With the announcement last month of its Corner Store experiment in Washington D.C., Uber joins a list of prominent companies, including Google and Amazon, that are experimenting with grocery delivery services.
Beyond whether these services are profitable for the delivery companies (i.e. Uber, Google, and Amazon), the proliferation of grocery delivery services raises a number of questions for grocery retailers, including:
- Should grocers that don’t currently offer delivery service begin to introduce it? How does delivery’s effectiveness compare to other similar services, such as “Click and Collect”? Should they do both?
- Will impulse purchases and cross-sell decrease as a result of these programs (e.g. merchandise at checkout counters, end caps, etc.)? If so, will transaction frequency increase enough (from both new and existing customers) to offset a potential decrease in basket size? How does this vary by location?
- Should grocers build their own delivery service or partner with services like Uber that already have the necessary infrastructure in place? Or both?
These questions are not necessarily new ones—this blog has discussed similar topics before, such as “click and collect” (read more here). However, considering the fact that Google, Amazon, and Uber have all introduced similar programs, these services may gain more traction in the coming years.
As with all new product or service introductions, anticipating the profit impact of delivery for grocers is challenging without first trying it. Testing the service in a few markets will allow executives to gauge whether these initiatives are profitable, and help inform the optimal rollout strategy.