It’s in the Bag

For years, there have been two sides to the grocery wars: traditional stores, offering the convenience of last-minute stock-ups (so long as you don’t mind lines and crowds), and online delivery services, offering the ease of at-home shopping (so long as you live in or near a major city).

But with so much at stake in the $1 trillion U.S. grocery industry, a hybrid model is emerging that may challenge both: pickup, or ordering items online and collecting them at a nearby depot. The practice is already popular overseas, thanks to distributors like Tesco. Now U.S. chains like Whole Foods and Harris Teeter are starting pilot programs, while Relay Foods–the leading startup–has expanded from its home base in Charlottesville, Va., to Williamsburg, Va., and Baltimore.

It’s a savvy strategy. Although services like FreshDirect are popular in cities, their delivery method isn’t ideal for suburbs, where customers may be many miles apart. Pickup “turns that economy on its head,” says Relay Foods president Arnie Katz. “Instead of three deliveries per hour, we can do 20” pickups at no cost to the customer. (Delivery is available for a fee.) Moreover, nearly 30% of Relay’s groceries are sourced from local suppliers, which is the No. 1 reason that Karen Shatin, a 35-year-old living in Alexandria, Va., says she uses it.

The main drawback, says Laurie Demeritt, CEO of the retail-consultancy firm Hartman Group, is that pickup doesn’t allow for spontaneity; at Relay, orders must be placed 13 hours in advance, and Whole Foods requires four hours’ notice. There’s also the question of efficiency: If you still have to leave the house, is pickup really that much better than normal shopping?

So far, the answer appears to be yes. Relay says it’s adding 1,000 new customers per week, and similar startups, like Farmigo, have recently entered the space. “The traditional grocery is going to continue to lose ground,” says Demeritt. “That leaves an opening for creativity.”