Dive Brief:

• Albertsons and Instacart are expanding their e-commerce partnership with a pickup pilot in six cities in the Southwest, according to emailed information from Instacart. 
• The pilot, which started Tuesday, involves 40 stores across five of the grocer’s banners: Albertsons, Tom Thumb, Randalls, Safeway and Vons. The service is available in Las Vegas; Phoenix, Arizona; Denver; Dallas; Houston; and Austin, Texas. 
• Instacart’s service will be offered alongside Albertsons’ in-house Drive Up & Go offering, adding to the momentum pickup has built in grocery e-commerce since the pandemic began. 

Dive Insight:

Albertsons, which already offers delivery through Instacart, is now offering pickup through the e-commerce provider at a time when the grocery company is figuring out how much it wants to outsource versus own its e-commerce operations.

For pickup, the grocer has been expanding its Drive Up & Go service, roughly doubling the number of its stores offering the service last year. By the end of 2021, the service is expected to double again and be at a total of 1,950 locations, President and CEO Vivek Sankaran said during the company's latest earnings call in July. 

During a previous earnings call in April, Sankaran said pickup was seeing strong sales, with margins for Drive Up & Go improving because a greater number of orders absorbed more of the labor costs. Additionally, new picking algorithms and software were reducing costs and in-stock levels were improving due to efficiency from the micro-fulfillment centers the grocer is adding, he said. 

Albertsons has also been testing automated kiosks and contactless lockers for pickup. The new pilot with Instacart underscores the grocer's desire to funnel shoppers who utilize the popular app, and who might not be Albertsons customers, into its ecosystem. Albertsons is also trying to find the right balance between owned and outsourced delivery operations. At the start of this year, the company said it will stop using its own vehicle fleet for delivery fulfillment in several states and markets and instead rely on third-party fulfillment providers. 

This summer, Albertsons has ramped up its e-commerce partnerships, from announcing in June delivery from nearly 2,000 stores through DoorDash’s marketplace app to adding Uber’s grocery delivery service to around 1,200 stores in July. While store traffic has picked back up at Albertsons’ banners and digital sales were “virtually flat” for its first quarter of 2021, the grocer’s online sales were up more than 270% compared to Q1 of 2019.

For Instacart, Albertsons is its latest pickup partner. The e-commerce provider started offering pickup in 2015 and now is teamed up with more than 120 retailers across the country to provide the service. 

Albertsons' pickup pilot with Instacart comes at a time when pickup has been claiming an increasing share of grocery e-commerce. Pickup and delivery sales have been stable since May at just over $5 billion, according to monthly reports from Brick Meets Click and Mercatus.