Dive Brief:

• Albertsons-owned grocery chain Tom Thumb plans to lay off 97 delivery drivers in the Dallas-Fort Worth market, according to a report in The Dallas Morning News. WARN notices filed with the state of Texas confirm layoffs across seven stores, effective Feb. 27.
• A spokesperson for Tom Thumb told the newspaper that the move “will help us create a more efficient operation,” and said it will shift delivery to third-party companies while continuing to use store workers to assemble orders for delivery as well as pickup. The spokesperson did not respond to a request from Grocery Dive for further details.
• Albertsons has for several years run its own delivery service in markets throughout the country, and the Texas announcement spotlights how its chains are taking a hard look at the economics of last-mile fulfillment.

Dive Insight:

The latest announcement from Tom Thumb closes out a program that launched in 2016 and that’s been part of Albertsons’ owned delivery network — a rarity in the grocery industry — which is currently active in markets like Southern California, Phoenix and Chicago.

Albertsons also partners with Instacart on delivery nationwide. And that reliance on third-party firms is set to grow as Tom Thumb offloads its pricey last-mile operations, which are notorious for eroding order margins for grocers. The spokesperson for the chain told The Dallas Morning News that this is part of a drive to improve efficiency as sales flow into the digital channel at an accelerated rate due to the coronavirus pandemic.

“This decision will allow us to compete in the growing home delivery market more effectively,” the spokesperson said. “Since the COVID-19 outbreak, our e-commerce business has risen to new heights and has become more strategically important to Albertsons and Tom Thumb.”  

As e-commerce sales advance well ahead of schedule this year, grocers are examining their operations and trying to strike the right balance between relying on third-party firms to fill and deliver orders and having their own employees do that work.

Many chains rely on the likes of Instacart and Shipt to fulfill and deliver orders and even staff pickup services. But grocers like Sprouts Farmers Market and Kroger are showing they want to have more control over store-based fulfillment operations while pushing third-party providers to handle delivery. The majority of Walmart’s same-day deliveries are handled by last-mile firms.

Despite the shift in Texas, Albertsons is investing in delivery operations at the corporate level. The company is currently trialing its own two-hour delivery service in Chicago. It’s also offering an unlimited-delivery service in 12 of the top 15 U.S. markets, alongside its own delivery service, according to an Albertsons spokesperson.