Sam’s Club Jumps Into Same-Day Grocery Delivery With Instacart’s Help
The home grocery delivery wars just got a little more intense.
Sam’s Club, a unit of Walmart (WMT), said on Tuesday that it has begun offering same-day delivery of groceries and other items in three markets — Austin, Dallas-Fort Worth, and St-Louis — as it looks to better compete with the likes of Costco (COST) and Amazon (AMZN).
Instacart, which charges customers an annual membership of between $99 and $149 for unlimited deliveries, works with a number of brick-and-mortar grocery chains to put together orders from items off their shelves and deliver them to customers’ doors on the same day they are ordered.
Its roster of retailers includes Costco, CVS Health and Whole Foods Market, and the $4 billion startup recently signed up new partners in larger grocers Albertsons and Kroger. Instacart, valued at around $4 billion, recently faced a setback when Target bought rival service Shipt for $550 million and started to wind down their partnership, adding urgency to find new customers.
The budding Sam’s Club partnership comes at a time of major upheaval in the grocery industry, as retailers look to figure out delivery of online grocery orders, an area where e-commerce is but a small percentage of sales compared to categories such as clothing and electronics. Amazon’s $13.7 billion purchase of organic grocer Whole Foods last year was an earthquake that led retailers to redouble their e-commerce delivery efforts despite the thin margins in the grocery business.
While Sam’s Club lets non-members buy items at a higher price, in the case of Instacart, it will let its partner’s customers shop at Sam’s Club and get the same savings members get. When asked whether this could anger members or reduce the incentive to get a Sam’s Club membership, a spokeswoman told Fortune that as more people are exposed to Sam’s, more “will want to become members.”
The move is part of new CEO John Furner’s efforts to refocus Sam’s after years of underperformance compared to Costco. The chain’s focus had initially been on curbside pickup for grocery items. But as it seeks to strengthen its firepower in an area where it arguably has an edge over Costco — that is, e-commerce — it has redoubled its efforts of late: it recently announced free shipping for many items for its premium membership.
Its sister chain, Walmart, which as the top U.S. grocer sells about $170 billion a year in food, last year bought same-day delivery company Parcel and also offers grocery delivery in partnership with Uber or Deliv in some markets.