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updated: 9/19/2017 8:06 AM

With Amazon in, online grocery shopping taking off

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  • Enrique Diaz processes an order at the Peapod warehouse in Lake Zurich.

      Enrique Diaz processes an order at the Peapod warehouse in Lake Zurich.
    Steve Lundy | Staff Photographer

  • The Shipt app allows users to place orders with Meijer and have them delivered to their homes.

      The Shipt app allows users to place orders with Meijer and have them delivered to their homes.
    Mark Welsh | Staff Photographer

  • Enrique Diaz scans an order earlier this summer at the Peapod facility in Lake Zurich.

      Enrique Diaz scans an order earlier this summer at the Peapod facility in Lake Zurich.
    Steve Lundy | Staff Photographer

  • The acquisition of Whole Foods Market by Amazon Fresh is sending a new ripple through the online grocery industry.

    The acquisition of Whole Foods Market by Amazon Fresh is sending a new ripple through the online grocery industry.
    Associated Press

 
 

Sue Dreyer Raymond has been ordering groceries through Peapod online delivery service for years. Convenience is important to the full-time personal banker, who lives with her husband and mother-in-law in Palatine.

Julie LaJoie of Aurora is new to the online ordering game. She started using Shipt.com, spending about $100 to $125 a week. Having groceries delivered allowed the night-shift nurse to spend more time with her young daughter.

"I buy just what I need and I am not tempted to buy something for my daughter just to keep her busy," said LaJoie, 33, who is learning the process and shopping for delivery options.

Whole Foods' acquisition by Amazon Fresh is sending a new ripple through the online grocery industry. The number of shoppers is expected to jump 10 percent this year, and grocery stores realize they must jump on board to compete.

"Amazon's purchase of Whole Foods will only serve to energize Peapod and the brick-and-mortar retailers who are or can offer online services, since it will mean that Amazon may soon have a physical presence near them," said Bill Bishop, chief architect with Barrington-based Brick Meets Click, a grocery industry research firm.

How much of an impact Amazon will have is unclear, but competitors are preparing:

• Mariano's introduced delivery service in Vernon Hills and Oak Lawn, with 13 more stores coming onboard this year.

• Itasca-based Jewel-Osco plans to provide online grocery shopping and home delivery sometime this year.

• Walmart offers online grocery shopping with pickup service at a growing number of stores, including Batavia, Woodstock, Plainfield, Gurnee, Wheeling, St. Charles and New Lenox. The company is doing home delivery with its employees at two stores in New Jersey and one in northwest Arkansas.

• Meijer rolled out its online grocery shopping and home delivery with Shipt in some areas, including the Chicago suburbs.

• InstaCart.com and Jet.com have entered or expanded in the Chicago and suburban market.

• Even hotels, like Homewood Suites by Hilton, are grabbing a piece of this industry pie by offering free grocery delivery to their guests.

Market veteran

Online grocery shopping sales grew about 11.3 percent between 2015 and 2016, according to industry experts.

Nine percent of adults said they ordered groceries online for pickup or delivery at least once a month, including 4 percent who do it at least weekly, according to a Gallup poll taken in July. The trend is expected to continue into a $100 billion industry by 2025, the experts say.

Peapod, one of the pioneers, started in 1989 and supplied floppy disks so customers could order online while employees shopped for them at brick-and-mortar stores.

Now at Peapod, owned by Ahold USA, food and household items are shipped to a large warehouse in Lake Zurich. Employees select items for a customer's order, then load them onto a lime-green branded truck for delivery.

Peapod, operating in 13 states, is taking a closer look at its operations while in the shadow of Amazon.

"We are constantly scanning the landscape to see what is changing," said Chief Marketing Officer Carrie Bienkowski. "We take nothing for granted and we see more competition as a good thing."

She believes more players in the market will only help make online grocery shopping become more mainstream.

"Every time competition has entered into a market, we continue to grow," Bienkowski said.

Dave Osborne, Instacart's general manager in Chicago, said "the convenience factor is what is driving the growth"

"It means customers don't have to drive someplace to shop and wait in line. They just spend a few minutes online," he said. "Saving that time is invaluable to people."

Broad appeal

Online grocery shopping also appeals to people who work odd shifts, are sick or disabled, or might not drive, experts say.

Delivery fees range from about $3.95 to $9.95, sometimes depending on order size and delivery window. Fees might be waived for larger orders or for those buying a subscription or membership costing $99 to $180.

While Peapod has its own warehouses and food supply, Instacart does its shopping for customers at Costco, Binny's, Petco and other retailers. Instacart employees shop and use their personal vehicles to make deliveries.

Jet.com entered the Chicago market in April and offers New York specialties to suburban fans, said Joe LaMotta, senior director of Jet fresh operations. Jet.com does not sell alcohol online, while other services do by requiring ID before finalizing the delivery at the door.

"We're finding that customers order online purely for the convenience," LaMotta said. "Then it's quality, which is a strong second, then assortment and then price."

Meijer, which partners with Shipt, started offering online shopping this summer in the suburbs.

"Some people will make one, two or three trips a week to grocery shop, and that could take one hour or more if you count the driving time," said Art Sebastian, vice president of digital shopping for Meijer. "Some see ordering online as convenient and that convenience is the new priceless."

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