H-E-B pilots hybrid grocery delivery model
- H-E-B is experimenting with a hybrid grocery delivery model in which store employees pick and bag online orders while third-party companies Instacart, Shipt and Lash deliver the orders to customers, reports the San Antonio Business Journal.
- The new model is being piloted at around 100 of the Texas grocery chain’s 300 stores in the San Antonio, Houston and Corpus Christi markets.
- Instacart launched its “personal shopper” home delivery service in H-E-B stores in 2015, expanding into San Antonio in 2016, according to the San Antonio Business Journal. The publication reports that Shipt entered the San Antonio market in 2016 as well.
Despite the rapid expansion of grocery home delivery models, the ongoing struggle to solve the last mile continues. No reasons were given as to why H-E-B is transitioning to its hybrid fulfillment model, but a few possibilities come to mind.
One could be the company's desire to assert more quality control over the picking of produce and other fresh items. Execution and operational hurdles abound in the quest to adequately pick and deliver high-margin perishable products like produce and meat, as well as frozen and refrigerated foods that require controlled temperatures.
New research from the Retail Feedback Group finds that 39% of shoppers who use grocery delivery say that produce doesn't meet their quality standards. Frozen, dairy and fresh deli products also received low marks from shoppers who were surveyed.
Another possible reason is that Instacart and Shipt employees fulfilling orders inside the store are distracting loyal H-E-B shoppers. H-E-B’s internal staff are more of a familiar site to shoppers. Using them could also mean the retailer is focused on filling multiple orders at any given time, similar to the Kroger model.
With online grocery shopping only expected to grow, some experts suggest the store of the future will be a smaller box that emphasizes a stellar selection of perimeter offerings: fresh foods, refrigerated goods, prepared foods and foodservice, along with a convenient — rather than complete — assortment of center-store goods.
A significant portion of shelf-stable goods like non-perishable canned, boxed and bottled goods, and health and beauty, are expected to transition online. In fact, the Food Marketing Institute and Nielsen research projects that 40% of all center store shopping will happen online by 2025. Should this projection become reality, it would necessitate some reconfiguring of store space to accommodate this new way of grocery shopping — carving out more backroom space as a fulfillment area, for example, or taking the picking process offsite to a dedicated depot, or "dark store."
Whatever the rationale for the change at H-E-B, it likely involves not only improving the online shopping process for consumers but the economics of running the online business, as well. Consumers expect a seamless omnichannel experience, and typically that means getting the same prices and promotions whether shopping in-store or online.
The San Antonio Business Journal reports, however, that H-E-B’s current home delivery offer features higher prices for items bought online than in-store, on top of a picking fee and delivery fee added to each order. Moving to an in-house picking process could serve as a cost-cutting measure, in turn enabling H-E-B to better align online prices with those found in-store.
On the losing end of this proposition are grocery delivery firms like Instacart and Shipt and their teams of personal shoppers. The transition away from a 100% contracted to an in-house picking model undoubtedly shakes up contract negotiations, resulting in cutbacks for all involved third parties. It will be interesting to watch if other retailers follow suit if the H-E-B test proves successful.
- San Antonio Business Journal H-E-B pilots delivery across 100 stores
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