Delivery By Third-Party Startups Is Catching On

By October 9, 2017Press

Shopping Centers Today

by Joel Groover

Offering delivery by third-party startups might just be the fastest-moving trend in retail of late. Over the past few months, such chains as Aldi, Costco, Publix, Fry’s Electronics, Walmart, Wegmans and even McDonald’s and Taco Bell have announced partnerships with outside companies in a bid to ramp up delivery options for their customers. The trend is fueling strong growth at the likes of Deliv, Google Express, GoShare, Instacart, Shipt and Uber, which are hiring thousands of drivers to meet the demand, experts say. “We were looking at our year-over-year growth just yesterday, and the number was 484 percent,” said Shaun Savage, founder and CEO of San Diego–based GoShare. “Our business is growing month over month, year over year.”

App-based GoShare, which was launched in 2015, is often described as “the Uber for trucks”: Its freelance drivers use their own pickup trucks, cargo vans or box trucks to deliver larger items to users who hail them through the app. The initial idea for the company was to give consumers a way to move their furniture or other big items without having to rent trucks or turn to their friends, says Savage. But he describes being pleasantly surprised by the strong interest in the service from another group of customers entirely: brick-and-mortar retailers. “Within the first two months of launching GoShare,” Savage recalled, “[furniture and home decor retailer] West Elm contacted us and was like, ‘Hey, would you be interested in doing deliveries for our store?’ That’s how we got started in retail. It just took off from there.”

GoShare drivers now routinely deliver large items from such retailers as Ace Hardware, Big Lots, HomeGoods, IKEA, Marshalls, Pier 1 Imports and Sears, as well as from dozens of smaller antiques and furniture stores, says Savage. Sometimes customers simply buy a big item and use the GoShare app to have it delivered without involving the store in the process. In other cases, GoShare is the go-to delivery service for a retail chain as part of a formal partnership. “We are definitely open to working with retailers that are going to provide a lot of volume,” Savage said. “In return, we make sure to give them good pricing.” With its diverse inventory of bulky boxes, flat-screen TVs and furniture, Costco has worked with GoShare in California, Georgia and New Jersey at a total of 21 warehouse clubs.

But growth of third-party delivery is perhaps most noticeable in the grocery sector. Publix, for one, announced a partnership with Instacart this past June as part of a strategy to offer same-day home delivery in all Publix markets by 2020. The Lakeland, Fla.–based grocery chain, which operates 1,154 stores across the Southeast, is already working with Instacart to deliver in select markets in Florida, Georgia, the Carolinas and Tennessee. For the past couple of years, meanwhile, many shoppers have also been able to use the app-based Shipt service to order groceries from Publix. Rachel Elias Wein, a real estate strategy consultant to national owners and retailers including Publix, says Publix now enjoys an edge when it comes to delivery of online orders. “Nationally, online grocery sales average less than 2 percent, but at Publix that number is 2.8 percent,” Wein said. “Fulfillment by both Instacart and Shipt has put Publix ahead of the curve in implementing omni-channel solutions for its customers.”

At Shipt the rising demand for third-party grocery delivery is fueling a rapid rollout across the country, according to spokeswoman Julie Coop. Shipt now operates in 60 markets across 13 states and employs about 12,000 drivers, Coop says. The Birmingham, Ala.–based startup has worked with supermarket chains Harris Teeter, HEB and Meijer, as well as Costco and ABC Fine Wine & Spirits, to bring delivery to these markets. Shoppers who are signed up for Shipt services pay $99 a year for unlimited free deliveries on all grocery orders bearing price tags of $35 or more (the company charges a $7 fee for orders smaller than that). Shoppers use the app to buy items on their computers or smartphones. While Shipt funnels discounts and promotions to its members, the in-app prices can be higher than those inside the store.

At Shipt the rising demand for third-party grocery delivery is fueling a rapid rollout across the country, according to spokeswoman Julie Coop. Shipt now operates in 60 markets across 13 states and employs about 12,000 drivers, Coop says. The Birmingham, Ala.–based startup has worked with supermarket chains Harris Teeter, HEB and Meijer, as well as Costco and ABC Fine Wine & Spirits, to bring delivery to these markets. Shoppers who are signed up for Shipt services pay $99 a year for unlimited free deliveries on all grocery orders bearing price tags of $35 or more (the company charges a $7 fee for orders smaller than that). Shoppers use the app to buy items on their computers or smartphones. While Shipt funnels discounts and promotions to its members, the in-app prices can be higher than those inside the store.

Along with Publix, the likes of Kroger and Walmart continue to experiment with various omni-channel strategies as well. In an August blog post on Walmart.com, Marc Lore, president and CEO of Walmart eCommerce U.S., described the discounter’s plans to enable users of the Google Home voice-activated speaker, akin to the Amazon Echo device, to order any of hundreds of thousands of items for home delivery by Google Express. “And this is just the beginning,” Lore wrote in the posting. “Next year, we will also leverage our 4,700 U.S. stores and our fulfillment network to create customer experiences that don’t currently exist within voice shopping anywhere else, including choosing to pick up an order in store (often for a discount) or using voice shopping to purchase fresh groceries across the country.”

These changes are occurring against the backdrop of dramatic moves in the grocery sector by e-commerce giant Amazon.com — namely, its purchase of Whole Foods Market for $13.7 billion and its partnership with Sprouts Farmers Market. In the latter deal, Amazon Prime Now will reportedly offer home delivery from a total of about 20 Sprouts stores by the end of the year, with plans to ramp up the offering further in 2018. As Coop sees it, these moves are “further validation that the [grocery] industry is moving toward e-commerce.” (According to a report published in January by the Food Marketing Institute, the U.S. is poised to see a fivefold jump in online grocery shopping over the next decade, with Americans spending nearly $100 billion on food-at-home items by 2025.)

Meanwhile, some retail landlords are also expanding their relationships with outsourced, Uber-style delivery services. Back in 2014 mall owners GGP, Macerich, Simon and Westfield all began offering same-day delivery by means of Palo Alto, Calif.–based startup Deliv, which uses a mobile app to dispatch smartphone-equipped, crowd-sourced delivery drivers. When Macerich launched the service, at Santa Monica (Calif.) Place and at Westside Pavilion, in Los Angeles, it quickly proved popular among hotel guests who wanted a break from lugging holiday shopping bags, says Ken Volk, chief marketing officer at Macerich. Since then, Macerich has rolled out the service to a total of 10 properties, he says.

Swift service Walmart is testing a delivery service that can fill up a customer's refrigerator while they are at work.

During the initial test runs, items purchased at mall retailers would be whisked to guest services for delivery to shoppers’ homes or hotel rooms. Over the past couple of years, though, Macy’s and other major retailers have started to integrate Deliv into their apps and websites as well, Volk says. That means a shopper scrolling through an app at home or in a food court could order a blouse from the Macy’s and have the item delivered home that same day. “Shopping online from home, you’ll have options when you check out: standard delivery, overnight delivery or same-day delivery,” Volk said. “If you click on same-day delivery, Deliv will fulfill that service from the Macy’s at Santa Monica Place.” Retailers see Deliv as a way to counter Amazon.com and others offering last-mile delivery, Volk noted. “As far as Macerich is concerned, we see ourselves as an omni-channel landlord putting a bridge between physical and online retail,” he said, “and Deliv is just a great way to do that.”Over the past year alone, shoppers at Macerich’s Kings Plaza shopping center, in the New York City borough of Brooklyn, have placed about 4,200 Deliv orders, says Volk. All told, upwards of 20,000 orders have been placed through Deliv across the 10 Macerich properties that now offer the service. “The numbers we’re seeing coming out of the malls are pretty impressive,” Volk said. “If it’s a highly productive retail asset in a good market, we’re seeing some real volume with same-day delivery. It’s catching on.”

In general, the so-called “sharing” economy is growing in ways that affect malls. “You are seeing the Ubers and Lyfts of the world — shared rides and car services — becoming more and more popular,” Volk said. “It’s to the point where Lyft and Uber want to be in our malls, not only to create pickup and drop-off stations, but also to recruit drivers.” It can make good sense for malls or retailers to bolster their omni-channel capabilities by joining with such third parties, Volk says. He cites a startup called Happy Returns, which offers online shoppers in-person returns of merchandise as a sort of concierge service.

“Happy Returns has created return bars at a few of our properties,” Volk said. “They have relationships with probably a dozen online retailers. If people make a purchase online and want to return it in person rather than going to the
post office, they just bring the item to the mall and receive their full payment immediately.” The side benefit for Macerich: Shoppers can spend the money from those returns right there at the mall. “We love the Happy Returns service and are going to try to make them successful and introduce them to more retailers,” Volk said.

As Wein sees it, working with third-party service providers enables landlords and retailers to expand their offerings without losing focus or overextending themselves. “It allows you to stay focused on your core business,” she said. “We are seeing time and time again that there is a limit to the number of things an organization can do well. Should a grocery store be in the business of managing a delivery service itself? I would argue no.” Still, the consultant does have some concerns about the trend. A key question, she says, is whether the business models of companies such as Shipt or GoShare will be profitable enough for them to survive over the long haul.  Then, too, quality control, customer satisfaction and liability — all these should be of concern to retailers as their customers interact with freelance drivers hired by these providers. “Let’s say my delivery person goes and buys the meat I ordered, but leaves it in the hot car and runs a couple of errands,” Wein said. “The meat spoils, and then I eat it. Is it the fault of the delivery service, or the grocer? How do you determine whether the meat wasn’t already spoiled when it came out of the store?”

Rachel Elias Wein

Rachel Elias Wein

Rachel Elias Wein founded WeinPlus, a strategy and management consultancy focused exclusively on retail and real estate organizations, in 2009. Ms. Wein serves as the principal strategic advisor for industry-leading public and private real estate owners and national retailers. With over 15 years of management consulting experience, Ms. Wein’s expertise is focused on leading enterprise-level strategic change.

Leave a Reply