One size does not fit all in on-line grocery retailing.
Of three retailers known to be starting on-line shopping ventures in the next two months using an outsourced Web site, each is going about it in a different way. Five-store GA Foods Group, Lowell, Ind., has launched a delivery-only service; Geissler's Markets, East Windsor, Conn., also five stores, will offer delivery and store pick up when it launches this month; and U Save Foods, Omaha, Neb., will start a pick-up only service by midsummer in two of its 14 stores. All are using applications, systems and processes from MyWebGrocer.com, New York.
Nationally, on-line grocery sales are expected to grow rapidly, said research firm NPD Group, Port Washington, N.Y., in a recent report. For the three months ending in April, total sales reached about $260 million, and 9% of consumers who made purchases over the Internet bought groceries. Penetration, or the number of people now buying the category on-line, grew 15% over that period, NPD said.
"If you look at everything that has happened in the last two years in Internet, everybody can sense that is the way commerce is heading," said Glenn Gintert, president, GA Foods. Some estimates for the potential of on-line food shopping are from 10% to 15% of the total grocery business. "In our area right now, nobody is doing a good job with it, so we want to stake our claim to a good portion of that market," he said.
Federal Express and UPS are not going to be able to deliver perishables, Gintert noted. "That's why we've got to figure out a good way to do that. Sometime in between when the UPS truck pulls up to people's houses and the pizza delivery guy shows up later in the day, there's a niche where we can pull up with groceries, and that's what we are striving to find," he said.
GA Foods also is unique in that its Grocery-Stock.com service, which went live in mid-May and commences full operations this month, is a separate retailing entity from its stores. "We have five units and four different names that we operate under, and there isn't a broad-based geographic presence for any one of our names. Our new entity will be an umbrella for all of the areas that we want to cover," he said. The program will be promoted differently than its stores, emphasizing billboards rather than print advertising, Gintert said.
"If we tied it to one of our operating stores, people would expect all of the weekly specials and all of the in-store specials that they would get when they walked in the store. The support of the database becomes much more difficult if you are honoring weekly ads, and you are trying to keep your item file in sync with your in-store item file. It is a much bigger project than it looks like on the surface. So the Web site will have its own set of specials," Gintert noted.
The retailer is building off an existing phone-based delivery service. The orders will be filled at one store chosen for its breadth of offerings and delivered as far as 10 miles away, Gintert said. So far the phone-based delivery service has not been profitable. An earlier attempt at an on-line application didn't work, and neither did a pick-up window at the store, he said.
"But we want to be in this business. Efficiencies both in MyWebGrocer's support of the database and in our performance will improve as time goes on. We are not going to sit around and be paralyzed with further analysis. We are going to jump in and get this thing running and improve on it as we go," Gintert said.
For the first month of operation deliveries will be free, but the retailer later will charge $12.95. "For us, this fee will discourage the real small orders." To encourage loyalty, GA Foods will add something free of charge to the larger orders, such as soft drinks or a loaf of warm French bread.
"On-line shopping and delivery are natural next steps for a grocer who is focused on providing the best services and products for its customers. Our customers are time-pressed and appreciate the convenience and the time savings that on-line grocery shopping and delivery represent for them," Gintert said.
Geissler's Markets will offer both delivery and pick-up, fulfilling the orders out of its East Windsor store, which is centrally located, said Jim Nilsson, president. Geissler's also has an existing delivery service, with an employee dedicated to it. The retailer went with the outsourced program because it didn't have the resources to establish an e-commerce site of its own.
"We need the ability to give consumers their choice of picking up the grocery order at the store or having it delivered. We want to offer on-line service that matches the product variety, pricing and merchandising for each individual store. Finally, we want a capability that features and helps build the Geissler brand, not the service provider's brand. MyWebGrocer.com meets and exceeds all of these criteria," Nilsson said.
Initially, about 75% of the retailer's offerings will be available on-line. "We add the rest as requests come in, or as we see the business increasing," he said. It will be available through the retailer's Geisslers.com Web address.
"We want to get in on the ground level and capture the market dollars that are there now, and try to hold onto them," Nilsson said.
Retailers are already starting to feel the competitive pressure from on-line merchants, said a source close to all three retailers. "There isn't a grocery store in America that hasn't been impacted by on-line shopping where some of the consumers are buying products on-line that they used to buy in the grocery store. Consumers are voting with their feet and their pocketbooks every day. If retailers don't play in this arena, they are losing business. Top-dollar losses in this case can have a dramatic impact on the bottom line," Nilsson said.
With a new franchised Cub Foods store in Omaha opening this summer, U Save Foods will have 14 units, and two Cub stores in Omaha where it will begin its on-line shopping program, said Jim Carpenter, director of information technology. Contrary to the other programs, the chain will not offer delivery.
Because of the Cub stores' locations near commuting paths of many people, Carpenter thinks the pick-up only program will work. The logistics and capital investment in delivery also are a concern, he noted.
"To do delivery, you have to be able to facilitate your deliveries between say, 3 o'clock and 8 o'clock at night. That gives you a five-hour window. If it really takes off like we are hoping it will, you'd have to have a heck of a fleet to do that. We think we can provide as good a service for our customers with pick up, because there will be a special parking area for them, and we will have people with headphones who can call to the back and have the pickers get their groceries out of coolers and delivered to their car within a 10-minute time frame, or less," said Carpenter.
"We will be the first in the Omaha market. We want to provide an added service to our customers and again with Omaha, which has a very large base of technical workers. It's a very high-tech town," he said.