I’ve been quoted before as saying that if there were money to be made delivering groceries, Hooper’s Store would still do it. But, believe it or not there’s a second wave of online grocers. And there is actually a chance they are not all doomed.
From the ashes of the Webvan bankruptcy rises several breeds of internet based food delivery systems. On one hand, you have online divisions of the grocery stores you may already shop at: Albertson’s; Safeway. They have the distinct advantage of not needing big warehouses with lots of employees: regular employees can just take product off the shelves and put it on a truck. Then you have companies like Peapod, who in addition to their own internet grocery business do product distribution for several traditional grocers. Finally, you have the specialists. Companies like FreshDirect appear to be the boutique shopping option for groceries.
So, what do these companies have to do to avoid Webvan’s ignoble fate?
Do it right from day one. Too obvious, huh? If you let the customer’s first experience be a bad one, you can just forget ever serving them again. So find out what the customers are going to want first and determine whether you can — literally — deliver.
Make lots of information available online. There are lots of people who read labels before they buy things. If you want to make them internet shoppers, you have to get them that label information, whether it’s in the form of a big database or links to manufacturers. Likewise, alert customers to things like label changes and availability of seasonal produce. While you are at it, take a cue from Home Depot’s “don’t forget to buy this for your project” lists. If your system can see that a customer has all but one ingredient for a common recipe, suggest it. Or use an Amazonian model of “people who bought these products also selected these items.”
Advertise, but don’t over-do it. I still have a collection of assorted Webvan magnets. I have no idea how many postcards they sent me that I threw away. By contrast, I occasionally hear an ad for Albertson’s online service, and I see the truck sitting out front. I know they are there if I need them. Really.
Service, service, service. Toilet paper and boxes of cereal are one thing, but most people just aren’t sure they want fruits, vegetables, and meat picked out by a complete stranger. To counteract that, an online grocer must develop an absolutely impeccable reputation for quality and freshness. Oh, and now that it’s picked out, it needs to arrive on time, every time, when I need it. If that means delivery at 7 PM when everybody is home from work, so be it. If that means before 7 AM so things are there by breakfast time, so be it. If your customer had time to go to the grocery store during banker’s hours, they probably would.
Grow conservatively. It’s best to do one region well than 4 regions poorly. Attempted (and failed) hypergrowth is one of the reasons Webvan failed. For that matter, be willing to write off failures as soon as they are obviously failures. Food Lion wasn’t afraid to walk away from its failed stores in Texas.
Be realistic. Not everybody is willing to pay $10 to have groceries delivered. That’s just the way it is.