Trade Wars

Name That Tune: The ‘Unsustainable’ Grocery Delivery Wars



The opinions expressed here are solely those of the author and do not necessarily represent the views of FreightWaves or its affiliates.

The promise of home delivery in just 15 minutes is the latest attempt to win the “grocery war,” according to a recent industry press. There is the occasional need for prompt delivery. How much speed is needed, how often is it needed and how much are consumers willing to pay for it?

The competition to gain more customers in grocery stores with fast home delivery shares an eerie resemblance to the famous ‘Name That Tune’ game show for competitors trying to identify a tune in the fewest notes, for example, 5 notes, and even more unlikely, only 1 note. How often do you need to name a song in one note?

How often do you need groceries delivered in 15 minutes?

La Poste, then UPS, and later FedEx offered a range of delivery options and prices. The basic (and cheapest) option is “he’ll get there when he gets there.” For many years that was fine for most mail and packages, as long as the delivery finally arrived.

The pace of life has accelerated for everyone. Thanks to improved travel speed and logistics, delivery within 3 to 5 days has become possible. When FedEx entered the scene, the 2-day, overnight, and first-night options became mainstream, and consumers were willing to pay for them.

Amazon has set a new standard for the delivery of consumer durables purchased online by offering 2-day, next-day and 2-hour delivery. This “need for speed” has spread in the grocery wars for home delivery.

Home delivery of the “Name That Tune” type, that is to say in 15 minutes instead of 2 days, the next day or the same day becomes a weapon of the war of the grocery stores.


The profit margin on groceries is typically 2-5%, which means there is no room for the price of the product to absorb a loss during home delivery. Fighting the grocery war with subsidized home delivery, as it is today, is not sustainable over time. At some point, shareholders and investors will tire of covering losses.


Are consumers prepared to pay the full cost of “shipping” durable goods and paying the actual cost of “delivering” groceries? No, not today. Grocers lose money on home delivery. The faster the delivery, the higher the cost and the greater the loss.

The profit margin on groceries is typically 2-5%, which means there is no room for the price of the product to absorb a loss during home delivery. Fighting the grocery war with subsidized home delivery, as it is today, is not sustainable over time. At some point, shareholders and investors will tire of covering losses.

So what is the solution.

Grocers are investing hundreds of millions of dollars in automation to pick and pack online orders faster and reduce labor costs. This helps, but will not generate enough savings to offset the losses associated with point-to-point delivery to customers’ homes.

Huge investment in autonomous delivery vehicles and drone technology is also underway. But THE BIG QUESTION is, “How will this technology transfer groceries from the road or from the air to the front porch of the house?” Collecting deliveries from the road or yard rather than the porch is a much worse experience for the customer.

The problem is on the porch. There must be a way for consumers to accept home delivery of perishable groceries any time of the day or night without answering the door.

An unattended, smart, 24/7 home delivery would streamline the process and the price. When customers need fast delivery, they’ll pay for it; Otherwise, customers will pay lower prices for next day, 2 day, or once a week replenishment deliveries. Only then will grocers, their couriers and customers match the cost and delivery experience.

I bet consumers are willing to provide a safe, refrigerated container, if properly encouraged by retailers.

About the Author:

John Simms is CEO and Founder of HomeValet. The company is developing temperature-controlled smart boxes that can be placed outside a home to safely store groceries or other contactless delivered items. HomeValet is conducting a system test with Walmart in Bentonville, Arkansas.