Target is teaming up with Instacart to offer same-day delivery of groceries and household items for $3.99 in its hometown of Minneapolis as the big-box retailer rolls out an alternative to online rival Amazon.com’s $299- a-year Amazon Fresh grocery delivery service.
Target will be Instacart’s second-largest retail partner by revenue, behind Costco Wholesale, significantly expanding the San Francisco-based delivery startup’s inventory as it positions itself as the antidote to Amazon for brick-and-mortar retailers.
Even as sales of books, electronics and clothing shift online, shoppers still prefer supermarkets for food. Companies expect that grocery sales may move to the Web as well and are experimenting to find the best approach. Amazon, the world’s largest e-commerce retailer, has promoted its grocery delivery service with free 30-day trials in some markets. Google last week announced plans to begin testing a delivery service for groceries and fresh food later this year in San Francisco and one other city.
"One of the reasons we are interested in doing this is just to understand the guest behavior," said Jason Goldberger, president of Target.com & Mobile. "What do they buy and when do they buy it."
Instacart works with retailers that provide stores close to customers. The company supplies the technology to enable online orders as well as employees who fetch groceries from store shelves and mostly contract drivers who deliver them in their own vehicles. Instacart’s other retail partners include Whole Foods Market, Petco and local supermarkets in 18 metropolitan areas including Miami, Seattle and New York.
"Our hope and plan is that you’ll see many more Target-Instacart cities coming soon," said Nilam Ganenthiran, vice president of business development & strategy for Instacart.
The Target partnership announced Tuesday adds considerably to Instacart’s inventory of health and beauty items as well as baby products. It expands online order options for Target customers, who can already get free delivery within five days on a $25 minimum order. The Instacart deal adds perishable foods such as milk and eggs to online order options and faster delivery, rounding out the company’s offerings for online shoppers. Grocery delivery fees through Instacart start at $3.99.
Online groceries are a $10.9 billion industry in the US, and the market is expected to grow 9.6 per cent annually through 2019, according to a December report by IbisWorld.
Google will also partner with Costco and Whole Foods in its planned delivery service. Amazon’s Amazon Fresh is available in Seattle, Northern and Southern California, New York and Philadelphia.
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