A delivery service announced Tuesday that it will start making runs to Costco to pick up orders for customers, another move toward a world in which traditional retailers compete side-by-side with online sellers to move goods directly to homes.
The service, Shipt, says it is launching its Costco service in Tampa and plans to expand to 50 markets and more than 30 million households by the end of the year.
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Grocery delivery is the latest way retailers in a thin-margin industry compete for customers. Kroger has teamed with Uber. Wal-Mart has been conducting test runs with Uber and Lyft since last June. Instacart got a huge infusion of funding earlier this month. Other delivery services include Instacart, Amazon Fresh, Google Express and FreshDirect.
Shipt says it is already working with Whole Foods Market and regional grocery chains like H-E-B and Harris Teeter. Earlier this month, another supermarket chain, Meijer, announced that due to a successful trial run in southeastern Michigan, it'll start offering Shipt delivery across six Midwestern states.
Shipt members pay a $99 annual fee for unlimited grocery deliveries. Customers have a one-hour window when the merchandise is dropped off.
By 2025, as much as 20% of grocery shopping -- or $100 billion in annual consumer sales -- could be online, according to the Food Marketing Institute, which calls the shift "seismic." More than 70% of shoppers believe they'll shop for groceries online within the next decade, if not sooner.
"Everyone's looking to save time and get more out of less time. With Shipt in particular, people love the service and the quality of the experience," said Shipt CEO Bill Smith.
While consumers have long since become used to the idea of ordering everything from books to furniture to clothing online, perishables requiring refrigeration offers a unique logistical challenge.
Shipt says it is looking to deliver mostly three to four miles from stores, not from far-flung warehouses. "If you order ice cream from us, we'll deliver it directly to you," Smith explained.
Personal-care items, like toiletries, have a higher potential for online delivery than perishables like meat and vegetables, but as consumers get more comfortable buying online, they'll move into more categories, said Rupesh Parikh. Oppenheimer senior analyst for food, grocery and consumer products
"Consumers are demanding the convenience of home delivery," he said. "Right now, there's no easy answer to how to be able to meet the rapidly evolving consumer demands. I don't think right now there's a magic bullet. Consumers win with all this innovation out there."
Stacy Miletti of Troy, Mich., started using Shipt at Meijer about a year ago and spends about $90 every two weeks on items like breakfast cereal, milk and laundry detergent.
"The big motivation for me is it saves time. I don't have to walk up and down the aisles. I can log in at 2 or 3 in the morning and do the shopping when it works for me," the 48-year-old real estate broker said. "I love it, but it's not perfect. The only thing I don't like about it is you have to be home when it's delivered."
She has yet to buy fruits and vegetables online out of concerns about quality, but by buying her staples online, it still makes her in-person shopping easier.
"I don't want to buy a bad apple. I'd rather spend the time and pick out my own produce. It saves me time. I can get my bananas, apples and pears at the fruit stand up the street and I'm in and out in two seconds," she said.