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Grocers’ relationship with online marketplaces has gotten ‘complicated’

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LAS VEGAS — The surge of online sales early in the pandemic made clear to many retailers the need to operate their own e-commerce sites and apps, and to fulfill more orders themselves in order to preserve margins, gather valuable data and put their brand front and center.

But as they navigate a more complex current environment, when demand isn’t at the red-hot level it was in 2020 yet is still significant enough to warrant offering a broad range of services, grocers are recognizing they still need online marketplaces.

So what does an online ecosystem that incorporates owned properties as well as third-party marketplaces, many of which are offering an expanded menu of services, look like? Matt Van Gilder, At SpartanNash head of e-commerce and digital experience, summed it up in two words during a Groceryshop session on Wednesday: “It’s complicated.”

The grocer and distributor, which operates nearly 150 stores across several banners, has partnered with all of the major online marketplaces, including Instacart, DoorDash, Shipt and Uber. It can be a headache to have gig shoppers roaming store aisles, and the fact that the customers who come through these platforms can easily switch to other retailers isn’t ideal, Van Gilder said. But around 80% of the shoppers that these marketplaces serve up are new to SpartanNash, and the company relies on marketplaces to make last mile deliveries for its own online brand, Fast Lane, as well as for the white label service it offers to its distribution customers.

“I like to think of our relationship, if there was a status on Facebook with all those guys, it would be ‘it’s complicated,'” Van Gilder said.

SpartanNash’s head of e-commerce and digital experience, Matt Van Gilder, on stage during a session at Groceryshop on Sept. 21, 2022.

Jeff Wells/Grocery Dive

Instacart, which rose to prominence as a marketplace and e-commerce provider following Amazon’s acquisition of Whole Foods Market in 2017, has seen in recent years competitors like DoorDash and Uber elbow their way in. DoorDash, in particular, has rapidly added grocers to its marketplace, and this week announced a few prominent additions, including Sprouts Farmers Market, Giant Eagle and Weis Markets. Weis is also utilizing DoorDash’s delivery service for its own e-commerce platform.

Tom Pickett, chief revenue officer with DoorDash, said grocers are opening up to the idea of ​​listing their stores across multiple marketplaces. He compared the situation to the restaurant industry, where some of the major chains have broken off from exclusive agreements with delivery providers and listed across multiple ones.

“They often hit this mark where they say, ‘You know what, I just need the growth, and I feel like I’m leaving some customers on the sideline.’ And I think that’s the stage where we’re at in grocery right now,” Pickett said in an interview, noting that grocers that list on DoorDash can see incremental sales of 70% to 90% through the platform.

Grocers like Kroger, Sprouts, Grocery Outlet and Southeastern Grocers now list their products on two or more marketplaces. Albertsons, like SpartanNash, is listed on Instacart, DoorDash, Shipt and Uber.

Not all of the platforms are alike in terms of the orders they serve up. Van Gilder said that orders from DoorDash users tend to be smaller than those that come from Instacart users, and are more focused on snacks and fill-in items. Christian Freese, head of grocery and new verticals with Uber, said in an interview that many Uber grocery users are located in urban markets and tend to order small baskets for speedy delivery. Uber recently rewrote the code for its grocery application and is rolling out new features like order-ahead capability.

Amid all this marketplace activity, retailers like SpartanNash are trying to figure out where their own e-commerce platforms fit in. With delivery, Fast Lane focuses mainly on orders that need to get to shoppers in two hours or longer, Van Gilder said. That gives company employees time to pick and assemble orders that provide stronger margins than marketplace orders. Faster deliveries, he noted, require more labor that the grocer can’t afford, and thus make more sense for platforms to fulfill.

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