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How Pa.-based grocer Giant competes for your virtual shopping cart

Online orders represent a huge new market for supermarkets, and the Philly region is still up for grabs.

Cameron Whitelock delivers groceries to a home in East Coventry Township from the Giant Supermarket as part of their Peapod Grocery Delivery Service at their North Coventry, Chester County, location on Friday, September 14, 2018 TOM KELLY III/ FOR THE INQUIRER
Cameron Whitelock delivers groceries to a home in East Coventry Township from the Giant Supermarket as part of their Peapod Grocery Delivery Service at their North Coventry, Chester County, location on Friday, September 14, 2018 TOM KELLY III/ FOR THE INQUIRERRead moreTOM KELLY III/ FOR THE INQUIRER

As the Peapod by Giant truck pulled up, June Henion, 81 and Richard Henion, 84, opened their front door and waited for Cameron Whitelock to lug in their groceries.

Whitelock knew where to place the water bottles so June and Richard would not have to move them. He knew to pass the popsicles to Richard, who was ready to put them into the freezer.

After three back operations, June said she prefers delivery during her recovery. Once the pain in her right leg subsides, she said, she is going to check out Walmart's pickup option when it launches nearby because the prices might be lower.

The willingness of consumers such as the Henions to try buying groceries online has helped fuel a fiercely competitive market, and one that analysts expect to grow. The Food Marketing Institute and Nielsen predicted this year that 70 percent of consumers will regularly shop for groceries online by 2022 or 2024.

The biggest players in the Philadelphia region last month were Instacart with 33.8 percent market share, Walmart Online Grocery with 22.8 percent, and Peapod with 16.2 percent, according to Earnest Research, an analytics company that derived the data from credit and debit card transactions. Peapod and Giant have the same corporate parent.

Michael Maloof, a senior grocer analyst at Earnest, called the Philadelphia region "on the more competitive side of the markets that we're looking at. It's still up for grabs."

Though Giant and its competitors anticipate an increase in online grocery shopping, 84 percent of adults report never ordering groceries online, according to a July 2018 Gallup report. Just 4 percent of consumers order groceries online for pickup or delivery at least once a week, the poll found.

Consumers are hesitant to have "someone else pick out their groceries. We typically like to look at our produce and look at our meat," said Stephanie Cegielski, a spokesperson for the International Council of Shopping Centers. "People aren't necessarily quite ready to give up all of that control."

Still, retailers in the $700 billion grocery sector must invest in online, said Lauren Gilchrist, director of research in the Philadelphia office of JLL, a commercial real estate firm.

"It's something people are trying to figure out because the grocery segment is so huge," Gilchrist said. "The company who can deliver a seamless experience can potentially win the day in market share."

Retail giants have been expanding online. When Inc. paid $13.7 billion last year for Whole Foods Market, analysts expected the Seattle company to dominate the market with its quick delivery services. More than 1,000 Kroger stores have delivery through Instacart and a ClickList pickup service. Target Corp. last year acquired Shipt, a grocery delivery start-up, for $550 million and continues to expand into urban areas.

>> READ MORE: Amazon-Whole Foods: A year later, what's changed?

Costco Wholesale Corp. now sells meal kits from Blue Apron. Walmart works with DoorDash to deliver to what they predict will be 40 percent of U.S. households by the end of the year. Tom Ward, vice president of digital operations for Walmart U.S., has said that 90 percent of Americans live within 10 miles of a Walmart store.

Peapod, which was founded in Chicago in 1989, has felt the heat. Frans Muller, CEO of Ahold Delhaize, the parent of Giant and Peapod, said on a recent earnings conference call that he was dissatisfied with the company's 8 percent growth in online sales in the U.S.

Giant started delivering with Peapod in 2011 and among the ordering options is a flat delivery fee of $7.95 for orders over $60 and a $2.95 pickup fee. When asked about delivery errors, Brand declined to provide a rate and said the company provides substitutions or exchanges when needed.

Justin Hadwin, Giant/Martin's director of e-commerce, knows his team is competing among a buffet of options and that customers have "high expectations."

"If you deliver something to a customer and it's not perfect, you really have failed them," he said, while standing in a Giant warehouse attached to its store in North Coventry Township, near Pottstown. Items are arrayed in a way that makes it easier for employees to get customers exactly what they ordered.

Whereas in a grocery store, products are usually arranged by brands, the warehouse purposefully separates them so the employees bagging the orders don't accidentally grab the wrong item.

To fill an order of 31 items, Giant employee Fran Howard strapped the bar code scanner around her finger and then attached a display around her wrist. This is where the customer's order appears, item by item, instructing her which aisle to head to, which shelf to look at, and what quantity to grab. After scanning each item to make sure it's correct, she placed it in the box.

Howard grabbed everything — the whole milk, chicken salad, pack of burgers, mint chocolate chip ice cream — with the same precision. Referring to her scanner, Howard said: "This is like my brain, my heart, my blood flow. This is everything."

Unlike the store for customers, the Peapod warehouse is "not about appearance," said Tim Weighknecht, a Giant store manager. "The customer getting deliveries at home doesn't necessarily care how pretty this is. They care can they get it accurate and fresh and on time."

Later that afternoon, Nick Dippolito opened his front door for his family's first Giant grocery delivery order.

"I've been trying to get my wife to do it for a while," said Dippolito, 40. "This is really the first time we're, like, 'Well, do you try to drag three kids food shopping every week?'"

The couple decided that delivery would be easier. Once the food was all inside, Whitelock, the driver, asked him to check the eggs to make sure none was cracked.

"If you ever find anything wrong, the expiration date a little too close to your liking, bread's a little smushed, don't be afraid to call," Whitelock said, adding that customer service would "gladly help you out. … They'll do anything to make you happy."