Delivery

The delivery landscape is changing rapidly, and last year saw grocers modify delivery fees and order minimums as a result.

The most notable shift was Whole Foods Market's announcement last fall that it would do away with free two-hour delivery for Amazon Prime members and institute a nationwide $9.95 delivery fee.

The move prompted outrage among many shoppers. Within industry circles, however, the move has sparked debate over how to make e-commerce profitable — a top concern for grocers — while also catering to the needs of online shoppers. Although the specialty grocer's steep and sudden fee hike makes it an anomaly so far in the industry, it underscores the rapid changes in consumer demand and the need to bring fees in line with new services.

Consumers in a growing number of markets can now choose in-home service, instant-needs delivery in under 30 minutes and less expensive next-day delivery. As the pandemic continues to influence demand, the U.S. population over 65 continues to grow and young, digital-savvy consumers gain spending power, the need to offer a variety of services, along with the fee structures and promotions to support them, is increasing.

Lower or no fees and order minimums can boost customer acquisition and make online shopping more accessible financially to shoppers, while higher ones can help cover the costs of picking and delivering orders while also encouraging bigger baskets. Meanwhile, subscriptions, which often promise lower or no delivery fees, can serve to lock in shopper loyalty, but run the risk of alienating customers who don’t plan to be frequent shoppers. 

Experts said they expect — and encourage — grocers to continue testing strategies for dealing with delivery costs. 

"Right now, it's all an experimentation game," said Anne Mezzenga, a Target veteran and co-CEO of retail blog Omni Talk. "I think all every retailer is trying different levers. … to eventually make this more scalable, more profitable.”

Grocery Dive talked to several experts who weighed in on the factors grocers can consider when determining order fees and minimums, and how they can leverage them for different desired outcomes. 

1. Speedier service as a premium

The rise of instant needs companies in the U.S. is pushing grocers toward faster delivery service and also challenging the traditional retail strategy of speedier service equating to higher fees. Some instant-needs startups operating in major cities have no order minimums or delivery fees. The largest player in the emerging channel, Gopuff, charges a delivery fee of just under $2.

But given the volatility and challenging economics of this business, industry observers don't expect grocers and third-party marketplaces to follow suit, though fees and minimums will still need to be competitive. Mezzenga expects 30 minutes to be the threshold for grocers to charge for speedy delivery as a premium service.

Kroger Delivery Now, the 30-minute convenience delivery service powered by Instacart that launched in September, for one, charges a $2.99 fee and carries a $10 minimum.

While younger shoppers are coming to expect instant delivery, online shopping is becoming fragmented and faster service warrants premium fees, said Wendy Liebmann, CEO and Chief Shopper of WSL Strategic Retail. Higher fees for convenience delivery could prompt shoppers to switch to a delivery subscription to save money and stay stocked up on essential items, like diapers, while locking in loyalty for companies, Liebmann noted.

2. Lower fees to influence shopper behavior 

Wanting faster service doesn’t necessarily mean customers will pay the premium for speedy delivery, unless the item is a necessity. 

Low or no delivery fees are more compelling to grocery shoppers than choosing the fastest option in deciding where to shop for same-day or faster delivery service, Coresight Research recently found. In its consumer survey released in October, 60.6% of respondents picked low or no fees as the factor most important to them — placing it above pricing (53.4%), availability (49%), quality (45.2%) and choice (43.3%) of products. Only 40.4% of respondents said getting the fastest delivery option is their priority.

Grocers can use the attractiveness of low or no fees to influence shopper behavior. Retailers often leverage free delivery as a promotional tool around specific events, like during the holiday season, to help manage sales volumes, Dennis Moon, chief operating officer at delivery platform Roadie, wrote in an email. Many grocers also offer free or lower-fee delivery to attract new customers.

Giant Food recently reduced its delivery fees and minimums and added lower-priced weekday service. The changes incentivize customers to use its Giant Delivers service and get deliveries on days that were less busy for workers, said Gregg Dorazio, who heads up e-commerce for the grocer. The grocer has also worked with CPGs to offer delivery promotions when customers buy a certain amount of products from the brands, Dorazio said. 

So far, customers have responded the way Giant Foods hoped they would: “Tuesdays have now become as popular as Sundays in terms of delivery windows," Dorazio said. 

3. Make operations more efficient

To lower the costs of delivery operations and fees passed onto consumers in the long-term, sources recommended grocers invest in technologies now to improve operational efficiencies.

Batching orders is one way grocers can make delivery more financially viable, said Mezzenga and Tom Fiorita, founder and CEO of gig worker delivery company Point Pickup.

Increasing the number of deliveries by a single person improves not only delivery costs for companies but also per hour labor for workers, since they'll be able to earn more tips in less time, Fiorita said, noting grocers can invest in cold chain technologies, like environmentally friendly cooler packaging, that let drivers deliver more orders.

Ethnic e-grocer Weee has said its next-day delivery service, which is free for orders over $35, allows for improved efficiencies, like being able to deliver a higher number of orders per day and combine separate orders from a customer into one delivery. 

Automation is another area grocers can explore to improve efficiencies. While technologies like micro-fulfillment centers can be expensive upfront, Mezzenga sees long-term payoff: "That investment in one micro-fulfillment center that can serve online orders for 15 stores and maybe even some of the fresh produce that just needs to be picked, there are huge advantages in that and I'm surprised that retailers have been so reluctant to make that investment already."

4. Incentivize bigger baskets 

Whole Foods' fee hike last year sparked industry chatter about how grocers can pass delivery costs to customers and drive bigger baskets. 

At the time the fee was announced, a Whole Foods spokesperson noted that "average basket sizes have continued to increase since the beginning of 2021" and said customers keep using delivery to stock up on groceries. 

The specialty grocer, which differentiates itself with a product selection that already comes at a higher price point, can potentially benefit from a higher fee, said Carol Spieckerman, president and CEO of Spieckerman Retail.

"Charging a fairly nominal fee like $9.95 can actually have the effect of encouraging larger basket size because it becomes, 'Well, while I'm there and since I'm already paying this flat fee, I'll just load up.' …  I think that's a really good model for for Whole Foods," she said. 

Retailers like Whole Foods that have the "one-two punch" of loyalty and price-resistant shoppers are better positioned to charge fees than discounters with a price-sensitive consumer base, Spieckerman said.

Other grocers will likely find $10 hard to sell to shoppers. If grocers need $10 or more per order to cover delivery costs, Mezzenga instead recommends they explore other areas to generate revenue, like a subscription model or retail media networks. 

To drive bigger baskets, Harris Teeter took the opposite approach with the tiered service fee structure it rolled out last year for its ExpressLane service. The grocer has a $25 order minimum, except for subscription members, and charges a $4.95 fee for orders between $25-$49.99. The fee gets lowered to $2.95 for orders between $50 and $100. 

5. Experiment with subscriptions

Subscriptions with a monthly or annual fee for unlimited delivery are becoming more common, Moon of Roadie said. Several grocers, including Albertsons, Kroger and Ahold Delhaize, have recently launched offerings that bundle no-fee delivery with other perks like bonus fuel points and product savings. .

"When you have people locked into a subscription model, you really have them locked into your ecosystem. They'll look for excuses to shop with you and it will be an exception to look around," Spieckerman said.

Large retailers with broad assortments, like Amazon and Walmart, and marketplaces are better positioned to offer subscriptions, sources said. Spieckerman said it can be harder for grocers to convience consumers to add yet another subscription service to their lives, unless they have high customer loyalty or can lean into superior quality of produce to justify subscriptions.

"There's a real danger of shoppers saying, 'Well how many of these subscriptions do I want to pay for?'” she said. Other experts have raised concerns that grocers' subscription programs don't offer enough perks to make them valuable.  

6. Consider vulnerable shoppers

The exploding availability of online shopping for SNAP recipients last year and financial hardships brought on by the pandemic have brought more attention on shoppers facing financial obstacles. Testing of online purchasing for the Special Supplemental Nutrition Program for Women, Infants and Children (WIC) has just started as the federal government looks to modernize redemption of WIC benefits. 

Retailers face decisions over whether or not to waive or reduce fees or order minimums for shoppers receiving government assistance to help pay for their groceries. 

For example, Amazon offers reduced pricing on its Prime subscription for students and for EBT and select government assistance recipients. Shoppers using SNAP funds don't need to be Prime members to shop Amazon Fresh. The Giant Company and Giant Food waive order minimums for pickup and delivery for customers using SNAP funds to their orders. 

In looking to incentivize older people to turn to e-commerce, Harris Teeter waived its service fee for customers ages 60 and older and lowered delivery to $4.95 on Thursdays from 9 a.m. to 2 p.m. 

7. Offer transparency to consumers 

As grocers continue to experiment with fees, they face challenge of determining how much to information to share with customers so they aren't surprised when they go to checkout, sources said. 

Flat fees, while straightforward to customers, can leave grocers without room to tweak costs and spark backlash from customers when raised. Variable fees can provide more flexibility but can leave customers confused if they are not clearly explained, potentially leading to diminishing returns, Spieckerman said. 

“If it becomes too complex and too convoluted, you risk alienating shoppers, because especially for something like delivery, they really want it to be straightforward, easy to understand and easy to execute," Spieckerman said.

One option to bypass the problem of determining fees and order minimums is to instead build the costs of e-commerce operations into product pricing, she said. De-coupling online prices from and in-store can work as long as category pricing is competitive, Jordan Berke, founder and CEO of Tomorrow Retail Consulting, wrote on LinkedIn. 

Fiorita of Point Pickup, which has grocery delivery comprising 63% of its business, said he is seeing some grocers following in the footsteps of third-party marketplace models, which can increase product prices between 20% to 30%, by raising some prices while promoting lower fees and better service through their own e-commerce platforms. 

While it's understandable companies won't give away the exact algorithms with how they determine fees, some public-facing insight can let shoppers know what to expect, sources said. 

"More transparency is generally better, but most importantly, customers hate to see surprise fees at the point of sale," Moon of Roadie said. "Hidden fees or surcharges at checkout can cost you a sale, and sometimes a customer."

8. Provide a range of options

From faster but pricier service to lower-priced but slower delivery, grocers will want to have a range of options to meet different consumer needs, sources said.

Spieckerman broke delivery into three main categories: stock-up, urgent and the in-between shop for items customers need but not instantly. 

"The same shopper will make different decisions for different purchases, and smart retailers will offer them choices. It’s all about offering that optionality," said Moon.

While order minimums for free delivery aim to justify the cost of delivery for the retailer, Moon said he doesn't see a need for the grocer to add an order minimum if it's already going to charge a fee.

"[If] you’re charging the customer a fee for delivery, there’s really no reason to create limitations for that customer on what they can, can’t or have to buy," Moon said. "If your customer wants to get a week’s worth of groceries, great. If they’re really just craving pizza bagels and don’t want to leave their house to get them, that’s also great."

Walmart announced in early January that it plans to expand its in-home delivery service from 6 million U.S. households to 30 million by the end of 2022. 

To rapidly scale InHome delivery, the retailer said it will hire more than 3,000 associate delivery drivers — a newly created role — this year and also build out a fully electric fleet of delivery vans. 

InHome delivery launched in select cities in late 2019, but was put on pause early in the pandemic. Last April, Walmart said it planned to grow the service on the heels of Amazon’s announcement that it was expanding its in-garage grocery delivery service to all of its markets through Amazon Fresh and Whole Foods Market. 

Walmart’s InHome option allows associates specially trained in the service to leave grocery deliveries and pick up Walmart returns in customers’ homes or garages by using a one-time access code that pairs with smart access technology. Customers are notified of the entry and have access to a camera on the associate’s vest to watch live. The service costs $19.95 per month or $148 per year, which includes tips and does not include fees. A smart lock available for purchase through InHome costs $49.95.

Pharmacy delivery is "coming soon" to the service, per Walmart's website.

To scale the offering, Walmart said it has created a new full-time position in its stores called associate delivery driver that pays an additional $1.50 per hour from most current roles. The drivers, which the company plans to hire from its existing workforce, will receive in-person and virtual reality training. 

With the expansion of InHome delivery, the retailer is leaning into customer demand for convenient and premium delivery options and continuing to grow its last-mile delivery capabilities. 

Like Walmart, Amazon’s in-garage delivery service also launched in 2019 and now includes in-home service. The two companies are pushing ahead with their services despite health and safety concerns consumers might have with workers entering their homes and possible food spoilage by leaving perishable items in garages. 

As the two behemoths compete for online shoppers, Walmart said InHome is an “important part” of its last-mile delivery strategy, which includes a two-hour Express service. The company said its delivery network, which sends out more than 160,000 products from around 3,400 stores, currently reaches 70% of U.S consumers. 

Although Walmart is known as a value-oriented retailer, it's also trying to court affluent customers through premium services. The company experimented with a personal shopping service in New York City and has a membership program, Walmart+, that offers free delivery and savings on fuel and prescriptions for $98 a year.

As part of its InHome delivery announcement, Walmart also highlighted how scaling the service furthers its sustainability efforts. The fully electric vehicle fleet planned for InHome ties into the retailer’s goal of operating a zero-emissions logistics fleet by 2040 and will be supported by Walmart’s electric vehicle charging stations, which total nearly 1,400 at stores and clubs across 41 states. 

Online grocery shoppers place a higher priority on being able to choose when their order will be delivered than on how quickly it will show up, according to research released last summer in the MIT Sloan Management Review, a magazine published at the Massachusetts Institute of Technology's Sloan School of Management.

Customers are willing to wait 10.8 hours longer for their goods to arrive in return for shortening the delivery window by an hour, and 7.5 hours longer if they schedule it for the day of the week they prefer, the researchers concluded.

Even as investors pour billions of dollars into startups that promise grocery delivery in as little as 10 minutes, retailers that aren't equipped to fulfill orders on a dime are actually in an optimal position to give customers what they want when they head online to buy food, said Pedro Amorim, an assistant professor of industrial engineering at the University of Porto in Porto, Portugal, and one of the study's two authors.

That's because traditional grocers are in possession of large quantities of information about people's online shopping behavior and their delivery preferences that, taken together, can be used to understand the links between what customers buy and how they want to receive their orders, said Amorim, who specializes in supply chain planning with an emphasis on food products.

"It's important that retailers understand that they need to improve their planning operations, they need to be more granular, they need to have more info about how much time it takes to go from A to B at a given point in time," Amorim said.

To discern the connection between people's shopping patterns and delivery preferences, Amorim and co-author Nicole DeHoratius, an adjunct professor of operations management at the University of Chicago Booth School of Business, worked with an unnamed European food retailer with approximately 3,000 stores across multiple countries to analyze 152,195 online grocery transactions. For each transaction they looked at, the researchers knew what the customer ordered, the delivery slots they were offered and the slot they selected.

The researchers concluded that data grocers collect about shoppers sheds light on a variety of factors that affect people's delivery choices that can be easily overlooked, Amorim said. For example, the researchers found that people with larger baskets were willing to pay more for both delivery speed and precision, which Amorim said came as a surprise.

Amorim and DeHoratius also found that people who repeatedly placed orders with the retailer were willing to pay more than other shoppers to lock in their delivery preferences. In addition, customers with large baskets were willing to pay twice as much as people who bought less to arrange for a delivery window tighter by one hour, their analysis found.

Perhaps not surprisingly, Amorim and DeHoratius determined that shoppers are more interested in paying for faster delivery when ordering a lot of perishables. At the same time, customers tended to prefer to get orders at the end of the work week rather than over the weekend, they found.

Amorim, who co-founded LTPlabs, a firm in Porto that helps companies crunch information, and DeHoratius suggested that retailers pay close attention to data about how their customers shop online before committing to costly investments aimed primarily at making faster deliveries possible. Those investments, like automated picking systems and larger delivery fleets, might not be necessary, especially if grocers pay attention to data about traffic patterns that can help them better manage logistics, they said in their MIT Sloan Management Review article.

"Leveraging customers’ willingness to pay for the three core home delivery attributes of speed, precision, and day choice will require omnichannel retailers to consider preferences beyond simply delivery speed," Amorim and DeHoratius wrote.

Other research suggests that delivery speed is the most important factor for many grocery delivery customers. For example, 61% percent of participants in a survey conducted by NielsenIQ last year said they prefer to get their orders as quickly as possible. That same study, which was conducted between Feb. 26 and March 28, showed that shoppers were growing more interested in same-day delivery.

Numerous startups touting delivery in as little as 10 minutes have expanded across cities and Europe, and a few, including Gorillas and Jokr, have recently landed in New York City. Last spring, Instacart launched 30-minute delivery and expanded its 45- and 60-minute delivery windows to meet what it said is growing demand for faster fulfillment options. 

Kroger announced earlier this month that it will begin making deliveries in Houston, Texas, using the third-generation autonomous vehicles from tech firm Nuro.

The electric vehicles have double the cargo volume of Nuro’s second-generation model, customized storage space and new temperature control features, according to the autonomous delivery company. 

Nuro’s third-generation vehicle is their mass-market driverless model that the company plans to deploy at scale after five years of development. The company’s latest announcement notes that the vehicle, known simply as Nuro, will reach “millions” of consumers through services like retail and restaurant delivery.

Kroger has put itself in pole position to test and scale with the new model as it ramps up its new digital ecosystem, which increasingly relies on automation, including robot-powered warehouses going up in metros across the U.S. The grocer began piloting autonomous deliveries with Nuro in 2018 in Arizona. In 2019, Kroger shifted its testing operations to Houston, which has a growing population, numerous restaurants and retailers, and a sprawling, mostly flat topography that’s good for testing autonomous vehicles.

Kroger and Nuro have made "tens of thousands" of deliveries using Toyota Prius vehicles outfitted with autonomous driving technology and that have a safety driver inside, a Kroger spokesperson said. The spokesperson said the company and Nuro are still working out a timeline to begin using the new vehicles in Houston, and declined to say how many of the third-generation vehicles will be making grocery deliveries.

In addition to more space and modular storage features, the latest model has safety features like exterior airbags and multi-modal sensing that incorporates cameras, thermal cameras, radar and lidar, which together map a 360-degree view of the vehicle’s surroundings. 

Nuro recently broke ground on a $40 million manufacturing and testing facility in southern Nevada where it will develop the new vehicles. Unlike many early-model autonomous delivery vehicles, Nuro’s vehicles are purpose-built for last-mile delivery. They’re smaller than most cars and don’t have human-centric features like seats or rearview mirrors. 

Grocers across the U.S. have been testing autonomous delivery vehicles in recent years from companies like Starship, Nuro and Waymo, with pilots ramping up during the pandemic. The vehicles promise to cut costs in last-mile delivery, which is notorious for being one of the priciest steps in getting groceries to shoppers’ doorsteps. 

Steve Bishop, co-founder and managing partner with Brick Meets Click, said he expects to see more retailers launching autonomous vehicle pilots and rollouts in 2022 as availability of driverless carriers increases.

“Assuming things continue at the current rate, this means at a practical level any retailer who wants to satisfy delivery demand in their market will be able to do more easily with these vehicles,” he wrote in an email. “They will provide lower costs for the retailer, and we expect to see even more innovation in how these autonomous vehicles can operate, i.e., driving on roads or sidewalks.”

Kroger, which recently contributed to Nuro's $600 million investment round, noted in its release Wednesday that the firm's electric vehicles also support its environmental and social impact plan to reduce emissions at the corporate level and offer more eco-friendly services to shoppers.

In addition to Kroger, Nuro has been testing autonomous delivery with 7-Eleven and pizza chain Domino's. 

The e-commerce boom of 2020 helped support the rise of what Coresight called a "micro-industry" of instant-needs delivery firms. The largest U.S. player in the space, Gopuff, accounts for more than 70% of the U.S. market, per Coresight.

In all, the quick-commerce retail space generated between $20 billion to $25 billion in U.S. retail sales last year, Coresight Research estimated in a report released in November.

Despite its recent growth, quick commerce is a ruthlessly competitive space with low consumer loyalty and sky-high costs. Coresight noted that the industry is headed for consolidation. After this happens, the firm expects quick-commerce companies, many of which don't charge delivery fees or order minimums, will begin to implement "reasonable" fees in order to address profitability.

"Following the influx of new entrants, the instant-needs space is looking unsustainably over-supplied and profit-challenged," the report noted. "Consolidation, with some nascent players falling out of the market, looks inevitable given the glut of businesses competing on such similar unique selling points and often on the same turf."

Funding and growth will likely dictate which companies survive and which don't. Funding to date in the vertically integrated instant-needs segment is estimated to be $5.9 billion, Coresight noted, with Gopuff accounting for more than half of that amount ($3.4 billion). 

Of the six other instant-needs companies currently operating in or coming soon to the U.S. that Coresight looked at, Gorillas and Getir have each raised more than a billion dollars total. Jokr has raised a total of $170 million, followed by Buyk at $46 million and Fridge No More at $16.9 million, per Coresight, which did not have an estimate for 1520, other than to note the company has received unspecified seed funding. 

Gopuff is valued at $15 billion, Getir at $7.5 billion and Gorillas at $3 billion, per the report. 

Quick-commerce startups like Gorillas, Buyk and Fridge No More market faster delivery times than Gopuff, typically 15 minutes or less, but a Coresight survey fielded in October found that consumers value low fees and competitive product pricing more than speed, indicating incremental improvements in speed won't significantly impact customer interest in the space.

Coresight found that people who buy groceries for same-day or faster delivery said low or no delivery fees and the price of items are the most important factors to them (60.6% and 53.4%, respectively), while getting the fastest delivery is less important (40.4%).

Coresight noted that instant-needs companies are leveraging their hyperlocal logistics networks to meet shopper needs — an area that executives from Gopuff and Jokr also pointed to as an advantage and opportunity for growth.

"The name of the game is localization long-term," Daniel Folkman, senior vice president of business at Gopuff, said during a virtual event hosted by Coresight.

For Gopuff, which has almost 600 MFCs, Folkman said selling beloved local products not only appeals to customers but also provides new opportunities for small brands to advertise and build their presence locally and then nationally. For Gopuff, that helps it grow its ads business — a potentially lucrative part of the company, Folkman said. 

Jokr, which provides 15-minute delivery in several New York City neighborhoods, aims to cut out distributors and work directly with local brands as it looks to democratize the supply chain, Aspa Lekka, the company's founder and chief operating officer, said during a virtual panel hosted by The Center for Retail Transformation at George Mason University School of Business. Along with working with local suppliers, having real-time replenishment is also a top priority, Lekka said.

Giant Food has reduced or eliminated fees and order minimums for purchases made through its in-house e-commerce services, the grocer announced last fall. 

Giant Delivers has removed delivery fees on orders between Tuesday-Thursday, halved the fee to $3.95 for orders Friday-Monday and halved the minimum order requirement from $60 to $30. Giant Pickup, meanwhile, no longer requires a $30 minimum order at 155 stores for any day of the week, but has kept its pickup fee of $2.95. 

With the new savings for shoppers on online orders, Giant Food is looking to drive the use of its own services, which are fulfilled by the grocer’s workers. It also appears to be trying to rebalance order volumes across the week to better utilize labor and accommodate more customers.

Along with the changes to the fees and order minimums, the grocer is running a promotion for new and existing customers that gives them a free rotisserie chicken — or ready-to-eat pizzas as a meatless substitute — with a Giant Delivers or Pickup order of $30 or more. The offer can be redeemed up to twice a month through the end of the year.

Giant Food, which has also partnered with Instacart on delivery, has often turned to marketing and promotions in order to push shoppers toward its own e-commerce sites and services.

The grocer rebranded its delivery platform, previously known as Peapod by Giant, to Giant Delivers in 2019. In 2020, Giant Food expanded its partnership with Washington D.C.’s Union Kitchen, a food and beverage accelerator, to sell more locally produced products through Giant Delivers. Last June, the grocer started offering produce boxes for the summer in partnership with more than 20 farms in Maryland, Virginia and Delaware through Giant Delivers.

Grocery delivery and pickup sales plateaued to $5.3 billion from last May to July, down from the $7 billion highs reached earlier during the pandemic, according to reports from Brick Meets Click and Mercatus. Those sales bumped up again last month, reaching $6.6 billion. But e-commerce profitability remains a top priority for grocers as consumers have gotten more confident shopping inside stores again. 

Giant Food said it is looking to make delivery and pickup "more affordable and accessible" as the grocery industry looks to address food insecurity. 

"We are at the forefront of this growing space and believe lower delivery fees and order minimums will make these convenient services even more accessible to consumers," Gregg Dorazio, director of e-commerce for Giant Food, said in the announcement.

DoorDash announced in December it’s entering the ultrafast delivery race with its DashMart virtual convenience store brand, starting with a location in New York City’s Chelsea neighborhood. Additional markets will come online in the months following.

To meet the demands of rapid delivery, DoorDash will rely on full-time couriers working set schedules and has created a new entity, DashCorps, to employ them. DoorDash said it plans to hone DashMart’s operational model and eventually offer it as a service to retailers.

“We see a larger opportunity to help our partners offer quick deliveries to customers, and believe we can take our learnings and play an active role in applying them to our partners’ businesses,” Fuad Hannon, DoorDash’s head of new verticals, wrote in an email. “Our plan is to test, iterate and learn with DashMart and ultimately expand this service to partners.” 

Like Instacart, DoorDash is moving beyond courier delivery and online storefronts to offer fulfillment services to retailers. This aims to capitalize on retailers’ need to move beyond store-based fulfillment and also explore new digital services as more consumers shop online. In an interview last fall, Hannon said it sees DashMart as a toolkit retailers could use to build a range of services, like urban convenience delivery or a private label marketplace.

“From our point of view, it's four walls and a box that we can leverage to drive as much incremental value to our merchant partners and customers as possible,” he said. 

To enable its new 15-minute service, DoorDash will staff around 50 full-time employees at each DashMart dark store who will work set schedules and be actively managed by the company, Max Rettig, DoorDash’s vice president of public policy told The Washington Post. Hourly pay starts at $15, and employees will typically log between 25-40 hours per week and have the option of receiving insurance benefits he told the Post. Delivery staffers will also use a new company app to manage their workflow.

The employment of full-time delivery staff is new territory for DoorDash, which has fiercely resisted past efforts to classify gig workers as employees. And it reflects the operational realities of ultrafast delivery, which requires an on-hand, immediately available workforce to pick, pack and shuttle orders to customers’ doors in a matter of minutes. Other competitors in the space like Gorillas and Jokr also rely on full-time staffers for this reason and actively promote this to their customers.

The fact that DoorDash is establishing a new entity, DashCorps, to employ its full-time delivery workers indicates the size of the opportunity the company sees to offer rapid delivery service to grocers, convenience-store operators and other retailers. 

As with its other DashMart locations, the ultrafast service will offer around 2,000 convenience and grocery staples, including local products in categories like pasta sauce and bagels. Orders carry a $1.49 delivery fee plus service charges, Hannon said, while members of DoorDash’s membership program, DashPass, get the delivery charge waived and pay lower service fees.

DoorDash unveiled its DashMart online convenience store in 2020 and has expanded it to markets across the country. Asked exactly how many locations it has, Hannon would only say there are currently more than 25. Under this convenience delivery model, the company owns the dark stores and merchandise that power the service, with contract workers shuttling orders to consumers’ homes.

Dollar General linked up with DoorDash last fall to offer same-day delivery of groceries, cleaning supplies and other household items from more than 9,000 stores, according to a press release. 

Delivery times average less than an hour and customers don’t have to pick a time slot or meet an order minimum, making the service similar to other instant-need delivery services that have recently expanded. 

The tie-up comes less than a month after Dollar Tree switched on same-day delivery with Instacart at several thousand stores.

As convenience delivery services continue to build steam across the U.S., Dollar General is making sure it, too, has a digital storefront with a leading marketplace company.

The discount retailer has long offered the snacks, drinks, personal care items and other instant-needs goods that companies like Gopuff are now offering, and it wants to make sure it's offering shoppers the option of delivery while also casting about for new customers that rely on DoorDash. Dollar General offers pickup, as well, across the vast majority of its stores, having quickly ramped up the service during the pandemic.

As Dollar General increases its focus on healthcare, offering more personal care and home health products, the value of delivery service could increase for shoppers. 

The tricky part for dollar stores is maintaining their low-price appeal in an e-commerce channel that’s notorious for high fees and price markups. Browsing the company’s storefront on DoorDash showed a 99-cent delivery charge, and the announcement notes there’s no minimum order size that shoppers have to meet. The storefront lists products organized according to categories as well as need states like “stock the fridge,” “under the weather” and “snacking favorites.”

Dollar General and DoorDash initially piloted a program in summer 2021 with approximately 600 stores in rural and metropolitan communities. The companies said they planned to expand delivery to 10,000 Dollar General stores by December, accounting for more than half of its footprint.

DoorDash, meanwhile, has continued to link up with retailers across the grocery, convenience-store and pharmacy sectors as it expands its platform beyond restaurants. It recently partnered with Albertsons and kicked off alcohol delivery nationwide. The company also announced nationwide shipping for restaurants and retailers, and the approximately $8 billion acquisition of Finnish food delivery firm Wolt.