German grocery chain Aldi Inc. said on Sunday it has partnered with Instacart Inc to deliver groceries in three U.S. cities, a move that comes amid intense competition and disruption in the industry.
Aldi will launch a pilot starting the end of this month in Los Angeles, Atlanta and Dallas with the potential of expanding to more cities in the future.
The German retailer does not offer customers an option to shop on its own website now and the partnership is a way to test online grocery demand, Aldi’s Vice President of Corporate Buying Scott Patton told Reuters.
“Grocery shopping online is a relatively small part of the business but it is continuing to grow,” Patton said.
A report from the Food Marketing Institute and market research firm Nielsen in January this year estimated online grocery spending during 2016-2025 to grow from 4.3 percent of the total U.S. food and beverage sales to as much as 20 percent, or more than $100 billion. Last year, online grocery sales were about $20.5 billion.
Aldi’s move also comes at a time when grocery chains in the country are caught in a price war. German rival Lidl has started opening stores in the country and online retailer Amazon.com Inc. said in June it will acquire grocery chain Whole Foods Market Inc.
To better position itself, Aldi said in June it would invest $3.4 billion to expand its U.S. store base from more than 1,600 currently to 2,500 by 2022.
In May, Aldi Chief Executive Jason Hart told Reuters the chain intended to have the lowest prices and would focus on adding in-house brands to win over price-sensitive customers.
The partnership with Instacart will allow shoppers to order goods from Aldi stores using Instacart’s website and app. Instacart, which charges a delivery fee, does not hold inventory but picks up orders from the store and brings them to a customer’s home in as little as one hour. Other U.S. retailers who have tied up with Instacart include Target Corp, Whole Foods Market Inc. and Costco Wholesale Corp.