Online grocery delivery has reached escape velocity. Which is why Ahold Delhaize is adding to its existing resources in this e-commerce channel by buying a big stake in FreshDirect. This year’s stay-at-home lifestyle has accelerated online shopping and the grocery vertical has been among the winners. Many national grocery chains are reporting triple digit, year-over-year sales percentage gains.
Third party delivery partners such as Instacart and Shipt are capitalizing on this trend as well. Challenges still exist as supermarkets are investing heavily in their warehouse infrastructure with new technology and additional locations. Additionally, last mile delivery of grocery items remains an expensive part of the order fulfillment process. But online grocery is hot right now and grocers are scrambling to gain scale and share in this expanding market.
The following excerpt from a Wall St. Journal article reports more on the topic:
The owner of supermarkets including Giant and Stop & Shop said it would acquire a majority stake in grocery delivery company Fresh Direct LLC, expanding its U.S. presence as online ordering has boomed during the coronavirus pandemic.
Netherlands-based Koninklijke Ahold Delhaize NV said Wednesday that the deal will accelerate its growth online and around New York, where FreshDirect mainly operates.
“Delivery, to me, is here to stay,” said Farhan Siddiqi, Ahold Delhaize’s chief digital officer. He added that New York is among the most important regions for e-commerce because of its huge population and high rates of online shopping.
FreshDirect is profitable today, said CEO David McInerney. San Francisco-based Instacart, one of the biggest grocery delivery companies, last month raised $200 million, giving it a valuation of $17.7 billion. The venture capital-backed company said its valuation has more than doubled since the start of the year, and that its order volume and workforce have increased.
The rapid growth of online grocery shopping has fundamentally changed how consumers purchase everyday essentials, prompting retailers to accelerate investments in digital capabilities and fulfillment infrastructure. Strategic acquisitions like Ahold Delhaize’s stake in FreshDirect demonstrate how established grocers are positioning themselves to compete in an increasingly digital marketplace.
As online grocery demand continues to evolve, success will depend on balancing convenience with operational efficiency. Retailers that can optimize fulfillment, improve last-mile delivery, and scale their e-commerce operations will be best positioned to capture long-term growth.
Overview by Raymond Pucci, Director, Merchant Services at Mercator Advisory Group
