By Jennifer LeClaire E-Commerce Times
08/06/02 2:28 PM PT
Just as there is a new breed of online grocers, there also seems to be a new breed of
online grocery shoppers.
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The first wave of online grocery stores is all but gone, but one year after Webvan
secured its title as the biggest dot-bomb ever, the online grocery segment is slowly
reinventing itself. Brick-and-mortar supermarkets are cooking up some early success
with hybrids of the original model.
Indeed, it is a new era for online grocers.
"Webvan pursued a warehouse fulfillment model and failed,"
Giga Information Group analyst Andrew
Bartels told the E-Commerce Times. "Albertson's and
Safeway (NYSE: SWY) are finding success with an
in-store fulfillment model."
More About the Model
Albertson's (NYSE: ABS) originally launched its
online grocery service in Seattle in November 1999. The company created a Web site and
tied the Internet service to existing pricing and inventory systems.
While the Peapods and Webvans of the online grocery world were racing to market with
half-baked models, Albertson's took the slow and steady route. The result is that the
company matured its model of fulfilling online orders from select regional stores and
weathered the storm that drowned the pure-play dot-coms.
"By bringing our brick-and-mortar investment to bear on the online portion of our
business, we have evolved our online model to take advantage of our retail grocery
expertise, brand recognition and existing infrastructure," said Dennis Bassler, senior
vice president of marketing for Albertson's Southern California division.
Partnering for Success
Meanwhile, Safeway is taking a similar approach -- with a twist. The company is offering
online grocery service through GroceryWorks, an Internet-based home-shopping service
that it co-owns with Tesco (Nasdaq: TESOF) , a UK food
retailer.
"The online grocery business in the U.S. has dramatically changed in a few short years,"
said Vasant Prabhu, Safeway's president of e-commerce businesses.
Successful online grocery models, noted Prabhu, will come from brick-and-mortar retailers
with well-established brands, purchasing power, and existing distribution infrastructures.
New Breed of Shoppers
Just as there is a new breed of online grocers, there also seems to be a new breed of
online grocery shoppers.
Webvan attracted fairly young, affluent shoppers seeking time savings, according
to Nielsen//NetRatings (Nasdaq: NTRT). The demographic
profile for Albertson's and Safeway customers indicates that they, too, are fairly
young, but there is a higher percentage of females and a lower percentage of affluent
shoppers.
According to Nielsen//NetRatings, there is also a higher concentration of online shoppers
on the West Coast, which is the prime target area for both Albertson's and Safeway.
The careful planning of test-market locations is paying off for the new leaders in the
online grocery space. Nielsen//NetRatings' statistics for May to June show Albertson's and
Safeway had audiences of 576,000 and 463,000 shoppers, respectively.
Holding Their Breath
Still, analysts said that many national grocery chains are holding their collective
breath, awaiting the fate of Albertson's and Safeway in a troubled market. And it is
going to take more than a new model to remove the stigma from online grocery shopping.
"Online grocery shopping has to be as convenient -- if not more convenient -- than going
to the grocery store," Nielsen//NetRatings e-commerce analyst Dawn Brozek told the
E-Commerce Times.
That, she said, means the interface must be user-friendly. Online grocers must offer
search engines that streamline product selection and shopping carts that quicken
checkout times.
To survive and thrive, analysts also recommend that online grocers not only give
customers the ability to select delivery times, but also offer them a product mix that
includes nonperishable goods that can be delivered when the customer is away from home.
The Rebirth
The long-term outlook for the online grocery market gives players a worthy prize for
which to compete. Forrester predicted
that the number of households doing at least part of their food shopping online will
grow to more than 14 million in the years ahead. And Jupiter predicted annual sales will
top $11 billion within several years.
But many analysts are taking those numbers with a grain of salt, no matter what the
model. "We are not seeing the volume of online grocery sales we expected to be seeing,"
said Bartels. "But it will come back again."
Likewise, Brozek thinks online grocers are here to stay, in one form or another. But
brick-and-mortar supermarkets are not going anywhere, either.
"For many reasons," she said, "there are customers that like to shop in the store and
will never be converted to online grocery shopping -- even if they have online access
and that service is available in their area."