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Why Discount Grocer Aldi Is Getting Into the Delivery Game

August 14, 2017, 2:01 AM UTC

One of the hottest discount supermarket chains in the U.S. is partnering with Instacart to offer grocery delivery—a service once reserved primarily for high-end food retailers and high-income customers.

The move by German grocery chain Aldi, which will test the service in Dallas, Atlanta, and parts of Los Angeles starting August 31, is a sign of how competitive the supermarket landscape has become as food retailers look for every edge possible in a fast-changing marketplace.

“Aldi follows the digital world and e-commerce just like everyone else in the business,” Scott Patton, Aldi’s vice president of corporate buying, tells Fortune. “Online grocery retailing will be part of the future.”

The e-commerce shake-up in the rest the retail has been slow to hit food sales, with only 9% of U.S. adults reporting that their households order groceries online at least once a month, according to a recent poll from Gallup. However, the low use rate suggests a “theoretically enormous potential for growth,” according to Gallup.

Discounters like Aldi, known for its no-frills stores and highly coveted private label, have put pressure on traditional grocers, which are also trying to prepare for an e-commerce future likely to be remade by Amazon (AMZN) and its acquisition of Whole Foods (WFM).

Patton said discussions with Instacart pre-date the announcement of Amazon’s Whole Foods deal. “I think we, along with everyone else, are waiting to see how it develops,” he says of the tie-up. “It’s hard to predict at this point.”

Aldi, with currently some 1,600 U.S. stores, has said it will invest $3.4 billion in order to up its U.S. store count to 2,500 by 2022. The additional stores would make Aldi the third-biggest seller of food in the U.S. behind Walmart (WMT) and Kroger (KR).

Even though Aldi is a discounter and appeals to customers who want to save money, the company doesn’t think that will deter its shoppers from paying extra for Instacart’s services. “We are known for great quality and low prices,” Patton says. “All different income levels want to save money.” Aldi, however, has shown a desire recently to appeal to high-end customers; it recently started to move into move into higher-end zip codes.

As for Instacart, the Amazon-Whole Foods deal has put the startup in a delicate position. The delivery service—which essentially provides a personal shopper for the grocery store—has close ties to Whole Foods, which has invested in and has an ongoing contract with the startup. But Instacart’s recent deal with Aldi bolsters some theories that Amazon’s Whole Foods acquisition could actually aid Instacart as more supermarkets look to speed up their entry into the delivery game to fend off Amazon.