot. Her Instacart shift today is 8 a.m. to 6 p.m. She’s got her shopping sneakers on and a fully charged phone — watching the screen for incoming grocery orders, which she will both shop for and deliver.

The first “batch,” as they call it, is a bust: $8 with no tip, for seven items, to be taken 4 miles. But the store is 8 miles away. Instacart says it pays 60 cents per mile for delivery to the customer, but it doesn’t pay for the drive to the store in the first place. The company explains that it can’t be sure that the worker, for example, isn’t doing a non-Instacart gig until they begin shopping.

Logging miles is a big cost of the job. Some days Gordon might drive 100 miles, filling up the tank at least once a day. For every order, she does quick math to calculate the gas expense. This $8 order doesn’t cut it. Gordon picks one of her canned responses to Instacart: “Pay too low. I will not work for free!”

But you can’t skip too many orders — the app will think you stopped working. Gordon gets a good one: eight items for $9.87 plus a promise of a $6 tip. But most importantly, it’s only 1.5 miles of driving. She can knock it out in about 20 minutes.

Shopping for other people is a bit like a scavenger hunt, except the app is timing you. You rush through the whole store, scanning every item that goes in the basket and messaging the customer with updates.

Gordon checks each bell pepper for blemishes, throws a Hail Mary on the ripeness of avocados, tells Instacart that “organic celery” is out of stock. The app suggests she grab “spring water” instead. Gordon laughs out loud.

After almost a year and a half with Instacart, Gordon says she still loves grocery shopping. And she especially loves meeting new people — chatting up store workers for help and playing with friendly pets she meets at customers’ homes.

‘Hopefully tomorrow is better’

Like a lot of gig workers, this is not a career that Gordon pictured for herself. She has two master’s degrees — in counseling and family therapy.

She worked as a therapist in other states, but a move to California required more classes and exams, right as her oldest was born. Gordon became a social worker, until she made the calculation familiar to many working women: Her job took up mornings and evenings, with a not-so-great salary.

A few years later, the recession hit. Her husband lost his job in finance. Their house value dropped. They’re still paying down the debt that stacked up. But now there’s also soccer, swim team, lacrosse, broken cleats, a junior prom dress, trips to look at colleges, AP exams, SAT tests and summer camp.

This rhythm is all too familiar for women doing app work. Gigs help cover some expenses of child and health care — an opportunity for side income on top of a steadier job, either the deliverer’s or their partner’s. Workers who do app-based jobs to supplement income form a growing cohort within the gig economy, says Shelly Steward of the Future of Work Initiative at the Aspen Institute.

Gig workers are often independent contractors who don’t get benefits like health insurance or sick leave. And when families piece together multiple jobs and gigs to make a living, “the system of workplace benefits that’s been in place does not adequately cover nearly as many workers,” Steward says.

Stacie Ballard, 43, pieces together work for at least seven apps while building her own business in Atlanta. She keeps a stack of T-shirts in her trunk — green for Instacart, green and white to walk dogs for Wag!, green and gray to deliver packages for Shipt — changing between gigs as she earns extra cash for her teenager’s graduation and other expenses.

All the things to consider

Ballard, like many women in the gig economy, works for apps part time. For one, hustling full time is exhausting. But also, hours can be hard to get.

On Instacart, available hourlong shifts get claimed within seconds, workers said. Part-time workers like Ballard and Lewkowitz often stalk the app all day, hoping to grab some.

Gordon is one of the Instacart regulars who get “early access” to a full week’s worth of shifts so she can get hours predictable and long enough to make the work worth it for her. But to qualify, she commits to doing this “gig” full time, because early access requires working at least 90 hours in three weeks or 25 hours over three weekends.

Instacart says it has announced a pilot of a new way to qualify, which would encourage good customer ratings instead of long hours.
Even for full-timers like Gordon, signing up for shifts is “anxiety inducing.” She describes frantic clicking on Sunday mornings, when the schedule opens, selecting all the hour slots before they get claimed, within minutes.

And after all that, as any gig worker knows, having more hours doesn’t ensure a huge paycheck bump. It might be a slow day, or long distances might make orders not worth the cost of gas. Workers also consider the less obvious costs of these jobs. Is the order too complicated and time consuming? Too heavy?

Once, Gordon accidentally accepted a Costco batch with 81 cases of water. She says Instacart told her she could do multiple trips, but she refused and had to return — and ultimately give up — the whole order. So today, Gordon is eagle-eyed, spotting 13 cases of water in an otherwise appealing $32 batch.

One final thing she always checks is whether she knows the delivery address. Many delivery workers keep a mental track of locations that require climbing stairs, like apartments without elevators. On Gordon’s mental list are also a house with the guy who greeted her in a robe, and an older man who pressured her into bringing his groceries inside and said he’d been tracking her.

And then there’s the matter of tipping. Orders from businesses are notorious for being large and lacking tips. Workers say they wish the apps more aggressively encouraged their users to tip. Instacart recently changed its tipping system and retroactively compensated workers after workers and labor advocates fought a policy that counted tips toward base payments that Instacart promised for deliveries — sometimes offsetting what Instacart paid out of its own pocket.

Today, Gordon delivered eight orders in 10 hours and made $133, before extra bumps for heavy orders and good reviews. Today was OK. There was one day when she made $50 in six hours. That wasn’t worth it. Gordon’s best day’s haul was $255 — when she worked almost 12 hours.

Source: NPR.org

whole foods

Whole Foods under Amazon is still the priciest grocer. Do we care?

Despite Amazon.com’s publicity push to promote price cuts at Whole Foods, the chain remains the highest price grocer in the land, according to a new study by Bank of America Merrill Lynch (BOA).

The study, which included the round of price cuts announced on April 3 that the grocer claimed included deeper discounts and double the number of exclusive deals for Prime members, doesn’t appear to have moved the needle on the chain’s pricing competitiveness compared to other grocers.

BOA’s research included 10 pricing studies in eight different metropolitan areas around the country over the past year. The last of these took place after Whole Foods announced its latest price cuts.

“In Philadelphia, Whole Foods’ basket was still priced at a +39% premium to Walmart (the grocer with the lowest overall average prices). Produce [was] still at a +25% basket premium to Walmart, and center-of-store items at a +58% premium to Walmart,” BOA analyst Robert Ohmes told CNBC.

In an online discussion on RetailWire last week, BrainTrust member Ron Margulis, managing director of RAM Communications, saw Amazon’s failure to shift price perception as a strategic failure.

“Whole Foods is strictly applying science (in this case, data science) to a challenge that still requires some art,” wrote Mr. Margulis. “As much as they’d like to think that their shoppers’ fickleness can be modeled using advanced algorithms, it can’t be.”

Others were decidedly unimpressed by Whole Foods’ failure to bring down prices under the ownership of the e-commerce titan.
“With so many good places to shop for equally good produce and everything else, I dislike the feeling of being robbed at the checkout counter,” wrote Cynthia Holcomb, CEO of Prefeye. “Whole Foods is a presentation experience at best.”

“Whole Foods’ discounts for Prime members are also a reminder that there aren’t discounts for those of us who refuse the pay the Prime fee,” wrote Cathy Hotka, principal at Cathy Hotka & Associates. “It’s one thing to surrender your phone number to get a discount at a traditional grocer; it’s another to have to pay $12.99 a month for it.”

Whole Foods’ premium to Walmart was actually one percentage point higher than BOA’s pricing studies over the past three to four years. While comparing Whole Foods prices to Walmart’s may seem unfair on the face of it, consider that Sprouts Farmers Market, a growing competitor in a similar niche to Whole Foods, had an average premium of 8% to Walmart’s prices.

Most of the price cuts by Whole Foods were in produce, according to the research, with fewer deals to be found in other parts of its stores.

The BOA research supports findings by others that the hoopla around price cuts at Whole Foods didn’t add up to big savings for the chain’s customers. Last fall, a Gordon Haskett market basket study of 108 items sold by Whole Foods found that prices at the chain were only 0.8% lower a year following its acquisition by Amazon. Prime members, who were supposed to benefit most from Amazon’s ownership, only saved an additional $1.54 on a basket of over $400 when compared to non-members.

For some RetailWire BrainTrust experts, though, keeping prices high wasn’t off-brand for Whole Foods’ high-end grocery experience.

“No one bargain shops at Whole Foods,” wrote Tom Erksine, CMO at One Door. “Whole Foods is an incredible example of how a premium experience, including better brand image, premium brands, healthier choices, better overall category curation, and better visual presentation, can translate into commanding a premium price.”

“Whole Foods is clearly the best grocery store (although some units may not be) with the best quality in terms of product, the best environment and the best people,” wrote Lee Peterson, EVP Thought Leadership, WD Partners. “Hence, their prices are higher. So?”

Source: Forbes

Union says first contract offer from big three grocers ‘unacceptable’

The union that represents workers at Southern California’s three major supermarket chains on Friday strongly criticized the grocers’ first comprehensive contract offer, calling it “unacceptable” and making its first veiled threat of a possible work stoppage.

Representatives of Vons, Ralphs and Albertsons have been in talks with the United Food and Commercial Workers since early March, and union leaders say the chains had not made any offers on wages and benefits, the key issues,

But after three days of talks ended Friday, May 24, the websites of UFCW’s seven locals said the grocers’ first offer of wage and benefits changes were “unacceptable.” The union represents about 60,000 workers spread out over all of Southern California.

According to the union postings, the offer would provide pay increases of just 1%.

Greg Conger, president of Local 324, which represents workers in Orange County, said the stores have proposed that cashiers — the best-paid clerks in the stores — be formally downgraded to positions with lower pay scales.

Conger said in an interview that the chains have proposed fewer payments into the union trust account that funds health care coverage. While this would not immediately affect medical coverage, it would likely reduce the levels of health care in the future. The web posting also said the grocery chains have refused to submit a plan to adequately fund pensions.

“We’ll try to figure out what our next step will be, but they are not bargaining in good faith,” Conger said.

Representatives of the three chains did not reply to requests for comment.

Conger said that more talks will be held in two weeks, and if UFCW doesn’t see progress, then leaders will go to its members to discuss authorizing a strike. This is used by unions to increase negotiation leverage and does not necessarily mean a work stoppage is imminent.

In 2003 and 2004, a four-month strike at Albertsons, Vons and Ralphs shook up Southern California’s grocery industry and cost the stores billions of dollars. Since then contract talks have frequently been contentious, and strikes have been authorized but not carried out.

Last month, UFCW workers walked off their jobs at the New England chain Stop & Shop. The 11-day strike ended April 21.

Source: Press Enterprise

Kroger, Walgreens to test Loop reusable packaging

The Kroger Co. plans to pilot a reusable packaging system for leading consumer brands in an exclusive grocery retail partnership with Loop US LLC, a circular online shopping platform developed by waste management firm TerraCycle.

Kroger, along with retail pharmacy chain Walgreens, will be the first U.S. retailers to employ the Loop system, the companies said. Loop officially launched its U.S. program Tuesday in New York, New Jersey, Pennsylvania, Maryland and the District of Columbia.

Products available via the Loop platform come packaged in reusable glass or metal containers and are shipped directly to consumers in a specially designed tote bag. After use, the products are collected free from consumers’ homes and then cleaned, refilled and reused.

Participating customers in the selected markets will be able to shop more than 100 products — including food, beverages, health and beauty care, and nonfood items — that were redesigned with brand-specific, durable containers. Consumer packaged goods (CPG) companies taking part in the Loop U.S. pilot include giants Procter & Gamble, Unilever, Nestle, PepsiCo, The Clorox Co., Colgate-Palmolive, RB (Reckitt Benckiser) and SC Johnson.

Other participating companies/brands include Soapply, Melanin Essentials, International Harvest, Purely Elizabeth, The Body Shop, Greenhouse, Preserve, Teva Deli, Nature’s Path, Burlap & Barrel, Reinberger Nut Butter, The Honest Company, WellPet, Bilal’s EasyKale, Arbor Teas and ECOS.

Cincinnati-based Kroger noted that the partnership with Loop is part of its efforts to scale back single-use plastics under its Zero Hunger|Zero Waste plan.

To shop for the products, consumers go online to www.loopstore.com, www.thekrogerco.com/loop or www.walgreens.com/loop to place an order, which they will receive in the special Loop shipping tote. Once the items are used, customers place the empty containers into the totes and go online to schedule a pickup from their home.

Loop said it uses cutting-edge technology to clean the products so they can be safely reused, and items are promptly replenished to consumers as needed.

U.S. consumers in the Loop pilot region who want to participate can find out how to sign up at www.loopstore.com, www.thekrogerco.com/loop or www.walgreens.com/loop.

Down the road, the companies plan to expand the selection of Loop products for purchase online as well as make the platform available to customers in additional Kroger and Walgreens markets. Kroger added that, depending on the consumer response, it may work with Loop to create “an in-store Loop experience” in a Kroger community.

Last week, Loop and French retailer Carrefour announced the launch of a similar test serving Paris, according to Colgate, one of more than 25 CPG companies participating in the Loop pilot. The New York-based manufacturer said it’s now developing durable package designs and plans to begin the test with mouthwash. Based on learnings in the U.S., France, later this year in London and in ensuing pilots, Colgate aims to extend the Loop packaging to other oral care products and additional CPG categories.

Source: Supermarket News

Kroger, largest grocery chain in U.S., to eliminate plastic bags

The nation’s largest grocery chain has vowed to stop using plastic bags.

Cincinnati-based Kroger says it will phase out the plastic bags by 2025. The chain goes through 6 billion bags annually.

The project will start at Kroger’s Seattle chain QFC, where CBS News reports that it expects to be plastic free by next year.

Seattle last week became the first major U.S. city to ban plastic drink straws and utensils, while similar proposals are under consideration in New York and San Francisco, CBS reported.

According to the World Economic Forum, humans have dumped 150 million metric tons of plastic into the Earth’s marine environments with an estimated 8 million more metric tons being dumped each year.

Many of those plastics break down into microplastics which can be a danger to marine life at all levels of the food chain.

Kroger, which serves almost 9 million people daily through its two dozen grocery chains, has more than 2,700 stores across the nation.

The company is encouraging its customers to choose reusable bags, the Daily Journal (Tupelo, Miss.) reported.

Source: TribLive.com

UFCW Local 1776KS Members Approve ShopRite Contract

UFCW Local 1776KS members at Philadelphia-area ShopRite Supermarkets have voted to ratify a new union contract for over 2,500 ShopRite workers. Workers from six ShopRite employers came out to two union meetings today to hear details and vote on the tentative agreement, which includes wage increases, benefit protections, and more.

Negotiations with the ShopRite employers began in early 2018 and continued over many months, wrapping up just recently on May 3 rd. The 5-year pact protects benefits, increases wages, expands non-discrimination language, requires earlier notification of scheduling, and provides for additional shop stewards.

“I want to thank our bargaining committee for their hard work,” said Local 1776KS president, Wendell Young IV. “I am incredibly proud of this membership who stood together and worked to negotiate an agreement that raises wages and protects benefits. I am happy to see a good contract come out of this committee’s dedication.”

The 5-year agreement covers members from six area ShopRite employers, Ammons Supermarkets, Browns Superstores, Collins Family Market, Colligas Family Market, R & R Shoprite, and GMS Zallie Holdings, which span Southeastern Pennsylvania. UFCW Local 1776KS represents over 35,000 union members, including supermarket workers across Pennsylvania, West Virginia, Ohio, and New York.

Source: Yahoo! Finance

Boxed Partners With Grocery Chain Lidl

Boxed, the digital retailer known for bulk sizes and just 1,600 products in its online store, will now license pieces of its end-to-end technology to its first grocer. The startup now offers delivery to Lidl customers in parts of both New York and Georgia, as it tests out a partnership with the fast-growing chain. Boxed customers in those areas will now also have access to fresh meat and produce delivery for the first time.

While grocery-delivery app Instacart has recently inked high-profile deals with Costco, Kroger, Albertsons and Publix, Boxed is betting on Lidl, the German grocery chain which expanded to the U.S. in 2017. Its 68 stores, mostly in the Southeast, are mainly stocked with the chain’s own private-label products. The real potential for Boxed comes with Lidl’s global footprint, which tops more than 10,500 stores in 29 countries.

“This is just the first test,” says Chieh Huang, CEO and cofounder of Boxed. “But as the partnership gets deeper, we can bring a lot more to the table.”

Boxed is one of the leading startups in the food logistics business. In September 2018 it raised $111 million in Series D funding that valued the firm at $600 million. In all, it has raised $250 million from investors like Greycroft and Founders Fund. The company declined to provide sales and last released the figure three years ago, when it surpassed $100 million. A representative for Boxed only said “it has increased significantly since then.” The company is not yet profitable—but Huang says it is on track to be soon, and the Lidl partnership will surely help.

In the ever-challenging grocery industry, any possible edge over competitors matters. Recently, that’s created a healthy appetite for acquisitions, particularly among delivery startups. After Walmart spent $3.3 billion to acquire Jet.com in 2016, a panic set in across the rest of the industry. In 2017 alone, Plated was acquired by grocery giant Albertsons for a reported $200 million and Target spent $550 million to acquire Alabama-based Shipt.

Boxed then started to attract its own offers. In January 2018, Kroger reportedly bid $400 million for the startup, but Boxed’s board voted against the deal. Amazon, Target and Costco also were said to have expressed interest in acquiring Boxed, and Huang met with these companies (and even Jeff Bezos) to talk about potential deals. In the end they did not submit formal bids.

It all taught Huang a crucial lesson. “We found out that the technology we built is actually really valuable and that we could use it to really bring most grocers, whether in the U.S. or around the world, into the 21st century pretty quickly,” says Huang. “I don’t think a lot of folks really believed me when I said we were staying independent. Now that we’re licensing the technology out, it shows that we’re in this for the long haul.”

In fact, Boxed is one of the only end-to-end platforms like this in the world. IBM can build a company’s warehouse management system, and Salesforce can build the management system to track purchases. Delivery apps like Instacart and Shift can handle the transport. But globally the only other companies with the kind of combined capabilities that Boxed now has are some of the most prominent tech giants out there: Amazon, Alibaba, JD.com and Ocado.

“Because we started off with no resources and a completely blank slate, we were actually forced to build our own solutions,” says Huang. “We didn’t have the money for a sales force or to call up SAP or Oracle or for an off-the-shelf software like Shopify or Squarespace. And we knew it wasn’t going to be sophisticated enough as we got into the hundreds of millions, if not billions, of sales.”

Now, Huang says Boxed will offer these different kinds of “plug-and-play” solutions to any company that needs it. While Boxed has become well-known for limiting the products it sells online to maximize its own profit, Huang says the software works for any number of items and can be tweaked to fit the needs of any business.

So is Boxed now handling how Lidl warehouses its products, too? Huang says not just yet, but that it could come eventually. Lidl and a lot of regional grocers only maintain local warehouses, so Boxed, for example, could start storing products for Lidl’s in-house private-label brand and distribute it across the country for the first time, delivering it in two days or less. Boxed could also build Lidl a website that can tell each customer the exact expiration date that the item in their cart will have. Because the website that customers use is tied to Boxed’s warehouse management system, the company knows exactly which pallet the item will come from by the time the order is filled. Currently, Boxed is the only retailer that offers this level of detail to its customers.

Huang hopes Boxed’s new focus will be worth it: “Partnering with Lidl certainly would not have happened if we had merged with anyone a year ago. Food retail across the globe is probably even more in flux than it was. The opportunities for us are even larger today. I don’t think we would’ve maximized them if we had merged with someone.”

Source: Forbes

Amazon Lockers are driving people to Whole Foods, but they’re staying less than 5 minutes

When customers say they want to run into Whole Foods to pick up a few things, they might not be talking about groceries.

Whole Foods Market has seen an increase in foot traffic in the first quarter of 2019 versus the same quarter in 2018, according to data from inMarket, a marketing campaign and customer engagement specialist.

However, the grocer, which was acquired by Amazon.com Inc. in August 2017, has also seen visits of less than five minutes, or micro visits, rise 10%, implying that some of the changes that Amazon has imposed, including the addition of Amazon Lockers at Whole Foods locations, is having an impact.

Amazon lockers are self-service kiosks where customers can pick up packages and drop them off for return.

“There was a substantial increase in micro visits in 2019, which may be due to the increased rate of additional Amazon Lockers and streamlined online order pickups for quick in-and-out trips,” the inMarket report said.

Foot traffic was up 16.5% for the period.

“Amazon seems to be focused on inspiring visits from their customers by incentivizing their Prime membership holders with special perks and doubling down on their digital omnichannel strategy,” the report said. “This may also indicate that shoppers are visiting more frequently than the previous year.”
Prime membership exceeds 100 million.

The data also shows a 2.5% drop in new shoppers as the brand implements a strategy to focus on current shoppers, and a 0.2% drop in “dwell time,” which inMarket attributes to the increase in micro visits.

InMarket used location data for its latest analysis.

Amazon has made an impact on the food retailing business with its Whole Foods acquisition, though it faces tough competition from sector leaders like Walmart Inc. and Kroger Co. With its “Whole Paycheck” reputation, Amazon has focused on bringing down prices at Whole Foods, with the latest cuts arriving in April.

“Amazon’s move to invest in fresh pricing is consistent with our framework that grocery is a significant priority for long-term growth,” wrote KeyBanc Capital Markets analysts led by Ed Yruma in an April 3 note. “While grocery has structurally lower margins than other categories in retail, its high purchase frequency and total dollar spend makes it an important area of focus for Amazon.”

KeyBanc rates Amazon shares overweight with a $2,100 price target.

Building the bricks-and-mortar grocery business will be important for Amazon because online grocery, while growing, is still just a small part of U.S. grocery sales.

Coresight Research’s U.S. Online Grocery Survey 2019 shows 36.8% of U.S. shoppers bought groceries online in the last year, up from 23.1% in 2019. And Amazon is the leader, with 62.5% of online grocery shoppers making their purchase from the e-commerce giant.

But Coresight estimates that only 2.2% of U.S. food and beverage retail sales were online. That figure is expected to climb to 2.7% in 2019.

And many are only buying a bit of their groceries online, with nonfood grocery and packaged, non-fresh food still the majority. Just 11.8% of online shoppers bought much of their groceries digitally.
Even in this online category, Walmart has narrowed the gap between itself and Amazon, with Coresight finding that Walmart’s online grocery shoppers doubled in a year.

“With around 35% of Walmart.com shoppers doing ‘some,’ ‘most’ or ‘all or almost all’ of their grocery shopping online, they are more likely to be ‘full-basket’ shoppers of the kind we see in bricks-and-mortar grocery stores,” wrote Coresight in its report.

Moody’s sees the grocery competition between Walmart and Amazon heating up.

“While Walmart has the wherewithal and willingness to meet the Amazon threat in food, as well as a different customer demographic, other food retailers will continue to feel the pressure from the ongoing and now-escalating battle between Amazon and Walmart, with this battle continuing to impact almost all retail categories,” said Charlie O’Shea, Moody’s lead retail analyst.

Amazon stock has climbed 24.6% for the year to date while the S&P 500 index is up 13.7% for the period.

Source: MarketWatch

Grocery Outlet Sees Opportunity for 4,800 Stores

Grocery Outlet hopes to lure investors with a compelling story of reliable growth and profitability—and a very big opportunity for future expansion.

In a stock registration statement filed with the U.S. Securities and Exchange Commission this week in advance of a planned initial public offering, the Emeryville, Calif.-based extreme discounter said it sees the potential to more than double its current 316-store base in states in which it currently operates, and could quadruple its store base to 1,600 locations by expanding to surrounding states.

“Our goal is to expand our store base by approximately 10% annually by penetrating existing and contiguous regions,” the prospectus read. “Over the long term, we believe the market potential exists to establish 4,800 locations nationally.”

That figure—though decades away given current growth rates—would make Grocery Outlet the nation’s largest discount grocer in terms of number of locations: Aldi is currently approaching 2,000 U.S. stores and Save-A-Lot has about 1,230 stores. Grocery Outlet operates stores in California, Nevada, Oregon, Washington, Idaho and Pennsylvania.

Grocery Outlet’s ambitions are rooted in the belief that discount is a long-term trend that will continue to win share from traditional supermarkets—and has been supported by strong financial growth at Grocery Outlet, including 15 consecutive years of comparable-store sales improvements and sales that have more than tripled since 2006. Profit margins have varied between 30.1% and 30.8% over the past decade, the company added.

The company’s sales in the fiscal year ending Dec. 29, 2018, totaled nearly $2.3 billion, up by 10.7%, while comps improved by 3.9% and gross margin as a percent of sales totaled 30.4%. Net income of $15.9 million was down by 23% from 2017. The company carries $875 million in debt.

“We believe that consumers’ search for value is the new normal in retail,” the filing said. “The success of off-price retailers represents a secular consumer shift toward value as a leading factor in purchasing decisions. Moreover, as millennials mature and baby boomers age, they are increasingly focused on value, driving shopper traffic toward the deep discount channel.”

The prospectus highlighted what Grocery Outlet described as differentiated model for buying and selling resulting in a “Wow” shopping experience. The company sources name-brand consumables and fresh products opportunistically through a centralized purchasing team that leverages long-standing relationships to acquire merchandise at significant discounts including closeouts and overruns. The company sources about 85,000 SKUs overall, but its stores operate with a frequently changing selection of about 5,000 items, “creating a ‘buy now’ sense of urgency that promotes return visits and fosters customer loyalty.”

Grocery Outlet’s stores are independently operated by entrepreneurial small business owners who are responsible for store operations, including ordering, merchandising and managing inventory; marketing locally; and directly hiring, training and employing their store workers. They share in the profits from items sold at their stores.

“This combination of local decision-making supported by our purchasing scale and corporate resources results in a ‘small business at scale’ model that we believe is difficult for competitors to replicate,” the company said.

Although a share price and number of shares to be offered were not included in the S-1, the filing indicates that Grocery Outlet’s current majority owner, the private equity investor Hellman & Friedman, would retain a controlling interest of the company. Erik Ragatz, a partner of Hillman & Friedman, is Grocery Outlet’s chairman.

Hellman & Friedman acquired the company in 2014 from Berkshire Partners. The company, founded in 1946 by Jim Read, is still run by Read’s descendants. CEO Eric Lindberg and Vice Chairman MacGregor Read are cousins and third-generation descendants of Read.

Under Hellman, Grocery Outlet has made numerous infrastructure improvements enabling growth, including a new warehouse management system that has increased distribution labor productivity and improved store ordering capabilities to help reduce shrink, the filing said.

Productivity enhancements are one of three growth strategies identified by the company in the prospectus. Additional unit growth—with 32 new stores expected to open this year—and comp-store growth are the other two strategies.

Grocery Outlet intends to grow comps through deeper relationships with suppliers providing more deals for its retailers. The company cited expansion of its NOSH category (natural, organic, specialty, healthy) and recent additions of grass-fed beef and seafood.

The company said comps would also benefit from an effort to provide independent operators with more data and insights intended to reduce shrink and out-of-stocks, as well as through consumer outreach built around brand awareness and encouraging visits from bargain-minded shoppers through digital and other forms of advertising around its new “Bargain Bliss” campaign.

Source: Winsight Grocery Business

Walmart launches free next-day delivery, taking aim at Amazon

Walmart is rolling out free next-day delivery on its most popular items, increasing the stakes in the retail shipping wars. The nation’s largest retailer said Tuesday it has been building a network of more efficient e-commerce distribution centers to make that happen.

The next-day service will cover 220,000 popular items from diapers and nonperishable food items to toys and electronics. That’s nearly double the number of items Walmart carries in its stores.

Next-day delivery, which will require a minimum order of $35, will be available in Phoenix, Arizona and Las Vegas on Tuesday. In coming days, it will expand to Southern California. The discounter plans to roll out the service to 75 percent of the U.S. population by year-end. It will also be adding hundreds of thousands more products as the program expands.

The announcement comes just two weeks after online behemoth Amazon said it’s upgrading its free shipping option to Prime members, who pay $119 a year, to one-day delivery from two-day delivery. Amazon has declined to say when the switch will happen, but it already offers one-day delivery for some items in certain areas.

“Trying to get ahead”

Walmart said its new delivery program has been in the works for a while. “Customer expectations continue to rise,” Marc Lore, CEO of Walmart’s U.S. e-commerce division, told The Associated Press in a phone interview. “We’re trying to get ahead of that.”

The move will only increase pressure on other rivals that are already investing millions of dollars to shorten the delivery window. Amazon changed consumer expectations when it launched its two-day delivery for Prime members back in 2005 and forced other retailers to step up their game. But analysts said Amazon then needed to cut the delivery time in half to make its membership more attractive because Walmart and other retailers offered free two-day deliveries without any membership.

Two years ago, Walmart began offering free two-day shipping on millions of items on its website for orders of at least $35. Target also offers free two-day shipping for those who spend at least $35 or use its RedCard loyalty card. Walmart has also been expanding same-day grocery delivery service fulfilled from its stores for a fee of about $10.

Lore said it will be cheaper for the company to do next-day delivery versus two-day service because eligible items will come from a single fulfillment center located closest to the customer. This means orders will ship in one box, or in as few as possible, unlike two-day deliveries that come in multiple boxes from multiple locations.

Amazon hikes self-delivery

Still, Walmart sells far fewer products than Amazon, and its online U.S. sales are only a fraction of Amazon’s online global merchandise empire. Amazon has also been delivering more packages itself rather than relying on the U.S. Postal Service and other carriers like UPS and FedEx. The company expects to spend $800 million in the second quarter to speed up deliveries and has expanded its fleet of jets. On Monday, Amazon announced it will be expanding an incentive program to its employees so they can quit their jobs and start their own Amazon package delivery businesses.

Walmart has one big advantage over Amazon: It has more than 4,700 stores. Walmart and Target have been turning their physical stores into shipping hubs, speeding up deliveries and helping defray costs for services like curbside delivery and in-store pickup. Walmart has also been expanding the use of robots in its stores, which keep tabs on what’s on and not on the shelves. And Target has redesigned its staging area for packages to help speed up fulfilling curbside deliveries.

Source: CBS News