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Should posts be capitalizing on the grocery delivery market?

Note: The below article has been reposted with permission from the US Postal Service Office of Inspector General’s ‘Pushing the Envelope’ weekly blog

In the battleground that is last-mile delivery, groceries are the soup du jour. Major players and smaller upstarts are jumping in to test grocery delivery to the consumer’s doorstep. The competition should benefit consumers, if not their waistlines.

One reason for the interest in grocery delivery is that online grocery shopping is poised for tremendous growth over the next few years, analysts predict. Online grocery sales are expected to go from US$23bn in 2014 to US$100bn by 2019 (moving from 3.5% to 12%, respectively, of total grocery spending), according to Packaged Facts.

No wonder major players are interested. Walmart recently said it will test a grocery delivery service with Uber Technologies and Lyft, in what many analysts see as part of the retailer’s growing efforts to compete with Amazon.

During the pilot program, a shopper can place a grocery order online and then Walmart employees will select the merchandise and package the order, the Wall Street Journal reported. Walmart will then hail an Uber or Lyft driver to pick up and deliver the order. The service will cost US$7 to US$10, paid to Walmart, not the drivers.

Amazon was an early player in the grocery delivery market, launching AmazonFresh nearly a decade ago. Two years ago, the company tapped into the US Postal Service’s market test of its Customized Delivery service to deliver first in San Francisco and then in New York City. Postal officials map out the day’s deliveries and then city carrier assistants load the trucks and deliver the totes of food between 3:00am and 7:00am, leaving them at front doors.

Other well-established players in the market include Peapod, Instacart and Fresh Direct, which work with many of the big name grocery stores.

So what’s next? Delivery to your refrigerator? It’s actually closer than you think. In Sweden, logistics company PostNord has teamed up with a smart-home startup called Glue, and ICA, Sweden’s largest grocery chain, for a pilot project that takes grocery shopping into the future. With a digital lock installed on the door, the customer can hand the digital keys to PostNord carriers to let themselves in and unpack the groceries. (Once we’ve nailed down the robot chef thing, we’ll never have to leave the table.)

The million-dollar question, of course, is just how much consumers are willing to pay for the convenience of home delivery of groceries. The margins on grocery delivery are reportedly quite thin. If they get even smaller, can all the current players survive?

To read more from the US Postal Service Office of Inspector General’s ‘Pushing the Envelope’ weekly blog, click here.

June 29, 2016


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