Ahold’s bfresh announced a partnership with service provider CartFresh to launch online grocery delivery in the Boston area. To promote the launch, bfresh is offering zero delivery fees and no minimum order requirement.
This launch comes just seven months after the store opened in Allston, signifying the banner’s continued push to lead the urban and Millennial-focused grocery space. The announcement also comes one day after Amazon shared that AmazonFresh will be coming to the Boston area in the coming months. But why partner with a third party, CartFresh, when you have the largest and oldest online grocery banner, Peapod? Three different explanations are top of mind:
- Maintaining bfresh as an independent, Millennial-focused, urban format: Ahold launched bfresh specifically for the Millennial shopper using colloquial signage and a smaller format to meet the need for a convenient, urban grocery store in a neighborhood filled with college students and recent grads. The store has zero visible affiliation with Ahold, carrying numerous niche brands despite Ahold’s sophisticated and tiered private label program. Launching online grocery services with CartFresh could be another way for the retailer to differentiate bfresh from its parent company and maintain the store’s Millennial focus.
- Simplifying online grocery fulfillment: The assortment at bfresh is very different from that of your typical Stop & Shop store, with increased perimeter services, niche brands, and prepared food-to-go to target the Millennial palate. For example, bfresh carries more than 30 different BBQ sauces, has a fresh-made pasta station, and offers numerous grab-and-go food options. Peapod uses Stop & Shop’s back rooms to fill orders. With such different assortments, Peapod would need to make additional stops at bfresh to fulfill orders, increasing time and costs. Not to mention, a Peapod truck would take up half the small parking lot bfresh has behind its store for shoppers. By using a third party, bfresh is simplifying its online grocery fulfillment, saving time and money, to keep costs low for its shoppers.
- Testing online grocery demand: The partnership of bfresh and CartFresh could be a way to test the demand for online grocery from its Millennial shopper base before establishing a more permanent/sophisticated program. We have seen this trend with other grocers such as Whole Foods, Food Lion, and H-E-B, all of whom partnered with Instacart to provide online grocery delivery services. Using third parties is also an easier way to establish oneself in the online grocery space without large capex investments and interruptions to supply chain in the short term. Once bfresh gauges the adoption rate for the new services, it could move to leverage Peapod’s fulfillment capabilities to establish a first-party program.
Online grocery continues to heat up in Boston with more than five different services offered in the area, including Peapod, Whole Foods, and H-Mart through Instacart, Roche Brothers, and soon AmazonFresh. To remain competitive, bfresh must continue to differentiate through its assortment, services, convenience offering, and low delivery fees to lock in loyalty and lead with the Millennial shopper.