Can D-FW grocery stores compete with growing 'basket bandits' threat?
AP
This Oct. 6, 2014 photo shows an example of a home delivered meal from Blue Apron, in Concord, N.H. A bevy of new online services is angling to be a virtual kitchen assistant, giving the chance to outsource the tedious aspects of cooking so that customers can focus on the more satisfying assembling and eating parts. (AP Photo/Matthew Mead)
A year ago, while Dallas’ grocery market was considered one of the most competitive in the U.S., food retailers were for the most part still competing with each other. Amazon.com was nibbling customers in dry grocery aisles of supermarkets and warehouse clubs and impressing a few more with the novelty of its easy-replenishment Dash buttons.
Now the market is suddenly flush with new online options that the industry is calling “basket bandits” for good reason. They sell some, but not all products typically sold in a supermarket and grab slivers of the grocery business that would otherwise be bought on a regular trip to the supermarket, said Bill Bishop, food industry analyst whose firm is called Brick Meets Click.
Meal-kit delivery subscriptions led by Blue Apron and others with clever names like Hello Fresh and Plated are finding customers in Dallas-Fort Worth. All together they're replacing trips to the neighborhood supermarket for a growing number of households. Home maven Martha Stewart has just launched her own version and so has The New York Times with Chef 'D.
Since June, Amazon has been capable of delivering perishables thanks to a local partnership with Sprouts Farmers Market. And this summer national online delivery services with deep pockets and rounds of funding -- Google Express and Shipt -- have set up shop here and are using local retailers as their fulfillment centers. Instacart has said it plans to operate in Dallas soon.
Now the new layers of competition appear to be a lot more threatening. leading Wal-Mart andKroger to each open their own online grocery shopping apps for customers who want to drive up to a store and pick up their bagged groceries.
“Grocers seeing flat market share without the benefit of food inflation are trying to sell us more units of everything, but those units are being pulled away by the basket bandits,” Bishop said.
In Texas, Dallas-Fort Worth is Blue Apron’s largest market, said Matt Salzberg, co-founder of Blue Apron. He declined to say how many customers it has here.
Last summer Blue Apron opened a fulfillment center in Arlington, one of three in the U.S., and now that facility employs more than 650 people.
Nationwide Blue Apron delivers 8 million meals per month. The meal kits are usually subscription-based, delivered on a designated day and provide consumers with enough fresh ingredients and recipes for several meals each week.
“Texas is a fantastic market for us with really great suppliers,” Salzberg said. The company works to source a large percentage of its produce from local farmers. The Home Grown Farm of Waco grew 18,000 pounds of cucumbers that went out to Blue Apron customers in June for a Japanese rice bowl and mushroom tempura recipe.
Most people still go to the grocery store weekly, but now they may have two meals a week coming from a Blue Apron and then picking up carry out on a Friday night, Bishop said.
Once a household converts to buying meal kits regularly they spend 6 percent less in grocery stores, according to study by Atlanta-based Cardlytics. For an industry that operates on slim margins and instead counts on big volumes, household spending decreases hurt profits.
Amazon is reportedly working with Tyson Foods to come up with meal kits. Whole Foods Market “has a huge interest” in getting into the meal kits business, said co-CEO Walter Robb during a conference call with analysts Wednesday. Whole Foods has partnered with Instacart to provide its online grocery shopping and is an investor in the San-Francisco based company.
“Not all grocery stores have moved aggressively as they should providing food on-demand,” Bishop said.
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