Does it make sense to follow Albertson's new "last mile" strategy?

Albertson’s recent decision to discontinue use of its own drivers and shift to third-party DoorDash for grocery delivery in certain markets makes it even more important for other grocers to consider how execution of “third-party” is changing – and in fact, moving beyond the typical players.  

Today most folks equate third-party with Instacart; they are the biggest third-party provider in grocery and played an important role during the pandemic. Other third-party providers with similar approaches, like Shipt, UberEats, etc., also offer grocers a way to outsource delivery.

The big challenge for grocers offering delivery (by any method) is the costs it brings with it, and these costs must be lowered to make the delivery business profitable.

Given this challenge, we anticipate that more grocers will get involved in the management of third-party delivery operations.

BMC POV

Beyond the typical third-party providers (Instacart, Shipt, DoorDash, etc.,) there are at least three additional third-party approaches that grocers can adopt to reduce cost and increase their control over delivery. These approaches include:

• Outsourcing to a large third-party supplier like Budget Rent-a-Truck, that has the scale and business model to offer lower cost deliveries.
• Outsourcing to several smaller third-party providers, different players in different markets, that have the cost advantages of market knowledge and established relationships.
• DIY: Creating their own gig-driven business network in which the retailer bids out the work to individual operators. The good news is that today several software platforms enable retailers to streamline outsourcing this work and lower costs.

While not all grocers will get more involved in third-party providers, we are beginning to see more action and we expect activity to grow in all three areas in the near term.