In Greek mythology, the serpentine water monster known as the Hydra had the ability to regenerate two heads for each one that was cut off in battle. The last-mile grocery delivery market displayed similar regenerative powers in the midst of the “COVID-19 Effect” battle. As online grocery orders increased exponentially, causing the system to nearly break during the start of the global pandemic, third-party restaurant delivery companies such as Uber Eats and DoorDash quickly jumped in and expanded their services. Additionally, major grocery chains started partnering with multiple fulfillment partners, further intensifying the last-mile grocery delivery battle.

With a recent collection of significant market developments, projecting which last-mile grocery delivery companies will come out on top has become difficult though integral to resource allocation. Ultimately, it has become clear that CPG brands need strategic plans that account for each of these companies in order to maximize e-commerce success.

Online Grocery “COVID-19 Effect”

Even before COVID-19 upended the daily routines of Americans, grocery retailers were rebuilding themselves brick by brick to handle the evitable shift towards e-commerce. What these retailers didn’t realize was that within just a few weeks’ time, that distant future would become their current reality. As government and public health officials increasingly urged Americans to avoid contact and stay at home, consumers were forced to choose between risking their health with traditional grocery shopping or overcoming the psychological barriers associated with online grocery shopping, such as not being able to pick their own fresh produce.

Ultimately, this led to a dramatic increase in online grocery pickup and delivery, with August 2020 sales topping $5.7 billion, an almost 5x increase over the previous year. The “COVID-19 Effect” not only changed grocery shopping habits at the sales channel level but also from a fulfillment standpoint. Before the coronavirus pandemic, pickup was the darling of online grocery fulfillment, partly because it was more profitable for retailers, but also because consumers felt they had more control over fixing potential mistakes. That being said, the value propositions of each fulfillment option were recalibrated for consumers as they navigated new challenges stemming from the coronavirus pandemic. For example, with more and more Americans now working and learning from home, the sheer convenience of grocery delivery has largely come to outweigh any benefits pickup may offer.

In fact, a July 2020 survey by The Manifest found that 12 percent of consumers used grocery delivery services since the start of COVID-19, while only 10 percent opted for pickup. Consumers who used delivery cited benefits such as time-savings, safety and a lack of parking and gas expenses. Many of these benefits will continue to be relevant once the “COVID-19 Effect” is over, indicating that the popularity of grocery delivery will likely extend well into the future.

Last-Mile Grocery Delivery Competitive Landscape

Instacart

Throughout the coronavirus pandemic, Instacart has impressively launched several new initiatives to quickly address consumer pain points around order scheduling and capacity. After revealing that customer order volume was up 500 percent year-over-year in May, Instacart received $225 million of new funding in early June, part of which would be used to continue scaling its operations and technology in order to meet surging demand. The cherry on top for Instacart came when it inked a partnership with Walmart to provide same-day delivery within select markets.

Why It Could Win: The perseverance Instacart has shown after Amazon’s acquisition of Whole Foods Market left it without its largest customer, combined with its ability to capitalize on industry disruption, sets up a high probability that it will retain market leadership post-pandemic.

Shipt

Knowing consumers would be facing financial hardships from the economic effects of COVID-19, Shipt partnered with Quotient to give customers access to manufacturer coupons when shopping on the Shipt mobile app and website. Through a partnership with WellCare, it worked to provide free grocery delivery to select Medicare Advantage members through the end of 2020. And in August, it decided to change its exclusive membership-based pricing model. The new hybrid pricing model still allows consumers to subscribe to their services annually, but it also lets them pay per order by purchasing Shipt passes. This has driven a 25 percent increase in new customers, as the base price to use the services has become more attractive to the market.

Why It Could Win: While most of the attention has been on Shipt dropping its membership-based pricing model, it could be parent company Target’s acquisition of Deliv’s technology, which has the potential to make deliveries faster and more profitable, that creates the additional value generation needed to grow Shipt’s market share.

Uber

After seeing massive success in the restaurant delivery market, Uber announced in July that it would be introducing grocery delivery services. This move followed several recent consolidation transactions, such as the acquisition of Chilean grocery app Cornershop, which has been the backbone of its expanding grocery delivery capabilities. Uber also acquired last-mile delivery app Postmates, further increasing the total available scale of its operations.

Why It Could Win: It shouldn’t be understated that Uber has been successful in the cutthroat restaurant food delivery market. Along with Uber Eats, the main business of Uber Rides gives the company many attractive ecosystem tie-ins that could be bundled together to undercut the competition.

DoorDash

In August, DoorDash launched on-demand grocery delivery through its app for the first time, partnering with major grocery stores across the country such as Smart & Final, Meijer, Fresh Thyme and Hy-Vee. With this launch, DoorDash is able to provide more than 75 million Americans access to a grocery store on DoorDash. Customers can choose from more than 10,000 grocery items, all of them available for delivery within one hour from participating stores. These deliveries are included in the company’s DashPass subscription, which offers free delivery and reduced service fees for a monthly rate of $9.99.

Why It Could Win: Despite only recently launching grocery delivery services on the DoorDash app, the company has been on a multi-year journey with grocery through DoorDash Drive, a white-label fulfillment product that powers direct delivery for grocery chains like Walmart, Hy-Vee and Coborn’s. It has also expanded into the Drug and Convenience Store channels and even launched its own chain of DashMart virtual stores, which offers delivery of retail products such as packaged desserts and bottled sauces from popular local restaurants.

Amazon

What’s the worth of an online grocery delivery article if it doesn’t mention Amazon, right? Amazon has been keeping its foot on the grocery gas by introducing Whole Foods Market dark stores to improve delivery speed and capacity. In response to the huge spike in online grocery shopping, it has started recruiting gig workers to deliver groceries from Whole Foods Market stores. It also introduced its first namesake grocery stores, Amazon Fresh and Amazon Grocery Go, which will inevitably provide additional opportunities for its grocery delivery capabilities.

Why It Could Win: It’s Amazon… Need I say more?

Conclusion

With enough buzz to keep heads ringing louder than Dr. Dre did in his 1995 hit song from the “Friday” soundtrack, it can be easy to forget that the last-mile grocery delivery battle is only getting started. As consumer adoption of online grocery delivery deepens, competition will naturally escalate as service providers push the limits of their strategic visions and investments in innovation. It is still unknown just how many companies will ultimately survive long-term, but if consumers continue to seek out value propositions related to convenience and time-savings as predicted, the battle won’t be ending anytime soon.