New and Old Models in Grocery Delivery, and Guilt About Good Jobs

Xconomy Boston — 

I’m not really the kind of person who wants to use a grocery-delivery service. I’m glad they’re available, especially for people who might have trouble navigating the aisles of their local supermarket. But while I’m able-bodied, I figure I should really be able to drag myself to the store and buy my own groceries.

Then we brought home our newborn. Within a day or two, as I watched our food stash dwindle, I was imagining the pure joy of having a stranger shop for me. It wasn’t long before I was signing up.

As it turns out, living in the Boston area offers consumers a chance to try out two generations of online grocery delivery services. One of them is Peapod, an original dot-com era company now owned by Dutch grocery company Ahold. In some areas of the U.S., Peapod operates the delivery services for a regional chain of Ahold-owned grocery stores—in my town, for instance, Peapod is connected to Stop & Shop.

The other service available in my city is Instacart, a very young startup that offers its service in a few cities around the country. Instacart deliveries can come from a number of stores in any given area, ranging from everyday supermarkets to more expensive specialty grocers, and even the membership warehouse mecca of Costco.

I tested both services at home over two weeks, and generally liked both of them. They were easy to use and delivered what they promised. I didn’t find any mistakes in any of the handful of orders I placed, and the delivery people were pleasant each time. Even someone like me, who thinks a lot of grocery baggers don’t do it right, was happy with the way things were packed—cold things were kept cold, dry things kept dry.

One major difference, which isn’t obvious if you just start shopping away, is how these two competitors make money. Instacart marks up the price of each of the items listed on its website over the in-store price to help pay for everything—the company doesn’t say by how much—and also charges a per-order delivery fee of $3.99 for two-hour delivery and $5.99 for a one-hour turnaround. The minimum order is $35.

Peapod says its prices are “comparable” to what you’d pay in an actual store, with some differences owing to how local grocery-store managers have priced their inventory at a particular store. Instead of sending shoppers into stores to grab things off the shelves, which is what Instacart does, Peapod has warehouses or smaller store-rooms filled with the items it offers, making its operations more centralized. Its delivery fees are a little higher: $9.95 for orders from $60-$100, and $6.95 for orders above $100.

Another big difference is the way your groceries arrive. Peapod sends its drivers out with climate-controlled box trucks to keep things the right temperature. Instacart, on the other hand, uses a workforce of people driving their own cars, so you’re more dependent on their packing abilities and a speedy arrival to ensure freshness.

Instacart definitely has a leg up in the quality of its website—it’s modern, easy to navigate, and pleasant to look at, while Peapod’s is still stuck in the early 2000s, if not earlier, with teeny-tiny fonts and rigidly rectangular navigation bars and drop-down menus.

Instacart also had much quicker turnaround times, which is a pretty crucial difference. Whenever I filled an order on Instacart, I had plenty of options for when I could get my stuff delivered, even if it was within a few hours and right around dinnertime.

With Peapod, the fastest you can get a delivery is the next day. Just about every time I went to the website to place an order, I was too late to get a next-morning delivery, and had to schedule a window for the afternoon or evening.

Both Peapod and Instacart do a good job of keeping you updated on the status of your orders, too. If you give them your phone number, Instacart shoppers can call and run through possible substitutions when the store is out of something you wanted—a complication that comes from Instacart being a separate company, not tied into any particular store’s inventory. They’ll also call or text when they arrive, if you want, and the service texts you afterward to rate the delivery.

Peapod’s service was almost shockingly on point with text messages—I headed down to meet the driver when I was notified he was getting close, and received a text message on my phone literally the same instant the colorful Peapod truck pulled up in front of my stoop. One slightly old-school note: I had to sign for the Peapod delivery on a paper invoice, which is where I filled in my tip.

All in all, the combination of quicker turnaround times, greater store variety, and more pleasant design made me slightly more likely to order from Instacart when I logged in for another re-supply.

But there was something else nagging at me when I did.

Instacart is one of many fast-growing smartphone-based startups that rely on a largely unattached workforce to make its service feasible. Instacart’s shoppers don’t work for the company, officially speaking—they are “independent contractors” wearing Instacart T-shirts and bearing Instacart-branded bags full of groceries.

You can read about this arrangement in Instacart’s terms of service, where the company makes clear that it doesn’t regard those shoppers as employees. Inside that thicket of legalese and carefully worded protections, the integrated, consistently branded grocery delivery service that you’d see from the outside becomes a passive technology service linking up buyers and sellers.

“Instacart is a communications platform for facilitating the connection between individuals seeking to order food and beverage products and other grocery items … and individuals seeking to assist customers by retrieving and delivering the groceries,” it says.

Instacart also claims to have no control over “the quality, timing, legality, failure to provide or any other aspect whatsoever of the Personal Shopper Services,” and uses all-caps to distance itself from any liability should a customer have problems or conflicts with the delivery people.

For the people who fill your orders and drop them at your door, that can mean a level of flexibility that isn’t possible with rigidly scheduled shift work—a benefit that’s often touted as especially well suited for students, retirees, parents of small children, or others seeking part-time work and a little extra cash. The company has said that drivers can make between $15-$30 per hour, depending on how quickly their jobs get finished.

For Instacart, it also means labor costs are about as low as they can get. Unlike the engineers and product managers at Instacart headquarters in San Francisco, the shoppers and drivers aren’t getting any health insurance, free food, or equity in the company. They also have to cover self-employment taxes and their own transportation expenses.

People reviewing the company at job-listings site Glassdoor have complained about the pay pretty consistently, saying there’s sometimes a minimum guarantee of $10 an hour in newer markets, but that it gets eaten up by parking tickets and gas.

Peapod, on the other hand, is a distinctly real-job kind of company. Its ads for delivery drivers list pay of at least $11 per hour, before tips. Drivers can also get a 401(k) retirement plan with an employer match, health, dental, vision, and life insurance coverage, paid days off, and discounted pricing on groceries.

But online reviews of these jobs aren’t fantastic, either. There are plenty of complaints of bad management, stressful schedules, heavy turnover, and difficult-to-predict schedules. If you’ve ever had a blue-collar job making an hourly wage, you’ll recognize most of these gripes.

Let’s just be honest here and say that, no matter what kind of scheduling and pay scheme the employer is using, delivering groceries for other people can be a grueling job that you probably wouldn’t want to do forever. In a slow-recovering economy, with about 9 million Americans still unemployed, people will take what they can get.

It still makes me question my choice when I buy something from Instacart.

There are a great many startups doing pretty interesting things these days at the place where powerful mobile computing and real-world logistics cross paths. The car-hailing service Uber is the headline example here, and yes, Uber also maintains that drivers are contractors and not employees. It’s being sued by drivers who say they’re being shortchanged by that distinction.

If it continues to grow quickly and expand to new cities, it seems pretty easy to imagine that Instacart will have its own reckoning over how it treats the people doing the heavy lifting. As an otherwise happy customer, I frankly wouldn’t mind seeing a judge decide whether the whole system is fair, or a bit of creative accounting that shortchanges working people.

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5 responses to “New and Old Models in Grocery Delivery, and Guilt About Good Jobs”

  1. Curt–it’s so refreshing to see a tech reporter question the quality of life/jobs of a company he is supporting. While no one wants to need a UAW for protecting every last worker (management should be more enlightened these days) I do see a lot of slippage back to those bad old days before Walter Reuther. Anyway, thanks for the piece.

    I was a huge HomeRuns customer back in the day and I was downright depressed when they went under. Life’s logistics become so fragile and pressurized when you have kids.

    You might want to also try Something GUD for home delivery of strictly-local foods. They have found the “best of the best” in Boston and they literally gave me back my Saturday….when I used to run around sourcing my local favorites like Sophia’s yogurt, Fastachi nuts, Petsi’s pies, Swiss Baker breads, New England fish, cheese, produce, and meat, etc. They have none of the convenience you seek (you have to place your order three days ahead) but the ability to discover and support local food purveyors is amazing to me.

    • Curt Woodwardcurtwoodward says:

      Thanks Jules! I have seen those flyers for Something Gud and wondered what it was, sounds like it’s worth checking out.

  2. rafer says:

    When you get a chance, check out helloenvoy.com, which takes great care of its shoppers with a service better than instacarts. It’s far more subscription than on-demand so far, only west of the mississippi for now, but it’s the sign of things to come.

  3. Well, if anyone is thinking about starting a home based grocery delivery business check out mountaindeliveredgoods.com They provide your website, marketing materials, etc. They have already helped around 30 families start their own restaurant delivery and grocery delivery services.

  4. Jeff says:

    Hi Curt, thanks for the article and shedding light on a not
    so obvious topic. I started a grocery delivery company in Boston called Boston
    Organics back in 2002, bostonorganics.com.

    You are correct, grocery delivery is tough work, especially
    when you factor in the weather and urban driving conditions.

    In 2012 we became a Certified B Corporation. B Corps are
    companies that are obligated to consider all stakeholders when making business
    decisions – the environment, community, workers, and of course shareholders. As
    a certified B Corp, we went through a rigorous third party audit to verify and
    measure our business practices. You can visit the BCorp website to see our
    scorecard.

    We pay our drivers living wages, matching 401K, health
    insurance, paid time off and access to free and discounted food. In addition, we
    own and maintain a fleet of vehicles and carry high levels of all kinds of
    insurance (auto, liability, etc). We’re
    not perfect and continue to strive to do better. I think it is in my company’s
    best interests to provide competitive wages. We have found that by treating
    colleagues with this kind of respect leads to happier staff which translates to
    happier customers and better business.

    I also wonder where we are heading (both as a business and
    society). It will be interesting to see
    how things pan out over the next few years for these well funded companies that
    are intentionally or unintentionally leveraging their technology to shift the
    cost of doing business to the independent contractor.