The impact of e-commerce is starting to be felt in the grocery industry, as national chains such as Whole Foods, Walmart, Albertsons and Target start to dive deeper into online-based ordering and delivery services. And some local and regional supermarkets are starting to move into the arena.
In recent weeks, Alexander’s Highland Market, DeLaune’s Supermarket and Matherne’s Supermarket all debuted their own grocery pickup services through their websites around Baton Rouge. Alexander’s is even delivering groceries to south Baton Rouge and Prairieville. Meanwhile, Rouses has teamed with two national delivery services, using Instacart in its New Orleans and Baton Rouge markets, and Shipt, in those two markets plus Lafayette, to provide same-day delivery to customers.
Craig St. Pierre, who owns DeLaune’s Supermarket, said it cost him “a few thousand dollars” for Associated Grocers to set up a curbside pickup service at his St. Amant store.
“It’s a big deal for us to offer this to our customers,” he said. To enhance the local feel, St. Pierre said the orders are placed in a brown paper bag.
“We like that it’s local people pulling your product,” he said. “We want to push that local flair.” The hope is as the service gets more established, DeLaune’s employees will learn exactly what their customers want — like if they want lean or well-marbled meat or how ripe they want produce to be.
While some of the stores have decided to handle selecting food items and delivering orders on their own, Thibodaux-based Rouses has joined forces with two of the largest delivery services.
CEO Donny Rouse said teaming up with Instacart and Shipt was the way to go for his company because they have multiple locations. “We wanted to keep the prices low and not have a bunch of labor infrastructure,” he said. “We didn’t want to hire enough people to make deliveries and shop the orders. If we had one store, doing it in-house would be the right way to do it.”
Because the profit margins are so slim with supermarkets, Instacart and Shipt charge for deliveries. Instacart starts at $5.99 per delivery of $35 or more, but it offers subscription services of $14.99 a month that provide free delivery of all orders over $35. Shipt’s subscription service is $14 a month.
Rouse said the chain is getting ready to offer “click and collect” service, where customers can shop through an app and pick up their items at the store. The service will be introduced in the next few months, he said.
“As far as how big this is going to get, we don’t know,” he said. “It’s something new for us, something new for the consumer.”
Within the next seven years, it’s projected that 70 percent of shoppers will make some portion of their grocery purchases online, according to a joint report issued earlier this year by the Food Marketing Institute and Nielsen. That could equal $100 billion nationally in total spending.
Phil Lempert, an industry analyst known as “the Supermarket Guru," said only about 2 or 3 percent of total grocery sales come through delivery services now. That total is expected to change.
“Supermarkets have not really been very progressive,” he said. When Amazon bought Whole Foods last year, it was a signal to the entire industry that things were about to change. After all, Amazon has perfected the art of delivering everything but food to American households. And Whole Foods had a nationwide network of stores.
Lempert said the biggest change will happen in the next few years, as smart fridges and smart cupboards that are connected to the internet become more widespread. After customers use up a certain item, such as peanut butter, the web-enabled device will send a signal to a nearby store to make sure that the product is delivered.
“This will make sure you never run out of paper towels and you don’t have to go to a store to pick them up,” he said. Lempert estimates that in the next few years, 20 percent of grocery sales will be done online for pickup or delivery.
That will be a huge opportunity for grocery stores because it will allow them to get rid of the “unemotional boxes and cans” that take up so much space in the center of a supermarket. “You’ll have a better experience for shoppers, focused on things such as fresh produce, butchers and bakers,” Lempert said.
Lathan Alexander, who owns Alexander’s Highland Market in Baton Rouge, said the shift toward online ordering is being driven by changing technology and people’s changing lifestyles.
Right now, Alexander said between seven to 10 customers a day are showing up to his store to pick up orders they placed online and another three to four customers a day are placing delivery orders.
“I expect it to build,” he said. “A lot of it is trying to get the word out to our customers. This is kind of brand new and in its infancy.”
Alexander’s already was offering delivery service for its catering jobs and commercial accounts, so the store hasn’t needed to hire employees. But Alexander said he would like to make one tweak to his delivery service to get more customers.
Right now, Alexander’s is charging $19.99 per delivery of $100 or more. The goal is to change the software to allow for a tiered system, where people who live closer to the store would get charged less than people who live farther away.
“If we could charge people that live within a half-mile of the store $5, then it becomes a lot more appealing,” Alexander said. “It would become a lot more economical for people that live close by.”
Although there is a common argument that people don’t trust someone to pick out fresh meat and produce for them, if employees do a good job of picking and selecting items, that will curb some fears, Alexander said.
“You’re burying your head in the sand if you think this isn’t something people want to take advantage of down the road,” he said.