The Grocery Delivery Wars – A(n Unscientific) Customer Perspective
Online grocery shopping was gradually gaining popularity even before COVID-19 and it’s no secret that adoption has accelerated over the past six months. But the experience has been uneven, with product shortages and delivery challenges, and the benefits have not been uniformly distributed among grocers.
Personally, I enjoy the in-store shopping experience enough that I never tried an online service, despite my keen professional interest in the grocery landscape. That changed when a recent move left me without a neighborhood grocery store. I saw an opportunity to close a learning gap and signed up for four grocery delivery services available in my area – Amazon, FreshDirect, Instacart, and Walmart Grocery (recently merged into the “Pickup and Delivery” section of Walmart.com). What follows is an (admittedly unscientific) evaluation of each of them with some lessons for what makes for a winning proposition.
The experiment
I evaluated the services along three dimensions:
Shopping experience considered aspects like product selection, price, ease of navigation, search / sort / filter features, and the ability to shop seamlessly across multiple devices and interfaces
Delivery experience included the quality of fresh products selected (produce, meat & poultry, seafood, dairy), quality & frequency of substitutions, sustainability of packaging, and number & timeliness of deliveries
Cost evaluated the trial offers, subscription options, minimum order requirements, and delivery fees without a subscription
Pre-COVID results
FreshDirect was the clear winner, with a wide selection of fresh food and pantry staples, a clean easy-to-use interface, the ability to sort on unit price (an important consideration when comparing across different pack sizes and formats), a substantial organic assortment, minimal and sustainable packaging, and a seamless delivery experience. FreshDirect was the most expensive for an annual subscription, but also offer lower-priced options for mid-week deliveries and six-month subscriptions. Their performance was particularly impressive after a rocky transition to a new distribution center in 2018.
Instacart came in second with a shopping experience that was similarly pleasant but lost out to FreshDirect for its smaller organic selection, which, given its business model, is limited to availability at a single store. It also scored the worst from a packaging standpoint, with products double- and triple-bagged for no reason and no clear rationale for why certain products were grouped together. Product selection was average, but I found the ability to approve substitutions in real time useful. Instacart’s subscription is cheaper than FreshDirect’s and Amazon’s but similarly-priced to Walmart’s.
Walmart did an average job all around, with no major complaints but no standout positives either. Its subscription is cheaper than Amazon’s and FreshDirect’s but lost out to the other three in the length of its trial period – fifteen days versus thirty.
Surprisingly, Amazon brought up the rear with the worst shopping experience of the four. Despite its stupefying assortment, I found its grocery offerings – Whole Foods, Amazon Fresh, Prime Pantry – confusing, the website very difficult to browse (to a shopper, “Organic” vs. “USDA Organic” feels like a distinction without a difference), the inability to sort by unit price frustrating (a trait shared with Walmart), and search results downright strange (no, I don’t want books about oranges to be among the first results I see when I search for “oranges”). The delivery experience was good but while receiving multiple deliveries for a single order may appeal to others, it didn’t to me.
Pre-COVID grades: FreshDirect: A | Instacart: B | Walmart: C | Amazon: C-
The COVID experience
And then COVID-19 hit. Practically overnight, delivery availability became the only thing that mattered. For over two months I hunted almost daily for delivery slots – refreshing my browser incessantly, checking availability as soon as I woke up or late at night, hurriedly clicking through the checkout steps lest a rare slot somehow disappear. In the COVID world, Amazon won by a country mile, simply because it was the only site where I could actually find a time slot and place an order.
COVID grades: Amazon: A | FreshDirect: F | Instacart: F | Walmart: F
The Takeaways
It goes without saying, but the first lesson is to make sure your product meets the needs of your customer. It shouldn’t have surprised me, but the two services built specifically for grocery handily beat the two online Goliaths. They offered a superior shopping experience, tailored to how shoppers buy groceries. They differed mainly on the delivery experience, which might be down to the difference in operating models and Instacart’s reliance on gig workers.
The second lesson is to make sure you know not just what your customers value, but how much they value it. For a basic human need like food, on a scale of 1-10, availability is a 100. A great shopping experience means nothing if you can’t meet the base expectation of order fulfillment. Here Amazon’s sheer scale gave it a clear advantage over the rest.
And finally, make sure your execution is flawless. The best online assortment is irrelevant if the picker does a poor job of choosing the right products and doesn’t pack them with care. Remember that the delivery driver is your frontline face to your customer. FreshDirect was the clear winner here. The product selection was uniformly superior; they sent the same driver on multiple occasions, who quickly learned to call me if the front door was locked; even their delivery bags come in two colors – orange for returning customers but green for new customers to alert drivers to take extra care and ensure a positive first experience.
Looking Ahead
The struggle for online dominance will only intensify as online grocery becomes a larger share of the overall grocery market. While grocers generally agree that an omnichannel presence is no longer optional, the infrastructure behind it varies from a consolidated footprint of large automated distribution centers (e.g. Kroger + Ocado) to “micro-fulfillment” through a distributed network of smaller warehouses, dedicated “dark stores,” and existing physical stores (e.g. Amazon + Whole Foods and the recently-announced H-E-B + Swisslog partnership).
Unit economics for grocery being as unforgiving as they are, I believe the future of online grocery relies on mass localization and mass automation, which lower the two largest drivers of cost for last-mile delivery – transportation and labor. The war has just begun.