National grocery chain Aldi is testing same-day home delivery with Instacart, which delivers groceries and other products to consumers from nearby stores.
A pilot program, which will begin later this month in Los Angeles, Atlanta and Dallas, will allow customers to purchase products for delivery at Instacart.com or via the Instacart mobile app. At checkout, customers will be able to choose a delivery window any time from an hour from the time the order is placed up to a week later. Aldi does not operate an e-commerce site.
Aldi says it may expand the pilot to other cities. As part of the rollout, Instacart is offering Aldi customers $20 off their first Instacart orders over $35 until Sept. 30.
Aldi is testing Instacart’s services at a time when online ordering is becoming a bigger part of the grocery business. 38% of Americans shopped for groceries online at least once in 2016, up from 25% in 2013, according to a Consumer Trends Survey from market research provider Euromonitor International.
“If the pilot is successful, this is a big win for Instacart,” says Michelle Grant, head of retailing at Euromonitor. She says Aldi has about 1.3% of the total U.S. grocery market, just below the 1.6% share of Whole Foods, which Instacart is losing as a partner due to the pending acquisition of Whole Foods by Amazon.com Inc., No. 1 in the Internet Retailer 2017 Top 500. The issue, Grant says, is whether Aldi’s price-sensitive customers are likely to pay for delivery.
“For Aldi,” Grant says, “this move is a way to get into the online delivery game without having to invest in all the infrastructure.”
Grant says that, while some in the industry see this as a reaction to the Amazon/Whole foods merger, that’s not likely to be Aldi’s the primary motivation. Instead, she thinks Aldi is looking to be competitive with players like Wal-Mart Stores Inc. (No. 3) and The Kroger Co. (No. 88), which have been rolling out “click and collect” and online ordering for delivery.
Instacart charges $5.99 for a one-time delivery. It also offers a plan called Instacart Express, which includes unlimited deliveries for $14.99 per month or $149 per year, for orders over $35.
The deal between Aldi and Instacart brings together two companies with ambitious expansion plans.
In June, Aldi announced a $3.4 billion capital investment plan with the goal of expanding to 2,500 stores nationwide by the end of 2022. That would, Aldi says, make it the third largest grocery chain in the U.S. by store count. Aldi, which is based in Germany and has U.S. headquarters in Illinois, currently operates nearly 1,700 U.S. stores in 35 states. More than 90% of the groceries sold at Aldi are its own brands.
Earlier this year, Instacart raised $400 million from investors. The company plans to use that cash to expand into additional U.S. markets. Instacart now operates in 105 markets and is well on its way to achieving its stated goal of being available to to 80% of American households by 2018, a spokeswoman says. A lot of expansion occurred in the second quarter, considering that a March 8 blog post on the company’s website stated that Instacart operated in 35 markets at that time, up from 18 in January 2016.
Since 2012, Instacart has raised $674.8 million from 21 investors, across seven rounds of funding, according to Crunchbase.
Instacart works with a number of retail chains in the Internet Retailer Top 1000, delivering groceries and pet products from stores including Costco Wholesale Corp. (No. 9), Target Corp. (No. 20), Petco Animal Supplies Inc. (No. 109) and others. In July, Instacart reached a deal with kitchen and table goods retailer Sur La Table (No. 245) to offer same-day delivery from more than 80 Sur La Table locations.Favorite