What's going on?

Discount grocer Aldi has announced that it�s partnering with delivery startup Instacart to offer online grocery delivery to its customers as it looks to take a bigger slice out of the American market for groceries.

What does this mean?

Instacart�s partnership with Aldi, which is on track to become America�s third-largest supermarket by 2022, proves just how much grocery companies are betting on the digitization of their industry.

But even if ecommerce presents a big opportunity for grocers overall, many challenges in this already struggling market remain: for one, competition is increasing even more as foreign grocers, including Aldi and Lidl (a German discount grocer that�s opened its first stores in the US earlier this year), continue to expand their low-cost operations into the country. On top of that, lukewarm wage growth has made it hard for them to raise their prices (and boost profits).

Why should I care?

The bigger picture: Supermarkets are beginning to adjust their business models around ecommerce.

Compared to retail markets like bookselling and apparel, grocery shopping hasn�t been as radically changed by the rapid growth of ecommerce. However, Amazon�s recent acquisition of Whole Foods has led many to think that this evolution is now imminent. Even though most people still buy their groceries in stores, experts suspect that this market could grow massively as stores begin to market online groceries at a relatively lower price and begin to bundle retail products across a single ecommerce platform (which is what Amazon might do with Whole Foods).

For markets: Investors are distancing themselves from grocers who aren�t prepared to innovate.

Shares in Kroger and Target, two of America�s largest grocers, are both down by more than 20% this year as both have struggled to develop a convincing ecommerce strategy. Walmart�s stock, meanwhile, touched a two-year high earlier this year as investors have rewarded the company�s continued acquisition of ecommerce startups like Jet.com and Bonobos and its push to digitize its retail business.