New York City-based Jefferson Market, which began 60 years ago as a small neighborhood shop, has become the first grocer to make its services available to Internet-enabled cellular phones.
The announcement was made Thursday by Jefferson Market’s online partner, Peachtree Network, Inc., which said it hopes by Labor Day to extend wireless service to all 18 of its grocer partners in the U.S. and Canada.
Good, Bad or Neither?
US Bancorp Piper Jaffray senior research analyst George S. Dahlman was not surprised to see a small brick-and-click market take the wireless leap before such Internet-based grocers as Webvan and Peapod. However, he told the E-Commerce Times that wireless access should not be seen as a solution to problems facing the industry.
“Frankly, I’m not quite sure what to make of it at this point,” Dahlman said. “I’ve been struggling a little bit to figure out what incremental value this is bringing.”
Added Dahlman, “The fundamental problem is the logistics for delivering groceries and getting those costs down so they can be competitive. I’m glad someone’s trying this and I think it will help, but that to me is not the biggest issue facing online grocers.”
Just Another Way to Shop
Peachtree president and chief operating officer Jeremy Lee Jonas painted an optimistic picture for the launch of wireless grocery service, telling the E-Commerce Times that the biggest risk for Jefferson Market is if “the volume of orders takes off so much that they have problems maintaining their levels for customer service.”
Otherwise, Jonas believes that the wireless service is simply a natural step that will only augment business for a grocer that started delivering food long before its Internet existence began.
“They already take fax and phone orders; they do deliver in much of Manhattan,” Jonas said. “If you think about it, [wireless] is actually a much lower cost than taking it over the phone, because you’ve got to pay someone to take that order.”
Seeking Efficiency of Use
Peachtree said the wireless access to Jefferson Market will share many features that the online site offers, including product search functions and the ability to store commonly purchased items. Customers can also initiate an order using the wireless device and complete it with their computer, or vice-versa.
Jonas pointed out that consumers spend an average of approximately $102 (US$) per order on Peachtree’s network of markets, all of which are brick-and-click grocers. On the other hand, the average in-store basket total is $47.
“So for the grocer, they’re getting twice the sales thorough this platform,” Jonas said.
Unpredictable Future for Industry
Earlier this year, International Data Corp. (IDC) said the online grocery industry was primed for tremendous growth — but not without risk.
Primarily as a result of aggressive expansion, Webvan reported losses of $74 million for the quarter ended June 30th. Similarly, Peapod’s loss in the first quarter of 2000 doubled its first-quarter 1999 shortfall.
According to Jonas, the future of Peachtree’s brick-and-click grocer partners like Jefferson Market should be evaluated differently, because they had a pre-Internet existence and required virtually no new capital outlays. However, many realities for any business, online or off, will still keep Peachtree on its toes.
“This market shares many issues that have troubled offline businesses for years, including capital efficiency, obstacles to market penetration, and the price of gas,” IDC senior research analyst Jim Williamson said earlier this year. “For everyone who gets involved, it won’t be an easy process.”