Will Meijer’s free grocery delivery gesture be rewarded by customers?

Discussion
Photo: Meijer
Jan 20, 2022

Meijer is offering free deliveries of groceries on orders of $35 or more through Jan. 29.

The retailer, which operates more than 250 stores across six Midwestern states, said it rolled out the limited time offer in an attempt to support customers who may be unable to shop at its stores or reluctant to do so as a result of the Omicron variant’s spread.

Meijer’s free offer comes at a time when grocers are struggling to figure out how to profitably handle home deliveries. Many, including Whole Foods, have concluded that there is no answer other than charging for deliveries to maintain margins, even when it comes to Prime members. The grocery chain does offer free curbside or in-store pickup for subscribers to parent company Amazon.com’s program.

Whole Foods on October 25 began tacking on a $9.95 delivery charge to all home deliveries from its stores. The chain said that doing so allowed it to offer groceries online for the same price as they were in-store.

Walmart responded to the Whole Foods/Amazon’s delivery fee with an email promoting its Walmart+ subscription plan versus Prime.

“You may have heard that starting today, one grocery delivery service will start charging its customers $9.95 for every single delivery… That’s why, today only, Walmart is announcing that new customers who sign up for Walmart+, the membership that helps them save more time and money, will get $9.95 back. Because customers deserve a grocery delivery service that won’t leave a Whole in their wallet for delivery fees — whoops, typo.”

Walmart and Amazon, which share a high percentage of customers, are not the only players in the delivery space looking to separate themselves from the pack and turn a profit at the same time.

Instacart, which has faced price-related criticism tied to its fees, in November said it would reduce or waive delivery fees in select markets on orders placed more than 24 hours in advance. The option was intended to encourage more customers to plan and place their orders with longer fulfillment windows.

DISCUSSION QUESTIONS: Will Meijer’s free delivery gesture lead to higher net promoter scores or increased use of home delivery beyond Jan. 29? Can grocery retailers sustain free delivery over an extended period?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"If Meijer extends free delivery or adjusts its fee after the test, all retailers should take notice."
"The gesture is grand, but it eats away at Meijer’s profitability so it will be unsustainable over time."
"This notion of principled retailing isn’t some trendy incarnation of compassionate capitalism. It is the bedrock gene of Meijer’s corporate DNA..."

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21 Comments on "Will Meijer’s free grocery delivery gesture be rewarded by customers?"


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Shep Hyken
BrainTrust

We now have a new term — Delivery Wars. Free really isn’t totally free. It’s just not an extra charge. The cost of running a business, which could include free shipping, is built into the price of the product. Still, Meijer’s free delivery gesture will help their customers and may even bring in a few more. And once they are there, it’s an opportunity to get them to come back.

Liza Amlani
BrainTrust

Grocery delivery is something customers are getting accustomed to and it’s important to drive loyalty through either free delivery or other white glove offers/gestures.

Meijer is on the right track and customers will shop in return for their loyalty. Grocers need to set themselves apart as customers have more options than ever and have no reason to stick around. Product choice has expanded and merchants are working hard to have a point of difference in terms of a more diverse and optimal product range.

Bob Amster
BrainTrust

Meijer may increase its net promoter score in the short term. I believe that, once the offer expires, most consumers will seek alternative retailers. That will not have been Meijer’s fault. Free delivery is not sustainable. Once all retailers realize that free can’t be, net promoter scores will be based on more attainable perquisites, such as customer service, higher value, etc.

Richard Hernandez
BrainTrust

There are other retailers like H-E-B that have done the same thing and it seems to have brought more customers to using delivery. It’s a gamble and an investment, and it seems to resonate with customers.

David Spear
BrainTrust

This is a great move by Meijer and their loyal base of shoppers will respond in kind with higher satisfaction scores and continued use of home delivery even as the “free” part goes away. No doubt, home delivery is expensive for retailers and whether through an annual subscription like Walmart+ or an added delivery fee per order. Retailers will have to recoup the expense someway, somehow. Offering free all the time just doesn’t work with the math. Instead, retailers must create a real or perceived competitive advantage in product differentiation, customer experience or pricing such that shoppers are willing to pay for freight.

Jeff Weidauer
BrainTrust

One of the first rules I learned in econ classes was that there’s no such thing as a free lunch. Free delivery is paid for somewhere in the process. The question is whether the investment is worth it and sustainable. In this case, Meijer may be setting up an unrealistic expectation from its customers.

Bob Amster
BrainTrust

We agree here!

Ken Morris
BrainTrust

You can’t argue with free. It’s not a long period of time, but shoppers will remember that Meijer delivered for free. It’s definitely not going to hurt their NPS, unless they botch the PR and communications when they start charging again and some shoppers expected free delivery forever. Meijer knows that It’s also a good test for realistic delivery demand if they take delivery cost out of the equation. The $35 minimum order number must be the result of keen knowledge of average ticket and profitability, too. If Meijer extends free delivery or adjusts its fee after the test, all retailers should take notice.

David Naumann
BrainTrust

Good points Ken. There are still a lot of customers that haven’t embraced or even tried grocery delivery. The timing of the surge in Omicron and the free delivery may inspire some customers to try home delivery. It is a smart move to hopefully increase future home delivery orders and elevate customer loyalty.

Lisa Goller
BrainTrust

This thoughtful gesture will earn short-term buzz, yet Meijer also needs unique offerings to keep customers coming back.

Fierce competition among grocers and rapid-delivery players gives shoppers more choice and more retail power. A piecemeal, limited-time offer won’t suffice in today’s shifting grocery landscape.

Few grocers have the deep pockets to sustain free delivery over an extended period. Subscriptions (Amazon Prime, Walmart+) and Whole Foods’ delivery fees prove even giants seek recurring revenue to afford to get to our doorsteps.

Rich Kizer
BrainTrust

Thanks for the humor, Walmart: “That’s why, today only, Walmart is announcing that new customers who sign up for Walmart+, the membership that helps them save more time and money, will get $9.95 back. Because customers deserve a grocery delivery service that won’t leave a Whole in their wallet for delivery fees — whoops, typo.” The delivery wars are set to rage.

Ryan Mathews
BrainTrust
Many things have changed since Fred Meijer turned the reins of the company over to the current generation – some for the better, others not so much. But the constant “red thread” running through Meijer’s history is the idea that sometimes a company ought to do what’s right, even if it costs them sales, margins, or profits. This notion of principled retailing isn’t some trendy incarnation of compassionate capitalism. It is the bedrock gene of Meijer’s corporate DNA, the pattern of ethical thinking deeply woven into the fabric of the company’s history and brand identity. Forget “higher net promoter scores” – which I pay no attention to anyway, despite their popularity, since they are so easily manipulated. And forget temporary competitive advantage because these days all competitive advantages are temporary, at best. And damn the cost unless it’s so high it bankrupts the company, which is highly unlikely. This is about a retail citizen helping its community out in a time of need. The whole decision making process should start and stop there. Years ago,… Read more »
Matthew Pavich
BrainTrust

Having grown up in Michigan, I can attest to the strong brand loyalty that Meijer already has in the region (reminds me of H-E-B in Central Texas). This move will clearly strengthen that and provide a great offer for Meijer shoppers – if it can be sustained. They have now set an expectation, so setting a delivery fee in the future may hit them harder than a competitor who never offered the service for free. Ultimately, with the right customer, pricing and predictive analytics, Meijer should be able to successfully monitor the impact of the strategy and make adjustments as needed to understand customer growth, where to find margin to fund this strategy and how it impacts baskets, etc. Being able to delight your customers and having the tools and processes to make it happen and adjust as needed are always a winning recipe.

Brad Eckhart
Guest

I don’t think it’s realistic to expect improvements to any key metrics beyond Jan. 29 as a result of a short-term offer such as Meijer’s free home delivery for the month of January. I do however think that there are things that can be learned by analyzing the results of the offer and applying them to future decisions. While free home delivery in the grocery business is a drain on margin, it should be viewed as a long-term play and an opportunity to gain marketshare through customer loyalty.

storewanderer
Guest
6 months 27 days ago

Ultimately, pricing will simply be adjusted to pay for the costs involved with this sort of thing.

Ananda Chakravarty
BrainTrust

The gesture is grand, but it eats away at Meijer’s profitability so it will be unsustainable over time. This is a try before you buy customer acquisition play, not a customer retention play, so it won’t affect NPS. The concept is grand, but unless customers are wowed by the service and the delivery itself, they will revert to earlier habits. Great way for Meijer to test the market and establishing a value for delivery.

Angel brght
Guest
6 months 27 days ago

Speaking as a customer of most of these delivery service companies, I can tell you most customers will always be on the lookout for free in any facet of buying, or services. Instacart is the most expensive, hence they are the bottom of the list when I use grocery delivery.

Meijer is my go to; I spend lots of money there. I order from them, and what I pay online is the same in store. Delivery fee, and a separate tip for my shopper. They go through Shipt, the shoppers are friendly, and very nice. Instacart has not only a delivery fee, but also a service fee.

You will also see if buying from the store yourself, then buy from Instacart the same items and brands, you will find higher prices.

Meijer is doing it right: what’s better, having fair pricing and keep customer loyalty, or gauging the customer base because you know they’ll come back?

Like I said I use Meijer for my main shopping because of fair business practices, Instacart is last on my list.

Ricardo Belmar
BrainTrust

Meijer is trying to build a habit with their shoppers and will hope that it sticks with most customers. We’ve seen throughout the pandemic that delivery habits are habit forming, but still remain a bit price sensitive. It will be telling if Meijer decides to impose a smaller fee than other brands as a competitive advantage.

Free grocery delivery does not seem to be sustainable if your model is to have human labor picking and packing groceries in the store. Now if Meijer somehow transforms this into a micro fulfillment model in some way where they can lower the cost model, then maybe they can approach a free service.

I believe these free delivery services will hit their peak soon — it just isn’t sustainable overall, and consumers will have to adapt by deciding if the convenience is worth paying extra, even if the extra is a small amount.

Craig Sundstrom
Guest

Reward … or punish (by actually using it)? The economics of this are well known, but that doesn’t seem to discourage, or at least prevent, stores from offering it. Here, happily, at least the plan is to offer it temporarily, but it’s important to keep in mind that once something has been offered it comes to be expected … and removing it may generate far more ill will than its introduction (generated good will).

Ken Lonyai
BrainTrust

Essentially, this is a proof of concept. It’s positioned in a way that if they drop it when there’s a little more normalcy to the shopping routine, it won’t seem like a retreat, so Kudos to Meijer’s for giving it a try.

Anil Patel
BrainTrust

Amid lockdowns when customers had no options but to stay indoors, they actually enjoyed purchasing from the comfort of homes and getting products delivered at their doorstep. And interestingly, this has become a habit and is going to stay for the good. So we can safely say that home deliveries are not going anywhere, and more and more retailers like Meijer might have to include it in their strategies.

Speaking of free delivery, it’s a psychological concept that market players love to play with. Convenience does not come without a price. Either the retailer or the customer has to bear this additional cost of convenience. So as far as the question of sustaining free delivery is concerned, it depends on the cost structure retailers follow. No retailer will offer free delivery even for a day if it incurs losses. If they do, they won’t be able to keep home deliveries free for long. So to offer free delivery, retailers will have to price their products accordingly and b remain viable.

wpDiscuz
Braintrust
"If Meijer extends free delivery or adjusts its fee after the test, all retailers should take notice."
"The gesture is grand, but it eats away at Meijer’s profitability so it will be unsustainable over time."
"This notion of principled retailing isn’t some trendy incarnation of compassionate capitalism. It is the bedrock gene of Meijer’s corporate DNA..."

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