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Philly’s largest grocery delivery service lays off 56 workers as it ends Whole Foods partnership

Whole Foods and Instacart “have mutually agreed” to end their delivery services partnership, effective May 15, according to a Whole Foods Market spokeswoman.

Alid Alvarado transports orders for three different Instacart customers to her car at Whole Foods. (Brian Cassella/Chicago Tribune/TNS)
Alid Alvarado transports orders for three different Instacart customers to her car at Whole Foods. (Brian Cassella/Chicago Tribune/TNS)Read moreTNS

Grocery delivery service Instacart, which was the biggest player in the Philadelphia region as of September, is laying off 56 workers from three of its area Whole Foods Market locations, according to notices filed with state officials.

The layoffs come three months after Instacart announced it was “beginning to wind down” its five-year partnership with Amazon-owned Whole Foods Market. The layoffs will be effective May 11, but Instacart founder and CEO Apoorva Mehta said in a December announcement that he hopes to place up to three-quarters of those workers in another local retailer so they retain employment with the company.

A Whole Foods Market spokesperson said Tuesday that Whole Foods and Instacart “have mutually agreed” to end their delivery services partnership, effective May 15. Amazon paid $13.7 billion for Whole Foods in 2017, and at the time, analysts predicted that the Seattle company, known for its quick-service delivery, could dominate the growing market.

The layoffs break down as follows, according to the notices filed with the Pennsylvania Department of Labor & Industry: 24 layoffs at the Whole Foods at 929 South St.; 20 layoffs at the Whole Foods at 2101 Pennsylvania Ave.; and 12 layoffs at the Whole Foods at 15 E. Wynnewood Rd. It is unclear whether more Philadelphia-area Instacart employees will be affected by this change, and Instacart did not provide overall employment data for the Philadelphia region.

Instacart was the biggest player in the Philadelphia region as of September, with 33.8 percent market share, according to data from March 2017 to September 2018 compiled by Earnest Research, an analytics company that looked at credit and debit card transactions.

In the Philadelphia market, Instacart partners with various retailers, including Reading Terminal Market, CVS Pharmacy, Aldi, Sprouts Farmers Market, Sam’s Club, Wegmans, Acme Market, and Costco. Nationally, Instacart is in 5,500 cities and delivers from nearly 20,000 stores.

“In the months that follow, we expect to ramp down all remaining Whole Foods in-store shopping operations in preparation for Whole Foods to fully exit our marketplace," Mehta said in December.

Most Instacart shoppers work across grocery retailers to complete orders from customers, though the company does employ shoppers who are assigned one retailer as part-time employees who work up to 29 hours a week. Those employees include 1,415 store-specific shoppers across 76 Whole Foods locations, Mehta said in a December announcement. Almost 250 would be “impacted” starting last month, he wrote.

Mehta previously said he expected to place more than three-quarters of those employees affected by the notices in another local retailer, along with a transfer bonus. For those who are not reassigned, the company said, it would provide a “a minimum of three-months separation package based on your maximum monthly pay in 2018, as well as additional tenure-based compensation."

Instacart is now valued at $7.8 billion after receiving $871 million in new funding, the San Francisco Business Times reported Monday. More than half of the company’s $2 billion in funding is “reportedly sitting in the bank in case it faces an expensive standoff with Amazon,” according to the publication.

The grocery delivery services industry seems fragmented within Philadelphia, despite Instacart’s presence, according to the Earnest Research data.

Whole Foods currently offers Prime Now, a one- and two-hour grocery delivery service in more than 60 U.S. metro areas, including Philadelphia, where customers can add items to their virtual cart and check out using an existing Amazon Prime account. Whole Foods will continue offering Instacart delivery services until the partnership ends in May.

Walmart Online Grocery has 22.8 percent of the Philadelphia market, and Peapod, which has the same corporate parent as Giant, had 16.2 percent, Earnest Research data showed. Other retail giants have invested in grocery delivery services, too. Target Corp., for example, acquired Shipt, a grocery delivery start-up, for $550 million in December 2017.

Instacart recently came under fire after criticism that its new payment structure shortchanged employees by counting their tips toward their minimum compensation for orders. Last month, Mehta responded in a post outlining new measures for pay, including ensuring that tips would remain separate from minimum compensation.

“The U.S. is nearly a $1 trillion grocery market, and last year, we saw almost every major grocer in North America bring their delivery business online in a significant way," Mehta said in an October 2018 news release. “We believe we’re in the very early stages of a massive shift in the way people buy groceries, and we expect that one in five Americans will be shopping for their groceries online in the next five years.”