Target Corp is teaming up with Instacart Inc to offer same-day delivery of groceries and household items for US$3.99 in its hometown of Minneapolis, Minnesota, as the big-box retailer rolls out an alternative to online rival Amazon.com Inc’s US$299 per year grocery delivery service.
Target will be Instacart’s second-largest retail partner by revenue, behind Costco Wholesale Corp, significantly expanding the San Francisco-based delivery start-up’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 might 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 Inc 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,” Target.com president Jason Goldberger said. “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 Inc, Petco Animal Supplies Inc 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,” Instacart business development and strategy vice president Nilam Ganenthiran said.
The Target partnership announced yesterday expands online order options for customers. Grocery delivery fees through Instacart start at US$3.99.
Online groceries are a US$10.9 billion industry in the US, and the market is expected to grow by 9.6 percent annually through 2019, according to a report in December last year by IBISWorld.
Google is also to 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.
Target’s same-day delivery push comes as it revamps its grocery department, which it expanded several years ago by adding fresh meats and produce to compete with Wal-Mart Stores Inc and supermarkets. Customers complained about the quality and freshness of the products and the company was not able to get the type of traction it expected.
It had about US$18 billion in sales from the grocery business last year, which accounted for more than 20 percent of revenue.
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