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Possible Grocery Strike Raises Questions About Online Delivery In Southern California

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Possible Grocery Strike Raises Questions About Online Delivery In Southern California

A strike by thousands of union workers at major Southern California supermarket chains would have a huge upside for non-union big box grocers and e-retailers but would likely disrupt other online grocery delivery services, industry experts said.

"We know Amazon.com, Inc. (NASDAQ: AMZN) will not be impacted by a strike," said Bill Bishop, chief architect of Brick meets Click, a consultancy for grocery retailers and the consumer packaged goods industry. "We know brick-and-mortar will be. What we don't know is the impact on services like Instacart, whether that process will be disrupted."

Members of the United Food and Commercial Workers (UFCW) union in Southern and Central California are voting this week on whether to authorize a strike. Negotiation delays with Albertsons – which owns Vons and Pavilions – and Ralphs are among the reasons for the vote.

The impact of a work stoppage on online grocery delivery depends on the segment, Bishop said. "You've got the pure play coming from Amazon Fresh and then the online grocery that comes from your brick-and-mortar stores like Walmart Inc (NYSE: WMT), Kroger Co (NYSE: KR) and Safeway."

Most of the order fulfillment occurs in-house, so if there is a strike companies that depend on store products will be disrupted.

"And that's the fastest- growing portion of the business," Bishop said.

Todd Walters, president of UFCW Local 135 in San Diego, said members who work in online fulfillment jobs at Vons and Ralphs fall under the general merchandise classification. Wages for that classification have fallen behind, he said, and the supermarket chains are stalling on a new contract. 

 "Our members will tell the companies that we are frustrated," Walters said.

Votes from Southern California's seven regional locals will be tallied tonight after the final vote is registered. 

A strike will also impact the delivery aspect of the business that's driven by Instacart, although exactly how that will unfold is unclear.

Instacart hires people to go to stores to buy the orders that a retail customer places. Unlike some other grocery delivery services, the company doesn't stockpile items in a warehouse; rather, it lets consumers shop major grocery stores through its website, and then sends orders to one of its employees. 

Since Instacart partners with Ralphs and the other retailers that would be impacted by the strike, its service could be disrupted.

Instacart, Ralphs and Albertsons did not immediately respond to requests for comment.

The strike vote evokes memories of a four-month supermarket strike that took place in Southern California in 2003. The affected chains lost $1.5 billion in sales, and consumer shopping habits were forever changed.

Sixteen years later, the grocery industry is in a state of upheaval as Amazon and Walmart muscle in on traditional food retail operations. Both would be clear winners in the event of a strike, said Geoff Welch, a vice president with the Shelby Report, a publication that tracks the food and grocery industry, in an email. 

"The benefits for Walmart and Amazon would be huge," he said. "But disruption to the food chain affects all," he added. "Hopefully the strike won't happen." 

Amazon and Walmart did not return requests for comment.

Even if UFCW members vote yes, a strike won't necessarily take place. The tally would simply enable the union to call a strike whenever it wants. It is also designed to put pressure on the employers, with the next three-day round of negotiations scheduled to start on July 10.

Albertsons, Vons and Pavilions have a combined 342 stores and 29,000 unionized employees in Southern California. Ralphs, a division of Kroger Co., has 190 stores and 17,000 employees.

Image Sourced From Pixabay

Posted-In: delivery Freight Freightwaves Grocery storesNews Markets Tech General

 

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