Profits Scarce But Delivery Options Abound in Web-Grocery War

(Bloomberg) -- More than one in three Americans now buy groceries online, and retailers are racing to grab a bigger slice of that pie -- without sacrificing profit.

Walmart Inc. and Target Corp. have both unveiled new web-grocery services with an eye toward one-upping each other. Walmart is testing unlimited home deliveries for $98 a year in four cities, just a dollar less than Target’s Shipt subsidiary charges for an annual subscription to its same-day service. Meanwhile, Target’s online customers can now get deliveries via Shipt for $9.99 per order, without committing to a full year. Both retailers are vying with Amazon.com Inc.’s PrimeNow service, fulfilled in cities across the U.S. for $119 a year through its Whole Foods Market stores.

The moves, along with Instacart’s decision to lower its subscription fee to $99 for deliveries from a network of local supermarkets, illustrate the battle that’s emerging as U.S. shoppers become more willing to let strangers pick their avocados and Angus burgers. About 35 million more Americans are buying groceries online this year compared with 2018, according to Coresight Research, but delivering fresh groceries is complex, expensive and can sap profitability.

To make the web-grocery business viable, retailers are experimenting with a host of different methods of getting the goods to shoppers. Target offers no less than six unique fulfillment services, while Walmart is now rolling out a service where its employees, toting wearable cameras, enter homes equipped with smart locks to put the food right into the fridge while customers are at work.

Walmart’s new “Delivery Unlimited” service is available in Houston, Miami, Salt Lake City and Tampa, and can also be purchased on a month-to-month basis. It follows the failed experiment of a membership-based delivery service called ShippingPass, which Walmart shuttered in 2017 because it couldn’t compete effectively against Amazon’s Prime program. Prime now has more than 100 million members who receive free same-day delivery along with access to streaming videos.

“We understand that investors could view this new test with skepticism,” Joe Feldman, an analyst at Telsey Advisory Group, said in a note. “However, times have changed.”

To contact the reporter on this story: Matthew Boyle in New York at mboyle20@bloomberg.net

To contact the editors responsible for this story: Crayton Harrison at tharrison5@bloomberg.net, Lisa Wolfson, Jonathan Roeder

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