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Who’s Winning the Battle for Grocery Delivery Dominance? 7 Retailers Put to the Test

Rick Abens, Founder & CEO

The online grocery delivery market is growing fast and getting competitive. In 2018, online grocery share shot up 22% according to research by the consulting firm Brick Meets Click, and Nielsen research for the Food Marketing Network predicts online grocery sales will capture 20% of total grocery retail by 2025, up from 5.5% this year. Naturally, retailers want a piece of this. Forbes called the burgeoning market both a “battle” and a “race.” As more grocers offer e-commerce sites and home delivery, we set out to determine which of them are winning—from a shopper perspective.

We made a list of grocery staples including fresh produce, packaged goods, frozen foods, and snacks, totaling 19 items. To the extent possible, we tried to buy products we’d actually use, so into the cart went a case of Bud Light, at which point it seemed wise to add some Extra Strength Tylenol. (We actually wanted to see which services had alcohol restrictions.)

The plan was to order the exact same items from each service, and then rate and compare them based on overall shopper experience as well as these criteria:

  • Delivery fee
  • Delivery speed
  • Completeness of order
  • Quality of produce
  • Online prices vs. in-store
  • Site ease of use

We collaborated with RW3 Technologies to leverage their retail competitive pricing collection service to confirm that our product list contained key value items that grocers want to price competitively.  The items in our online shopping carts were:

 

Background

Pressure has been mounting on food retailers to jump in the home delivery game since Amazon acquired Whole Foods Market last year, rolling out home delivery to a total of 28 cities as of August with plans for further expansion. Then, last December, Target announced its $550 million acquisition of the delivery company Shipt and plans to offer same-day delivery of its in-store assortment from the majority of its stores in time for the 2018 holiday season.

The stakes grew higher when Walmart in March announced plans to expand its online grocery delivery services to more than 100 metro areas by the end of 2018. As part of an especially strong second quarter, Walmart saw overall e-commerce sales increase by 40%.

Currently, Walmart’s delivery service costs $9.95 per order and requires a $30 minimum purchase. (Walmart/Jet and Ahold Peapod were the only two services we evaluated that did not offer free same-day delivery.)

Kroger, meanwhile, has launched an aggressive rollout, announcing in March its expanded partnership with Instacart to bring grocery delivery service to more markets.

Business Insider deemed Target’s same-day delivery service “one of the best of the bunch because it balances affordability, convenience, and accessibility.” We’re wondering if the publication filled as many spreadsheets as we did to arrive at that conclusion, but we agree it’s a top-notch service, with an easy-to-use site, free shipping, and the lowest prices of the retailers that carried all the exact items on our list.

 

The Evaluation

We found ourselves in an apples-to-oranges situation, or more like apples, oranges, plums, and tangelos. That’s because the services varied on several factors, complicating our comparative analysis. Delivery times and windows, delivery fees, minimum orders, discounts and coupons, alcohol policies, and surcharges all differed depending on the service. Some offered product recommendations or suggested on-sale alternatives. Some offered incentives and conveniences for new and repeat users, such as a subscription model. All these variables factor into shoppers’ overall experience.

While it’s easy enough to compare the ripeness of our bananas, the real challenge for us—and by extension, consumers—is figuring out how these services compare in terms of value. Pricing structure and package sizes are not always the same across retailers. To make the data comparable, we adjusted price by package size and included all fees for the total cost of the order.

Although it does not appear so just by comparing receipts, it turned out that, when indexed, our order placed to Ahold Peapod—the pioneer in this space—was the costliest and Costco the cheapest of the seven services we evaluated. However, to be fair, Ahold Peapod offered big discounts if we purchased multiple units, which we chose not to do.  From least to most expensive in terms of online grocery costs, the services are:

  • Costco
  • Target
  • Walmart/Jet
  • Meijer
  • Kroger-Mariano’s
  • Amazon/Whole Foods
  • Ahold Peapod

 

The Verdict

Despite being in the Chicago market, we ended up evaluating two of the services—Meijer’s and Walmart’s—only up to the point when we placed the order, or tried to, as neither delivered to our area. It wasn’t easy on either site to figure out whether delivery is available in a certain area, which is both an inconvenience and an annoyance.

None of the remaining five services delivered our groceries in one or two hours, but we placed some orders in the evening when same-day delivery was no longer an option. Mariano’s was the fastest and arrived early. Amazon/Whole Foods and Target were late by 30 minutes and 10 minutes, respectively.

Not surprisingly, Amazon had the best site for ease of use. Target’s also rates as excellent based on its helpful search function and product suggestions. Mariano’s site was clunky enough to deter the average shopper from becoming a frequent user.  We thought we were placing an order for delivery, but all we had to show for our picking and clicking was a grocery list and nothing in the cart. We then had to start over with our selections in a different section of the site.

Remember when produce selection was one of the main reasons given for not buying groceries online? It turned out to be a nonissue, as all our produce looked good on arrival.

As for cost comparisons, rankings get complicated. Ahold Peapod’s delivery charge ($6.95) and prices were high, however many items were on sale or had coupons if you bought multiples. Amazon’s prices were also much higher than the other retailers.

Where Walmart does offer delivery, the fee is $9.95, so the retailer’s everyday low prices can’t beat Target’s overall good value. Kroger-Mariano’s had the greatest discrepancies between online and in-store pricing—both higher and lower without any pattern.

RW3 Technologies reports seeing retailers nationwide implement a variety of pricing models for home delivery, click and collect, and in-store shopping. Plenty of retailers, on the other hand, lack the resources to manage multiple prices or don’t want to confuse or upset their shopper base by charging different prices. According to RW3 Technologies Founder and CEO, Bruce Nagle, the big question that remains to be answered at this stage of the game is whether consumers are willing to pay more for convenience and, if so, is it worth it for retailers to invest in and manage different pricing models.

After accounting for free shipping, Target’s prices were the lowest of the retailers that carried all the items on our list. Costco also rated good for overall value, coming through with the lowest prices because of the quantity discount.

For overall shopper experience, only Target’s was excellent. Amazon/Whole Foods and Costco offered a good overall shopper experience, and the remaining retailers all rated fair.

Placing these orders all within 24 hours, we had a largely positive experience, and now we have lots of diapers to donate and beer to drink—even though Amazon/Whole Foods flagged our Bud Light as undeliverable. Having evaluated these services from a shopper perspective, we’re eager to see which ones emerge as winners in terms of market share.

RW3 Technologies is a software company that provides SaaS field sales, survey, and reporting applications for the CPG industry.  Their competitive pricing collection service helped Foresight ROI compile a representative product list for this report based on high-level key value item compilations and weighed in on our analysis of online versus in-store price comparisons.

ForesightROI is the leader in shopper marketing ROI measurement, who provides decision support analytics and planning software to help both CPGs and retailers optimize their shopper marketing effectiveness.

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