SAN FRANCISCO -- The on-line grocery segment is expected to accelerate in the wake of new technologies and a proliferation of personal computers in the home, according to industry experts who spoke here at eFood '99 last week.
On-line grocery sales are expected to reach $500 million by 2001, these experts said, which compares with overall food-store sales last year of about $443 billion, according to the Food Marketing Institute, Washington. And while Internet grocery sales have been slower to build than books or CDs, speakers at the conference expected growth to jump in the next several years. Some on-line retailers also hope to boost on-line shopping by developing relationships with brick-and-mortar retailers to provide fresh prepared, while others plan to add other services such as dry cleaning.
"The idea of having someone pick out your bananas and deliver them to your house is still a strange idea to many people, but food now ranks third or fourth among the items people purchase on-line," said Michael Brennan, vice president of product management for Peapod, Skokie, Ill. "While selling books or CDs on-line is an instantly national business, selling groceries on-line is more of a marathon than a sprint. It has taken a longer period to ramp up. There are so many logistics issues to deal with and each market is different. What works in San Francisco doesn't necessarily work in Chicago."
The eFood '99 conference was sponsored by the International Quality and Productivity Center, Little Falls, N.J.
Brennan noted that Wall Street is now giving serious consideration to on-line grocers. "The interest of the investment community and the acceleration in capital and competition is a good. I think we're going to keep up the aggressive pace we saw in the first half of this year," he said.
Frank Britt, vice president of Streamline, Westwood, Mass., told the audience that there is an "awakening" among consumers and investors. "Two or three years ago, you couldn't even link food and the Internet. Now, in the last six months that has changed and we're seeing $400 million to $500 million in venture capital. I predict we'll see four to six IPOs in the next six months."
Brennan also said expanding offerings beyond food could be a way to entice customers to shop for groceries on-line. While he declined to provide specifics, he told the audience, "we're focused on food right now, but that will possibly change in the near future." According to Brennan, Peapod currently ranks first in on-line sales of pet food and is the second largest on-line drug store. Peapod also has a relationship with Andronico's Market, Albany, Calif., to deliver prepared meals in certain markets.
Brennan noted innovations in technology will also help to boost interest in Internet sales. "We've got the opportunity to deliver messages in context at the point of purchase. Also, increases in bandwidth will make things easier. It takes 20 to 40 minutes to place a grocery order. You can order 35 books in that time. I also think that innovations in Web devices will make the Web portable. That will be a key to this channel."
Streamline's Britt said computerization of the picking and delivery process is also crucial to success. "You need a high degree of computerization because there has to be accuracy and efficiency. It is different than running a retail outlet where the customer is doing their own picking. You've got to be accurate," he said.
