Pickup Gains Ground Over Delivery

Pickup jobs are driving restaurant and grocery store sales at better margins than delivery, causing many to build services that they hope customers will continue to prefer even after the coronavirus pandemic has subsided.

Some supermarkets and restaurants want their pickups to hold back some online orders from apps like Instacart Inc. and Grubhub Inc.

RODEN 0.74%

They say the fees these and other companies charge for delivering their groceries added up during the pandemic as dining rooms closed, some customers shunned supermarkets, and business moved online.

Restaurants like Pizza Hut and Chili’s have expanded their pick-up service, saving the cost of delivery at lower prices for customers. Many independent restaurants have put together multi-course menus to keep business going during the coronavirus pandemic.

Executives in Darden restaurants Inc.,

The owner of Olive Garden said Thursday that they tried to add their own delivery service during the pandemic but found it inefficient and little sought after. CEO Gene Lee said the company plans to stick with an improved carryout offering instead.

Kroger Co.

, Albertson’s Cos. And other grocers are waiving collection fees and adding space to fulfill those orders. Aldi Inc. is offering a pick-up for the first time because customers asked for an alternative to visiting stores or paying for delivery, said Brent Laubaugh, co-president of the German discounter’s US operations.

“Delivery can be challenging for people,” Laubaugh said.

Delivery remains big business for restaurants and grocers, and the demand for services has increased during the pandemic, said research firms and providers like Instacart and Grubhub. But the demand has waned a bit as people start venturing outside their homes, even when it comes to picking up groceries from a restaurant or grocery store parking lot. Some delivery companies also scaled back the promotions they put in place to attract customers when the pandemic hit.

Pickup grocery sales in the week ending June 13 increased 81% year-to-date, while delivery sales increased 33% during that time, according to Nielsen. In restaurants, US dollars accounted for 42% of orders in May, compared with 13% of sales for deliveries, according to research firm NPD Group Inc. Carryout has maintained its share of restaurant sales since dining rooms reopened in May, NPD said, while transit and delivery have lost some ground to feed orders.

Analysts and economists are paying close attention to monthly retail sales to gauge how the economy is recovering from the effects of the coronavirus pandemic. Photo: Kathy Willens / Associated Press.

Alinea Group, which operates five high-end Chicago restaurants, added a daily take-away menu during the pandemic, which continues to generate tens of thousands of dollars in weekly income in every restaurant, even since an outdoor seating service in Chicago in June allowed.

“It’s a lifeline,” said Nick Kokonas, co-owner of Alinea.

He is also the founder of Tock Inc., a reservation booking system that added a take-out marketplace that charges a 3% commission, which is well below the fee he and other restaurant owners quote for delivering their groceries bring customers.

Tock has been handling pickup orders totaling around $ 2 million per day since the system was expanded to include a transfer option at the beginning of the pandemic, Kokonas said. The company registers an average of 50 restaurants a day, he said.

Casual dining chains like Denny’s Corp. and Chili’s also started contactless roadside takeaway during the pandemic. Many say they want to hold on to it to increase sales as customers slowly return to dining rooms with limited capacity across much of the country.

“The delivery was huge, but the take-out is significantly larger,” said Wyman Roberts, CEO of Chili’s parent company Brinker International Inc.

Starbucks Corp.

is building more pick-up shops in urban areas and a service to deliver drinks to customers’ cars in the suburbs. During the pandemic, Pizza Hut introduced contactless pickup. Employees wore gloves and delivered pre-ordered pizzas to customers’ cars.

The company is still focused on its delivery business, but believes that some customers prefer pickup because of its value, said Kevin Hochman, the chain’s US president. It’s also preferable for margins, he said.

“Delivery is expensive to run and it is very difficult to cover all of the cost of a pizza delivered,” said Hochman.

At Hy-Vee Inc., a grocery store in the Midwest, sales of grocery deliveries have declined year-over-year, while sales from collectors have increased significantly, said managing director Randy Edeker. The grocer is equipping more space to prepare for pick-up orders, which make up 84% of Hy-Vee’s online business, up from around 40% a year ago.

“Most new buyers pick up,” said Edeker.

Mary Alft, a 64-year-old retiree from Lincoln University, Pennsylvania, said she was cautious about going to grocery stores and restaurants during the pandemic because of her age and asthma. She said she enjoyed how quick and convenient it was to collect groceries when she tried her giant local store, owned by Koninklijke Ahold Delhaize NV, in April.

“Why haven’t I been doing this all my life? I didn’t like going to the grocery store, ”said Ms. Alft.

Delivery companies are also trying to do more pickup deals. Grubhub, Uber Technologies Inc.’s

The Uber Eats Division, DoorDash Inc., and Postmates Inc. all offer restaurant pickup. Instacart introduced pickup last year.

Cameron Mitchell, owner of Columbus, Ohio-based chain store Cameron Mitchell Restaurants, put together a roadside pickup service during the pandemic but decided against additional delivery. Takeaway sales have doubled, he said, and he plans to stick with the carryout business even after his dining rooms reopen.

“There is a sufficient fraction of the public that does not want to go out to dinner,” he said. “We’ll find out.”

Write to Heather Haddon at [email protected] and Jaewon Kang at [email protected]

Copyright © 2020 Dow Jones & Company, Inc. All rights reserved. 87990cbe856818d5eddac44c7b1cdeb8

Comments are closed.