H-E-B takes third-party route to deliver groceries
H-E-B, one of the most respected and successful supermarket operators in the U.S., is hopping on the online grocery bandwagon. Or should that be bandwagons?
Yesterday, H-E-B announced it was partnering with both Shipt and Instacart to offer online ordering and home delivery of groceries to customers in its home market of San Antonio, TX. Both regular H-E-B stores and the company’s Central Market concept are now participating. Customers who use Instacart have the added option of being able to order alcoholic beverages, as well.
“H-E-B strives to provide customers not only with quality products at affordable prices, but also with innovative and convenient services,” said Greg Souquette, senior vice president and general manager of San Antonio Operations at H-E-B, in a statement. “Partnerships with companies like Shipt and Instacart allow us to offer a shopping experience to fit the needs of our customers looking for time saving solutions.”
H-E-B’s announcement follows one last November that it was expanding its e-commerce capabilities to offer around 50,000 shelf-stable foods, general merchandise and health & beauty care items for delivery to all states within the continental U.S. (excluding CA) as well as American military bases around the planet. That effort had a particular Lone Star State slant with Texas ex-pats requesting that the chain make their favorite H-E-B items available for purchase online.
According to the San Antonio Express-News, H-E-B rival Walmart has been expanding its e-commerce presence in the supermarket chain’s hometown with a focus on its buy online/pickup in-store service.
Discussion Questions
DISCUSSION QUESTIONS:
Do you think H-E-B is on the right track with its rollout of e-commerce capabilities? Do you see the decision to partner with Instacart and Shipt in its home market as more of a defensive or offensive move?
Poll
BrainTrust
Ross Ely
President and CEO, ProLogic Retail Services
Mel Kleiman
President, Humetrics
Outsourcing the delivery process to two companies that have delivery enterprises is a good move for H-E-B. It allows them to get into the game faster and without having to make additional investment, learn how to do it well, etc.
Once they have the portion of the process up to the hand-off functioning at the level they want they can then make an informed decision if they want to handle delivery internally. I see it as both an offensive and defensive move.
On one hand, it’s good to see H-E-B expanding its use of e-commerce and home delivery capabilities. Shoppers are demanding these services today, and H-E-B must provide them to continue to be relevant in shoppers’ minds.
However, with their partnerships with Instacart and Shipt, they are effectively outsourcing a critical part of their shopper experience to third parties. What if Instacart’s and Shipt’s service is poor, reflecting badly on H-E-B? Worse, what if Instacart and Shipt hijack H-E-B’s shoppers, stealing their loyalty away from H-E-B and converting them to other retailers?
H-E-B should emphasize its own e-commerce and delivery capabilities ahead of those of Instacart and Shipt, following the lead of industry leaders like Kroger.
The only thing that motivates retailers more than their customers’ preferences is their competitors’ actions. As online grocery becomes more widely available from retailers at the high-end (Whole Foods, Amazon), mainstream (Kroger, Safeway, Peapod) and the low-end of the market (Walmart), doing nothing is no longer an option.
Partnerships like these can accelerate competitiveness and keep customers happy. It is smart to work with multiple options and learn by doing.
This is a smart move for H-E-B for a number of reasons. H-E-B has a habit like most great operators of experimenting with a number of different concepts and processes and picking the one that works out best instead of putting all of their resources on one concept and hoping they picked the right one. They also seem to want to learn from others and see how they can improve on the process.
Good idea to limit the infrastructure and initial investment involved with home delivery of (heavy, bulky) grocery items. Using an outsourced model H-E-B can stay in active control without taking on the huge financial burden. This allows H-E-B to test this concept to see if it is a positive for the company. One lesson from a very old business book is to stick to your core competency. H-E-B is a grocery operator and not a shipping/delivery company.
Agree that partnering with Shipt or Instacart is a quick, easy, low-cost way of testing demand for grocery home delivery. However, as these are turn-key services you don’t get to learn how to do it yourself. The smart move would be to test the third-party route alongside in-house trials in other markets. This can also be done quite cost effectively these days, with the help of technology partners such as Grocerkey, Rosie or Foodie.fm and lessons from Europe where the online grocery shift is more advanced.
It is an oddly defensive move as delivery was not really a part of HEB’s game plan. HEB does an excellent job of guiding customers into the store. Their app used to only allow you to add items to a shopping list rather than to a shopping cart to checkout. All interactions were guided towards getting shoppers into the store.
Their ecommerce offering was not a primary driver. It doesn’t offer the full assortment of products, but a select group of local products with nationwide delivery for home-sick Texans who missed the staples of home.
Order online and pick up in-store is an area being heavily leveraged by local competitor Walmart. It is a bit surprising that HEB did not go in this direction, but there aren’t any 3rd party click and collect services like Instacart.
If you have to dip a toe into the water, might as well make it someone else’s toe. As has been said home delivery competence is not necessarily the same as grocery competency.
In addition to agreeing with Ross Ely’s comment above, there is one critical factor that is not being discussed. Once a retailer hands their customer to Instacart or Shipt, they are no longer the retailer because they can not communicate directly with their customer. Those 3rd parties are the retailer and HEB is the warehouse.