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Inside the FreshDirect headquarters in the Bronx, New York. The company moved to this new, highly automated facility in 2018.
Timothy A. Clary/AFP via Getty Images
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Like most Americans, Steve Rainwater never used online grocery services. Then the coronavirus pandemic hit. Now his family — Rainwater, his wife and two cats — are getting food using Instacart and Whole Foods deliveries.
“Provided all these services keep delivering, I’m sure I could do this indefinitely,” Rainwater, a software developer in his 50s who lives in Irving, Texas, outside of Dallas, said last week.
He’s not alone. Millions of people across the country have turned to online meal kit providers like Blue Apron and delivery services like Peapod and FreshDirect to get their regular groceries as the pandemic has forced them to remain at home, fearful of going to the local supermarket or convenience store.
This severe and sudden change in lifestyle has brought a surge of new orders and customers to these companies, which have been trying for years to convince shoppers to buy more of their food online. But the increased attention has brought new and painful problems, such as out-of-stock items and frustrated customers and employees. Workers for both Instacart and Whole Foods staged prominent demonstrations this week to protest what they see as unsafe working conditions during the crisis.
A recent photo of Steve Rainwater, of Irving, Texas, and his wife during the coronavirus pandemic.
Courtesy of Steve Rainwater
“It is their moment, and they can’t handle it,” said John Trammell, a Manhattan resident who’s used online grocer FreshDirect since early 2012.
It’s possible Americans will come out of the coronavirus crisis having drastically changed the way they buy food, possibly permanently, as a large slice of the $1.2 trillion grocery market moves from supermarket aisles to phone and laptop screens. That could give shoppers even fewer reasons to leave the house to buy stuff, hurting local brick-and-mortar businesses and strengthening already huge retailers like Amazon and Walmart, which are two of the biggest online grocers. Smaller players like Hello Fresh and Sun Basket may be transformed into much bigger companies.
But if online grocers continue to stumble and fail to protect their employees, customers likely won’t stick with them and instead will rush back to their old habits when it’s safe to go outside again.
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David Glick, a former Amazon executive and the chief technology officer at logistics company Flexe, is skeptical that the online grocery world will get a long-lasting bump, saying the business was always tough and coronavirus won’t change that. Profit margins are thin and delivery is expensive. People still want to pick out their own produce, he added.
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Grocery shopping already has been changing, albeit slowly, with millennials and younger shoppers moving online. Glick says that while the trend will continue, the pandemic isn’t likely to change most people’s shopping habits.
“Online grocery is a hard business,” Glick said, “and the hardest thing about it is customers aren’t screaming for it.”
A sudden surge in demand
Prior to the crisis, online grocery was a tiny player in the US food market despite services like FreshDirect being around for two decades. These services accounted for just 3% of grocery spending, Bain & Company said last February. Gallup said in August that 81% of Americans never once used these services.
Now these providers are getting so inundated with customers that many are struggling to keep up with the demand. Shoppers have found that items like bread and eggs are out of stock. Snagging delivery slots for some services has meant squatting on the site waiting for them to open at midnight, only to find the site crashes.
These companies, virtually overnight, have gone from providing a service most Americans didn’t want to delivering a critical need to people, especially the elderly and those with pre-existing medical conditions, who are more vulnerable to the virus.
“With more and more people staying home over the past few weeks, we’ve seen an unprecedented increase in demand, both with our current subscribers ordering more meals and with new customers signing up,” Vanessa Meyers, senior vice president of growth for Sun Basket, said in an email interview.
She said her San Francisco company, which ships prepared meals, is hiring 150 more workers to keep up with demand. It also partnered with other food companies that couldn’t keep their doors open during the crisis and offered jobs to their employees.
“Online grocery is here to stay. I think following corona, it might have double or triple the market share.”
Bobby Brannigan, CEO of Mercato
Joining this hiring blitz, Instacart said it’s working to double its ranks of personal shoppers, who are contract workers who gather orders at stores including Kroger, Safeway and Wegmans, bringing on 300,000 more workers in the next three months. The company has said that ordering volume on its platform over the past few weeks has surged 150% from last year.
Amazon, which runs the Amazon Fresh and Whole Foods grocery delivery services, is hiring 100,000 more US workers. Walmart, the largest grocer in the US, is hiring 150,000 more employees. Kroger is hiring nearly 45,000.
Bobby Brannigan, co-founder and CEO of San Diego-based Mercato, which provides an online delivery platform for independent grocers, said his company has been launching 20 new stores a day. Some of these grocers have seen online sales surge to $50,000 in a day, compared to just $2,000 on a good sales day in the past.