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Internet Grocery Shopping Slowly Gaining Ground
bakreule writes "Online grocery shopping, once the laughing stock of the internet, has quietly started gaining ground. It seemed that the idea had been killed shortly after the bust as being just another bomb. The article has some good interviews and details to show how this industry is developing and whether or not this surprising growth can continue. I'm interested in seeing how grocery product advertising will be affected in this highly competitive industry."
I've seen far too many of those "grocery gateway" trucks driving around. The way this is going geeks will never need to leave the house.
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I always wondered how these places stay in business. Do you really think the vendor's actually put a lot of thought into finding the perfect tomatoes, freshest eggs and milk, and softest loaves of bread?
;-)
Or do they sell whatever the oldest crap they can get away with selling?
Personally, unless I'm buying books or CD's, I'll stick to real-life visits to the local grocery store.
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Some people, when looking for a new apartment here in NYC will ask: "does FreshDirect deliver here".
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I live outside of a major city but too far to get this right now but even when I lived in the city my biggest problem with the idea was stuff like produce. I love cooking and I am very picky about my fruit and veggies and cuts of meat. According to the article, however, this seems to also be a big concern of the companies. They even claim that they would do a better job. I would have to see that.
I actually enjoy grocery shopping sometimes (ok call me a freak) but I would to pull up a recipe and have the ingredients delivered.
While this trend may catch on in ultra-urban settings like NYC (where even McDonalds delivers), I can't see it making its way to mainstream America.
For one thing, who wants to pay for delivery? Second, my biggest gripe with grocery shopping was the crowds, which is why I love 24 hour grocery stores... I simply go at midnight.
"Those who would give up essential liberty to purchase a little temporary safety deserve neither liberty nor safety."
I, and I'de estimate 90% of the people on my street, already rely on Tesco's and Sainsbury's online grocery ordering. IMO the greatest benefit is not having to put up with screaming kids whose parent's post school shopping coincides with my post work free time.
I loved the searchable selection, the ability to pre-build shopping lists, and coolest of all was the one-click recipe ingredient ordering. I especially miss not waiting in line during the 5:30p grocery rush.
I live in a smaller town now (100,000) so I'm not holding my breath until I can get access to this again, but I'd be quite willing to pay 10% more to have this service.
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I think most people who are surprised that these companies can stay in business and who don't see the appeal of the service are overlooking those people (a lot of students) who don't have cars. I used Grocery Gateway often as a student because it meant I could buy more food than I would be able to stuff in my backpack to carry home.
As to the submitter's question about online grocery marketing, I don't think it will change too much. I for one go to the aisle of what I want to buy and look for the little yellow sale tags... then buy that one. I don't think website shopping and flashy ads will change that so much and at 10$ per delivery, I don't think you're going to have a lot of hunt and peck shoppers getting their 69 cent soup from one grocer and their 3$ microwave pizzas from another.
Not to mention at 10$ per delivery people like me who spend maybe $40 a trip on the high end will be willing to spend another 25% for delivery. That's where competition needs to happen. Drive those delivery costs below $5 and I can eliminate my single social burden!
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Here in the UK, the Tesco and Waitrose supermarket chains have been taking orders over the net and delivering the goods by truck for several years. It's no longer remarked upon as being anything special.
Tesco were the first to realise that using their regular staff picking goods off the shelves of their regular supermarkets was a low-investment and very cost-effective way of linking orders to delivery trucks.
Paul
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I think you mean "In America, Internet Grocery Shopping.." because certainly here in the U.K, it's pretty big business. My wife and I have been using Tescos once a week for two and a half years with no problems. Tesco and several other large stores who provide online-ordering and delivery are also turning a tidy profit in addition to their regular brick & mortar stores.
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Schwans delivers frozen foods. I've been using them ever since GroceryWorks went under and have been very pleased with their product quality.
One thing I really like is my food arrives frozen. The nearest grocery store to where I live is 10-15 minutes away and frozen foods tend to defrost a bit by the time I get home due to the hot Texas sun. Melted/refrozen ice cream from the grocery store isn't very good.
Although the CNN article focuses on the US experience, the UK has had successful and profitable online grocery shopping for several years. UK chain Tesco was one of the first - with an in-house developed software system - and now most of the UK major chains have followed suit with similar systems.
The Tesco system was initially thought to be un-economic as it simply comprised staff going round existing stores and loading carts that where then delivered using small vans to homes in the locality - but apparently its been profitable since the outset.
Tesco's approach is compared to that of WebVan (who feature in the CNN article) in this document written by a Prof at Wharton (free - but registration required)
More recently, a WebVan style UK Grocery operation called Occado has started too - working with upmarket Grocer Waitrose. Their approach is to use central warehouses to fill orders and distribute.
All this competition has resulted in competition between providers both on price (several offer the service 'free' for spends over a threshold of about 75) and quality (for example, discounts if delivery times are missed, or the goods / brands you order are not in stock etc.)
I don't know about mainstream America, but here in rural upstate NY, food delivery certainly has caught on. It seems like every other house gets delivery from Schwan's. The reason for this I think is that there are no grocery stores within 15 miles. It can be damn convenient to have that Schwan's truck stop by every other week.
Now, the problem I have with this service is that the food (not counting the very high priced steaks, etc.) is, to my mind, almost totally snack food. Some of it very good snack food (ummm... Tacquitos) but snack food just the same. A steady diet of this stuff and you're probably not going to be doing yourself any good.
Also, of course, only a couple of (frozen, of course) vegetable and fruit items.
From the article:
The key struggle for grocers is to make their service convenient enough and the cost low enough -- most charge less than $10 for delivery -- to change decades of shopping habits. Online grocers also need to operate in cities with high population densities and heavy Internet use.
Delivery costs are probably what most limits this kind of service.
If delivery costs could be reduced, say by taking the human (driving a two ton gas guzzler 10 miles each way) out of the loop, then this service would really take off.
The technology is almost here for cost-effective robotic delivery vehicles. With liquid fuel costs increasing dramatically, automated delivery will be here even sooner.
There should be less and less reason to send someone in car on a Go Fetch Errand to pickup groceries, a new hard disk, etc.
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I live on a 5th floor walk up in Warsaw, Poland, without any really good shopping places in my immediate vicinity. So every couple of weeks, I'd take the bus to a large supermarket, buy stuff for 2-3 weeks and take a cab home. Now, I save both time and money just by putting orders through a local grocery store.
For fresh produce, meat and fish, I still go to the local market. But for name branded goods with freshness seals, it's online shopping all the way. Last weekend I ordered just beverages - 60l of juices, water and pop. That's about 70kg of weight (counting bottles + packaging), so I was more than happy to not have to carry it up.
There are some things I will never buy online - fruit, veggies, meat (they don't sell them anyway) - but for the other stuff, it's a great solution.
http://www.e-zgrocer.com/
This service has been around for a few years. We're in a very sparsely populated area (35k people in my town). When it first started, we mocked it, saying that it would never work around here. Then we realized that it was still around, and aparently gets good use.
I think their secret is that it wasn't some kind of VC startup, but rather a grocer that decided to go online.
I use FreshDirect in New York and it rocks. The produce is generally better than if I picked it out at the store. Things are fresher, and I can get a better selection of brands. Oh, and including delivery charge, ($3) it ranges 8 - 10% less than the ghetto-style grocery store at my corner! No lines, no cramped aisles, no moody checkout clerks, no overcharging...
The delivery times are really good and it is next-day service. I will never go back to regular shopping again. This is like when I got my Tivo; completely revolutionizes everyday tasks.
When WebVan was around, they were *extremely* popular. So popular, that everyone would wave at the delivery guy as he drove by. I myself was an extremely happy customer as it saved me from having to carry a lot of groceries home. (I didn't have a car at the time.)
I think that WebVan's problem had less to do with a poor business model, and everything to do with scaling the business way too fast. They burned through a tremendous amount of cash every time they entered a new market. As a result, they were left with very little operating funds. They always figured that they'd be able to get more funding. Unfortunately, you can always count on VC investors to go to extremes. They over funded during the boom, and they simply wouldn't fund at all during the bust.
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(We're a family of five, including three kids age 5. 5. and 4.)
I can't imagine going back to traditional grocery shopping. I've seen the light - and I'd gladly pay an additional 10% to keep buying my groceries online.
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My g/f is visually impaired and has many friends that are visually impaired and blind. Because they cannot drive it is often hard for them to get all the groceries they need. Services like this are really helping that segment of the population. They all love it and think it's one of the greatest things ever. It is truely amazing how much you learn (as a fully sighted person) when you interact with people that do not have the luxuary of full sight. Services like these are just another thing that makes their lives much eaiser. I hope they stay around for that fact alone.
K Man
One of the big outfits for online groceries in Canada is Grocery Gateway. At my last job I worked with them for a couple of weeks (mostly looking at some of their IT systems - they run a tight ship and have good IT people if that matters) and got a good understanding of their business from the inside.
Essentially, they started out as, and still are, a shipping company. They don't just ship groceries, but pretty much anything that you would normally think to pack into a truck and ferry off somewhere. They partnered up with some grocery supply companies and basically inserted themselves as a delivery company and website. They don't really charge much for delivery, but they don't have to to stay profitable. Bulk buy directly from the wholesalers and distributers, mark up items so they're competitive with the grocery stores and charge a nominal fee for delivery and bang, you've made money.
As for the quality of the foods, they partner up with Sobey's for much of it, and the produce is about the same quality as what you'd get off the shelf in a good Sobey's. (For non Canadians, or people who don't live near a Sobey's - Sobey's is a grocery store that can definitely boast well above average quality produce.) I'm not a shill for these guys, and I don't work with them any more, but I can say that the quality isn't bad at all.
One of the other things I've done is try out Green Earth Organics and Fresh Piks. (No link because their site is down. Fun fact: When it couldn't find the server, M$'s built in auto search suggested www.Fleshpics.com as an alternative. Not the best suggestion when looking for an organic fruit and veggie delivery company. Probably a fun site though.) Both provided better produce than anything I ever bought in a grocery store, it was delivered and since I didn't want to waste anything I ate more fruits and veggies, and cooked more than I ever did at any other point in my life. If I weren't living in Spain now (where restaurants prominently feature recognizable animal parts where they cut the meat from and many don't serve salads at all) I'd still be getting a weekly delivery from these guys.
Someone has to pick stuff out and ship it to the store, why the hell not have someone pick it out and ship it directly to me. They know that if they drop the ball on quality I'll take my business elsewhere so they do better than the grocery store does. Anyway... I think that this is something that was a long time coming...
It's really tough for many elderly people to go grocery shopping - some are too old to drive a car safely, many grocery stores don't have powered carts so you have to walk the store, and the bags are heavy. Unfortunately, there are no online grocers where my parents live (both are in their mid 80s, and have the above problems). I was worried that the concept was going to die when Peapod and (I think it was called) Homerun ran into problems. But it sounds like it's catching on.
-MDL
Happy meals fund terrorism
First off, they fall asleep on the way there. Marvellous. So now you have to wake them up before you can get out of the car - that really cheers them up, as you can imagine.
Next up, the trolley has to be perfection. Yesterday's favourite is today's screaming fit, so you must make sure Her Majesty will deign to actually sit in the bloody thing (the son currently gets no say...). You can force the issue, but your ears will suffer.
You then get the fun of said two year old reaching out to every shelf and grabbing what she wants. If you put it back, she grabs it again or screams. Meanwhile my son is just screaming anyway - no apparent reason, unless it's the same one I feel like screaming about as well.
Finally, we get people such as yourself. We know we're pissing you off. We just don't get a choice about it. Some people respond graciously, others stare as if you're utter scum.
Nope, it's online shopping from the parents' point of view too as far as I'm concerned. Chuck 'em a fiver, and let the delivery people handle it all. It's a good deal for both me and you, it would seem.
Cheers,
Ian
The problem was never whether there was a viable business model in the idea of delivering groceries to homes. The problem was that it's a low-margin business, and it doesn't lend itself to the massive "economy of scale" theory behind most of the dot-com era companies.
Think about it for a second. Chances are that there's more than one grocery store in your town. Here, in my town of about 40,000 people, we have two Stop & Shop stores (both on the borders), a Shaw's, a Market Basket, both Wal-Mart and Target (selling a decent amount of groceries), and a smaller local store run by a guy who has four stores in the area. Plus a number of smaller specialty and convenience markets, and a couple more supermarkets right outside town - including a Trader Joe's.
My point is that all these stores have enormoous fixed costs. It's expensive to run a grocery store - for personnel you have deli staff, bakers, cashiers, baggers, management, stockers, butchers, etc. Depending on the store size, that's 10-30 people per shift. You also have high real estate costs, because your store needs to be in a nice, desirable shopping area, high advertising costs (though manufacturer co-op dollars help), and perishable merchandise that has to be disposed of if it doesn't sell. Not to mention high electrical costs, lots of water consumed, and high trash costs.
Now, take the same or better merchandise, stock it in a warehouse that's much cheaper to maintain, and pay delivery drivers instead of cashiers and baggers. You save on some of the fixed costs but make up some of that on the electronic infrastructure.
Altogether, it's a potentially viable business model that can work at least as well as the brick & mortar version. The catch is that the giant brick & mortar chains didn't spring fully formed from a venture capital infusion. They grew over time to become the giants - generally with one or two stores that did well enough to fuel expansion over a generation. Try and build big from the start, and you've got big costs. You don't have time to wait for the customers to find you. Start small, service a few markets well, and you won't run out of cash before the shoppers come. That kind of growth isn't good enough for either the VC market or Wall Street.
But it's good enough to build a company if done right.
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I've been using peapod , which is stop and shop's online service. I can say nothing but good things about them. The biggest benefit is that we save alot of money and time. My wife and I used to go on sunday afternoon to the grocery store, and just basically impulse buy what we thought would be enough food for the week. We'd end up with far to many cookies and ice creams and not enough healthy food. Peapod has helped us alot with this since we can just log in anytime we think of something we need or have run out of, and then save the cart until next time. We typically start making the order right after we recieve previous order, and will add items for the next couple of weeks (I find it easier to order 2 weeks of groceries at a time). Delivery fee is only about 5 dollars if you order over $100 worth of groceries. They also remember all your previous orders so you can look back and see what you ordered last month or last year, and you can copy/paste a text list into their search program to speed up searching for items. It's really a great program, and I reccomend you try it at least once if it is available in your area. And now for the shameless plug, if you do sign up as a new customer based on my positive thoughts: my account is peapod at heem.org of course substituting the word at with the @ symbol.
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Schwan's got it right in the U.S. They've been doing home grocery/food/meal delivery for years. When Internet popularity rolled around, they took advantage of technology to improve their business rather than to create it.
I've used Acme's online ordering and delivery twice so far. Both times there were errors in what they delivered versus what I ordered. The driver/delivery guy did not want to spend the time for me to make sure that I checked the order (he was nice enough, but he acted like he was in a big hurry), and both times I had to call the toll-free customer service number to get a refund or redelivery with the right stuff. To their credit, they made it right both times. Until drivers take the time to ensure that what they deliver is what was ordered, and they have the authority to fix the problem on the spot, there will still be some bad word of mouth press.
We used to have a choice of both Webvan and Peapod back in the day. Both were great. Right after our daugher was born, by C-section, my wife was ordered not to carry loads and to avoid stairs where possible.... we had a flight of stairs to the front door to our townhouse at the time. She was a heavy user of Peapod for groceries and DrugStore.com for diapers. She once said: "How did people ever have babies before the web?"
Anyway... Peapod was great, they did a wonderful job of selecting produce for you... always first rate stuff. But they pulled out of the area because they were competing with Webvan and were not interested in bleeding money in exchange for market share.
Webvan continued for a while, but let's face it... they were clucks. They had *no* control over their costs. Very stupid. In the grocery business the margins are thin and you *must* be on top of your costs. Webvan were completely brain-dead idiots in this regard, they did lots of things in expensive ways for no benefit at all over the cheaper ways. They deserved to die.
We have used Safeway.com a few times... but don't use them for anything other than food-in-a-box. Their produce is marginal to begin with, and what they select for web orders is the dregs of the bin. Both Webvan and Peapod delivered *great* produce... Safeway.com is a health hazard on wheels in that regard.