BRICK OR CLICK?

Buying groceries from online outlets has become commonplace for many time-strapped shoppers, but where does this leave traditional retailers? A number of chains have launched their own websites or partnered with a big Internet presence such as MyNetGrocer. Others have committed to the in-store experience, focusing on what customers cannot enjoy with online shopping. Renowned for its item selection

Buying groceries from online outlets has become commonplace for many time-strapped shoppers, but where does this leave traditional retailers?

A number of chains have launched their own websites or partnered with a big Internet presence such as MyNetGrocer. Others have committed to the in-store experience, focusing on what customers cannot enjoy with online shopping.

Renowned for its item selection and personalized customer service, Lakeland, Fla.-based Publix Super Markets has decided to play up its strengths in traditional settings.

In 2001 it launched its own online shopping service, PublixDirect, but shuttered it two years later because it did not meet the retailer's expectations.

“We realized that our customers enjoy the interaction with our associates,” said spokeswoman Maria Brous.

“They enjoy the variety of fresh and prepared foods we offer, along with squeezing and smelling fresh produce and the aroma of bread baking,” she explained.

Capers Community Markets in Greater Vancouver, British Columbia, is also zeroing in on its stores.

“In-store experience is paramount,” explained Aron Bjornson, spokesman for the four-store natural and organic chain that's owned by Wild Oats Markets.

One of Capers' focuses is hiring staff who are “authentic, friendly and approachable, who engage the customers and are knowledgeable,” he said. The chain also has a nutritionist on staff who runs regular seminars, both on-site and off, on topics such as feeding infants. These events are often followed by store tours.

Meanwhile, other retailers are successfully letting technology lead the way.

D'Agostino Supermarkets, a 19-store chain based in Larchmont, N.Y., unveiled a revamped website in May. Since then, about 5% of its business has been generated through the medium.

“We wanted to mimic the in-store experience online,” said D'Agostino spokesman Anderson Chung. “But we are also working closely to merchandise the products that resonate with online shoppers as opposed to the in-store customers.”

The retailer pared down its online item selection for quicker shopping. Its website currently offers 15,000-20,000 stockkeeping units — almost half the selection merchandised in its brick-and-mortar locations. “As customers ask for items that they can't find on the site, we will add them,” said Chung.

As a result of improvements made to D'Agostino's online offering, Web traffic has improved 50%, and orders have more than doubled in certain areas like New York's Westchester County.

The retailer seems to be on the right track with its strategy.

“The bulk of [online] sales will be driven by a small selection of products,” said Glenn Hausfater, managing partner of Partners in Loyalty Marketing, Chicago. He added that items shopped for online tend to be “boring” products like detergent.

Pittsburgh-based Giant Eagle has pursued a different strategy. Its online offering, which focuses on hard-to-find specialty items, is provided to supplement what can be found in its traditional aisles.

Bob's gluten-free Red Mill Hot Cereal, Romanoff caviar, WestSoy organic soy milk and Maple Grove Farm's raspberry syrup can be found on the site. Customers can also request products not currently offered. Giant Eagle works with Kehe Food Distributors to monitor and alter its selection.

“Our partner determines when requested items should be added to the offering on a case-by-case basis,” said spokesman Dan Donovan.

Some foods sold online are also available in Giant Eagle stores.

“Factors such as store size and layout dictate varied product offerings among stores, ” he said.


CYBER SPECIALTIES

Through its online grocery offerings, Amazon.com also provides specialty items.

Shoppers can find, for example, more than 300 varieties of green tea, natural sweeteners like agave nectar and almost 600 gluten-free products on its virtual shelves. The site also sells a number of international products in its gourmet food store from third-party merchants such as Ribena Beverage from the U.K., Achva Halva from Israel and Le Moulin de Marie Walnut Oil from France.

“Our mission is to be earth's most customer-centric company, where people can find and discover anything they want to buy online,” said Amazon's vice president of consumables, Maria Renz. “Our unique platform is different than a traditional grocer's, because we are not limited by shelf space, so we can stock a full assortment.”

Peapod.com, on the other hand, offers local favorites that can't be found anywhere else. For example, “here in Chicago, we sell truffles by Gale Gand, pastry chef at the four-star restaurant Tru,” said co-founder Thomas Parkinson. “She does not sell them anywhere else. We also sell Wildfire pies, which you can only buy if you go to eat at the restaurant.”

This small selection of products tends to lead to high-check averages for online shoppers.

“You might not get as much impulse shopping, because impulse is about things looking nice, but people do stock up,” said Neil Stern, a senior partner with McMillan Doolittle in Chicago.

Part of that comes from consumers wanting to get value for the delivery charge.

Amazon.com's Subscribe & Save feature allows customers to sign up for recurring deliveries and all of the items are shipped free, and items are discounted 15%. Unlike most other online grocers, Amazon offers free shipping if customers spend over $25 on qualifying products. And with Amazon Prime, customers can sign up for what the company calls an “all-you-can-eat” shipping program: For $79 per year, all qualifying orders can be shipped via two-day shipping for free or overnight for $3.99.

One retailer that's discovered that online sales can be lucrative is Roche Bros., a 14-store chain based in Wellesley Hills, Mass. Only 1% of sales are from online shopping, “but that's still a quarter of a million dollars per week,” said spokesman Arthur Ackles. And Roche's online customer base is growing.

“We typically serve very-high-income customers,” he said. “Some of them use it once a month to stock up, then come into the store for fresh things.”


ONLINE HURDLES

Online shopping services that offer customers real value and, at minimum, an equivalent shopping experience are key, said Jim Hertel, managing partner with Willard Bishop, Barrington, Ill.

Websites can be a great way to make customers feel valued, as well as to generate additional sales, he noted. For example, retailers can personalize the shopping experience and make suggestions based on current or past shopping behavior, such as “Mrs. Smith, may we suggest a pinot noir with that pork tenderloin you just ordered?” and they'll tap into the real-time ability to remerchandise to promote Web specials or time-sensitive promotions.

Despite the competitive advantages and incremental sales a website can bring, penetration of online grocery shopping is still fairly slim.

“There are some fundamental issues with online grocery shopping, and it's not just about delivery fees,” said Hausfater. “People who do it [tend to] view shopping as mere drudgery.”

This should serve as a wake-up call for retailers to improve their in-store experience, said Stern.

That is exactly what Capers Community Markets is doing. Customers keep coming back to Capers because the stores go above and beyond the basic shopping experience, said Bjornson. In addition to having a nutritionist and an educated staff, there are regular tastings and demonstrations, as well as events like Folk Fest Fridays with live entertainment, which makes for a great ambiance, he added.

Publix, too, is playing up its advantages in this arena.

“We connect with our customers; we are a part of their lives,” said Brous.

Publix has a popular demo program. Under the Publix Apron's Simple Meals program, stores demonstrate a meal and hand out samples. “How can you replicate this experience outside of our environment?” asked Brous.

Stern concurred. “If people don't go to a traditional store, they won't learn about new things, or get ideas of what to cook,” he said. “It's fun to talk to the fish guy and find out what's fresh. And it's social — you meet your community and your neighbors, and traditional retailers can take advantage of that. It's also easier to make decisions in a store.”

Instead of trying to beat traditional grocery stores at their own game, the online stores are touting their convenience and value.

Amazon bundles many of its grocery offerings or ships them in their original packaging to help customers save money.

“We work closely with manufacturers to keep per-unit costs low,” said Renz. “Our goal is to make sure customers find the products they want at low prices, with the added convenience of free shipping on qualified orders.”

D'Agostino's research has shown that customers shop the website on average once per week, but have a total number of 1.6 to 1.7 (online and in-store combined) transactions per week, “so we know they drop by the store at least every other week, too,” said Chung. The research also shows they're using the website to buy heavy products — water, juice, milk — and stocking up on produce in stores.