The grocery delivery wars are heating up fast. Amazon (NASDAQ: AMZN) and Walmart (NYSE: WMT) have expanded their same-day efforts in growing markets.
Walmart has enlisted Postmates in its effort to leverage existing same-day delivery networks. Walmart and Postmates will test same-day grocery delivery in Charlotte, North Carolina, a press release indicates. Postmates will deliver groceries ordered through Walmart.com/grocery and the Walmart Grocery App.
Postmates will test the service for around third weeks, the press release states. Walmart Grocery Delivery costs $9.95 and there is a $30 minimum order. Customers can get their first order delivered free by using a $50 minimum order and the promo card FRESHCAR.
The press release did not say where the service will be tested next or when it will be rolled out nationwide. Walmart and its Sam’s Club subsidiary are testing same-day grocery delivery with a number of companies including Uber, Lyft, Deliv, and Parcel (which Walmart recently bought) in an effort to expand service to cover 40% of American households.
Whole Foods Offers Grocery Delivery in Southern California
Amazon subsidiary Whole Foods is offering free two-hour delivery of groceries to Prime subscribers in Orange County and Los Angeles.
To access the service customers will shop through the Whole Foods Market section at Prime Now or use the Prime Now app. All the items at Whole Foods; including wine beer and liquor, will be available through the two-hour delivery service.
Prime Now Delivery will be available from 8 a.m. to 10 a.m. in Orange and Los Angeles counties. An ultra-fast option that allows delivery of orders of $35 or more within one hour is available for $7.99.
Is Fast Grocery Delivery Viable?
Many questions about super-fast grocery delivery remain; including will be it be viable or profitable.
A potential roadblock that can kill fast grocery delivery off fast is the liability. All it would take is for one person to be killed or injured in a wreck involving a Prime Now grocery delivery vehicle to kill it off. Personal injury attorneys are probably already salivating at the prospect of telling a jury how “the Amazon driver injured Joe Sixpack while racing to the country club to drop off a bag of sushi from the Whole Paycheck.”
Other problems including labor costs, traffic, finding enough drivers, and unionization. Labor costs might be a nightmare because drivers would be in a position to force Amazon to raise their pay to meet its two-hour schedule. For example, what happens if drivers struck on Super Bowl Sunday or the day before Thanksgiving?
This Lawsuit Might Doom Same-Day Grocery Delivery
An even bigger threat is lawsuits that force Walmart and Amazon to cover all the expenses of delivery. In other words to pay for delivery vehicles and insurance the way UPS does.
Domino’s franchisees are already facing huge lawsuits over the issue and costs of operations to drivers, The Denver Post reported. A federal class-action lawsuit filed by the law firms Stueve Siegel Hanson LLP and Weinhaus & Potashnick contends Domino’s (NYSE: DPZ) violated federal minimum wage laws by not covering the costs of drivers’ vehicles and insurance.
If successful that suit might make Walmart’s plan to use third-party contractors untenable by greatly raising costs. The suit would force Walmart or its contractors to provide a van and insurance for every driver. That would be great news for Fiat Chrysler (NYSE: FCAU) and Ford (NYSE: F) but costly for Walmart.
The lawsuit is Bodon, Curry, Annunziato et al. v. Domino’s Pizza, LLC and it was filed in U.S. District Court for the Eastern District of New York. A similar lawsuit has been filed by the same firms against DFL Pizza; which operates 22 Domino’s shops in Wyoming, Colorado, and Oklahoma, in US District Court in Denver on behalf of an Arvada, Colorado, resident, The Denver Post reported.
How will Kroger Respond?
The next big question is how will America’s largest standalone grocer; Kroger (NYSE: KR), respond to these moves. The free Whole Foods delivery from Prime Now is a shot across Kroger’s bow because Los Angeles is the main market for one of its flagship brands: Ralph’s.
Expect Kroger; which is already rolling out delivery nationwide with Instacart’s help, to counter Amazon’s move fairly quickly and aggressively and Target (NYSE: TGT) to follow suit. The grocery delivery wars are about to get really nasty and only the customers will win.