Unlike media, travel, entertainment and dozens of other industries transformed by e-commerce, the grocery industry has seen little impact to date from online selling.
In fact, in 2008, only 0.2 percent of food and beverage sales were made online, according the U.S. Census Bureau. By comparison, 50.3 percent of music and video sales in the United States were rung up over the Internet in 2011.
Consumers’ slow adoption of virtual models has led many retailers to put developing an online presence on the back burner—one big reason behind the recent rapid growth of innovative upstart e-tailers. Intuitive websites and the convenience of fresh, organic produce delivered to a customer’s home as quickly as the next day are prompting consumers to take another look at the online grocery model.
If brick-and-mortar retailers want to get (and stay) in the game, it may be time to overhaul their online operations.
1. Convenience reigns
Quick, convenient, easy—there’s a lot for consumers to love about Peapod’s new virtual rail program that allows shoppers to buy groceries while commuting. In May, the Skokie, Ill.-based Internet grocer placed a virtual grocery store at a train stop along Chicago’s highly traveled CTA line. Billboard “aisles” display products similarly to how shoppers would see them in a physical store.
After downloading a free Peapod mobile app, customers can use their smartphones to scan the bar codes of products featured on the billboard and have the items delivered to their homes in as few as 24 hours.
“People always want to save time, and we’re showing consumers that shopping can be done anywhere and at anytime,” said Elana Margolis, Peapod’s director of corporate communications. “This model really pushes the idea of convenience, which is what we’re all about.”
The retailer hopes American consumers take to the idea like South Korean shoppers have. Home Plus, a subsidiary of the U.K.-based chain Tesco, launched a similar program in Seoul subway stations. Within two years, registered shoppers increased 76 percent and sales rose 130 percent. Home Plus is now one of the largest online grocery retailers in the world, according to A.T. Kearney, a global management consulting firm.
2. Customized success
Shoppers may never again wonder "what’s for dinner?" once they use Door to Door Organics grocery deliveries. The Lafayette, Colo.-based e-tailer makes shopping and meal planning a cinch by allowing users to organize grocery shipments by recipe.
Ingredients for suggested menus ranging from Thai Panang Curry to Goat Cheese and Pistachio Pizza and Bison Tacos arrive each week, and, even better, each item is guaranteed certified organic. Customization and convenience drive Door to Door’s success. The company, which launched in 2004, delivers organic produce and natural groceries to homes, offices and schools throughout Colorado and Michigan and in Chicago and Kansas City.
“A lot of e-commerce websites essentially just have lots of products that people can scroll through and have delivered,” says Chad Arnold, president and CEO of Door to Door Organics. “I realized that business model is just not compelling enough to get people to change behavior. We focus on the advantages we can create through technology.”
In addition to allowing shoppers to browse by recipe, Door to Door is developing an intuitive online interface that shows shoppers products based on stated preferences and purchasing behaviors.
3. Unmatched deals
Affordable isn’t the first word many associate with natural products, but The Green PolkaDot Box hopes to change that. The Spanish Fork, Utah-based e-tailer uses the collective buying power of its members to lower the prices of organic and non-genetically modified foods.
Think of the model as an online Costco. After members pay an annual fee, they can browse more than 2,000 SKUs—but they don’t have to buy large quantities to get low prices like they do at the big-box club store.
“I think there’s a perception that if you’re going to shop organic, you have to have more money,” says Sariah Smith, executive purchasing manager for the company. “We’ve eliminated the middleman so we’re purchasing directly from manufacturers. We consistently sell organic foods at a better price than anyone out there.”
Though The Green PolkaDot Box just launched in December 2011, the e-tailer already has 13,000 members and growing, which Smith attributes in part to the company’s referral program. Rather than sinking money into expensive advertising campaigns, the company offers a basic membership for $50 or reward membership for $125, which allows participants to collect customer referral points to use on groceries.
Smith says shoppers love that they can buy high-quality goods at low prices and are even happier when they can get many of these products for free by racking up points.