Pete’s Fresh Market, a 40-year-old Chicago-based grocer, launches its first e-commerce venture Wednesday with delivery service Instacart, aiming to attract new customers.
The family-owned and operated Pete’s, with 11 stores throughout the Chicago area and a twelfthstore to open next month, focuses on health-conscious shoppers who seek fresh produce and is trying to fill a gap since the 2013 shuttering of a leading grocery chain.
Vanessa Dremonas, daughter of Pete’s owner James Dremonas, who co-founded the company in the early 1970s with his brother as a produce stand, says her family was convinced Instacart would attract such incremental customers as the elderly, late-night workers and people who don’t own cars, without taking an unreasonable cut of the revenue from the new business. She declined to give details on the percentage Instacart takes.
Shoppers will choose from Instacart items priced the same online as in Pete’s stores, and an Instacart employee will choose and deliver the items. The Instacart worker will call the shopper from a smartphone if an item or a flavor isn’t available to fulfill the order, and will check out the same way a regular shopper does in-store, Dremonas says. Instacart’s delivery window of as little as one hour and its technology that allows deliveries to be as fast as possible were key aspects that drove the grocer to choose Instacart, she says.
Instacart typically charges $3.99 for two-hour deliveries over $35 and $7.99 for orders under $35. The minimum order is $10. For a $99 annual fee, Instacart offers free deliveries on all orders of $35 or more. Instacart will serve Pete’s customers from three of its stores covering Chicago and eight suburbs.
Pete’s is adapting to the growing trend of online grocery sales. U.S. consumers bought about $18 to $24 billion worth of groceries online in 2014, or between 3% and 4% of their total spend, various sources estimate. That percentage is less than half of e-commerce’s penetration of total retail spending, but it’s a big jump from three years ago when e-grocery accounted for less than 1% of grocery sales, according to Kantar Retail. E-grocery sales will increase 21.1% annually through 2018, according to projections from BI Intelligence research, compared with 3.1% for physical supermarkets. In the past month, grocery shoppers spent an average of $396 online compared with the average of $251 for all e-commerce categories, according to digital advertising vendor HookLogic. The research shows that 52% of grocery shoppers buy just what they were seeking, and only 12% may or may not buy their intended item.
The fast-growing San Francisco-based Instacart, which has raised $275 million, has delivery partnership agreements with several other grocery retailers in the Chicago area, including Plum Market, Tony’s Fresh Market and Whole Foods, which means the grocers’ product catalogs sync with Instacart’s app and often Instacart receives dedicated space with a separate checkout lane in stores to more quickly fulfill orders. Instacart also delivers from Mariano’s and Jewel-Osco stores. Instacart is in 16 metropolitan markets and boasts 7,000 employees shopping in stores nationwide, an Instacart spokeswoman says.
Instacart employs about 100 part-time shoppers in the Chicago market, she says. Delivery drivers are independent contractors who drive their own vehicles, and are required to make sure that frozen and refrigerated items arrive as such to the customers’ homes, the spokeswoman says.
Separately, Instacart on Tuesday announced its first acquisition, of wedding app Wedding Party. The company says its primary aim is to bring on board the six engineers responsible for building the app that enables wedding guests and friends to post photos and videos to a shared, digital album. Terms of the deal were not disclosed.