business news in context, analysis with attitude

by Kevin Coupe
Of course, e-grocery never really vanished.

It just seemed that way. When Webvan collapsed, the assumption seemed to be in both the media and the industry that Internet shopping for groceries was a doomed initiative.

There were survivors. Ahold’s Peapod. Albertsons. Safeway. And numerous smaller companies, such as Lowes, Harris Teeter, D’Agostino’s, and Roth’s – all of which used outside service providers to develop their own web solutions and e-commerce alternatives for consumers.

There’s plenty of evidence that the e-commerce category as a whole is growing. After all, e-commerce passed $45 billion last year, making it one of the strongest elements of a faltering economy. It is fair to say that shopping one for groceries hasn’t taken off with the same velocity, say, as shopping for books and DVDs. But as today’s young people, who are unfamiliar with a world in which does not exist, become mainstream food shoppers with their own needs and priorities, there is no reason to think that they will shop for food the same way their parents and grandparents did.

It may be an indication that e-grocery shopping has re-emerged on people’s radar screens that there have been two articles over the past week or so focusing on its advantages and disadvantages.

In yesterday’s USAToday, its reporter compared good old-fashioned brick-and-mortar shopping in various venues to the act of shopping online.

In the case of grocery shopping, here’s what the reporter had to say:

    Offline: Drove five minutes to Safeway. In 15 minutes, found milk, bananas, coffee, yogurt, bagels, cream cheese and chicken breasts. One person ahead of me in line. Cost: $31.

    Online: Using high-speed connection, I went to I had the same list and used the search function. Prices were the same. The delivery charge was $9.95 no matter the size. I ordered at 3:49 p.m., paying with a credit card. The goods arrived as promised the next morning in good shape.

    Best: Mouse for big orders, foot for small ones.

No surprise there. If you need something quick, you probably don’t want to buy it online.

And then last week, The Wall Street Journal wrote that “with retooled business models, Internet supermarkets are back and growing. In fact, more groceries are sold online today than during the peak of the Internet bubble. Web grocery sales are estimated to reach $1.6 billion this year, nearly tripling since 2000, according to Jupiter Research. A quarter of all grocery stores now offer Web shopping, says the Food Marketing Institute.”

And, the WSJ writes, “The new dot-coms are trying to learn from predecessors' mistakes by keeping down their expenses and targeting affluent neighborhoods. Instead of building their own warehouses, many are teaming up with existing chains. They are also putting limits on when and where they deliver -- and charging more for the privilege. Peapod, for instance, has a sliding scale that goes up to $14.95: The more you order, the less you pay for delivery.”

The WSJ did a little shopping of its own, discovering that it didn’t make sense to buy just a pint of ice cream online (as our kids would day, duh!) and that on the day that it shopped, the results were mixed.

Well, guess what. Go to ten different supermarkets on a given day, and you’ll find a wide range of experiences – some good, some bad, some mediocre and unremarkable.

We know some people who thought that the WSJ piece was a troubling attack on the legitimacy of online shopping, but we think that’s giving the article too much importance.

E-grocery is a fairly young business model, still evolving and growing and finding its legs. It will be executed well and badly and sometimes unremarkably…and by different chains will do it differently on different days.

It isn’t the future. But it is a component of the future. And to think otherwise, we believe, is to ignore the inevitability of change.
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