Walgreens is joining its competitors, offering two-hour delivery

As consumers avoided in-store shopping during the pandemic, retailers rushed to add same-day pickup and delivery options.

Now, Walgreens is joining rivals promising to get items to shoppers’ doors in two hours or less.

While many consumers may be comfortable going back out into stores, some have gotten used to the convenience of shopping online, whether ordering for curbside pickup within 30 minutes, having a package shipped in a couple days or getting a delivery within a couple hours, said Stefanie Kruse, Deerfield, Ill.-based Walgreens’ head of digital commerce.

Walgreens already offered same-day delivery through services like Postmates, DoorDash and Instacart, which can deliver items in less than two hours, though that isn’t guaranteed and fees can vary. People will still be able to place orders through those companies.

Walgreens’ new two-hour delivery service lets shoppers place orders through its website or app. Walgreens employees will pack up orders and third-party delivery services will bring them to shoppers. Delivery will cost $7.99 per order in most markets, with no minimum order size, Kruse said.

Whether that’s a better deal than ordering with a service like Postmates, DoorDash or Instacart largely depends on whether a customer already has a membership with one of those services, and the size of the order.

Instacart, for instance, says members get free delivery and reduced service fees on orders more than $35. Nonmembers’ same-day delivery fees start at $3.99, but there are additional fees for orders worth less than $35 or one-hour delivery, plus a service fee.

Walgreens’ rate is the same whether shoppers are stocking up or buying a single tube of toothpaste, and loyalty members will be able to earn and redeem rewards on orders placed directly with Walgreens, the company said.

CVS delivers prescriptions in one or two days for free, and customers can add certain retail items to prescription orders. It also offers same-day delivery through Instacart, Shipt and DoorDash. Other competitors, including Amazon, Target and Walmart, also have options to get items delivered within hours.

Several of those retailers reported rapid growth in online sales during the pandemic. Walgreens’ online sales, including sales through partners like Instacart, DoorDash and Postmates, were up 78 percent during the quarter that ended Feb. 28 compared with the same period the year before, the company said in March. Overall U.S. sales online and at stores open at least a year rose 2 percent during the second quarter of 2021.

Target, meanwhile, reported 212 percent growth in same-day pickup and delivery orders during the quarter that ended Jan. 30. Drive-up orders, where an employee brings items to the customer’s car, grew more than 500 percent, Target said.

Demand for same-day programs is highest when they’re free, like curbside pickup, but much lower when consumers have to pay, said Sucharita Kodali, a retail analyst at Forrester.

Only about 4 percent of U.S. consumers who purchased online groceries within the past month said they’d used a same-day delivery service, according to a March survey by Forrester.

Kodali said she expects growth rates for pickup and same-day delivery services to be only slightly higher than they were before the pandemic as consumers go back to more typical shopping behaviors. Particularly at retailers with lots of bricks-and-mortar stores, a traditional shopping trip can be less of a hassle than ordering online and waiting for a pickup or delivery window, she said.

Meanwhile, even with delivery fees, it’s tough for retailers to make money on two-hour home delivery, she said.

“The only type of company I’ve seen offer it at scale and make money doing it is in the pizza delivery space,” she said.

Fast same-day delivery is more expensive for Walgreens than having shoppers pick up purchases at stores, but the company is betting it will help Walgreens keep convenience-focused customers who might otherwise have gone to a competitor, and get them to shop at Walgreens more often, Kruse said. The company’s roughly 9,000 U.S. stores put it in a position to get items to customers quickly, she said.

“While delivery is more expensive … the customer lifetime value is a huge benefit,” she said.