Grocery delivery shifts into a higher gear

July 01, 2013

Big names and entrepreneurs race to secure market positions as key deliverers of food bought online.

The biggest names in grocery delivery today are Amazon, Walmart, Peapod and Fresh Direct—consumers know them all.

By contrast, early dotcom delivery services such as Webvan, ShopLink, Kozmo, Streamline, HomeRuns and HomeGrocer typically lacked direct retail grocery experience.  They couldn’t capture the public imagination enough to win food share from brick-and-mortar stores.  Webvan, which went bankrupt in 2001, was the most dramatic example; its volume was too low to justify its costly truck fleet.

Today’s big names were around then too—but they’re more focused on grocery delivery today and smarter about their processes.

With today’s better customer insights and metrics, more time-pressed consumers wanting the service, and more valuable experiences to draw from, could grocery delivery be profitable—not only for them, but for a multitude of regional and local operators?  Could a successful formula include same-day service on a large scale, which would be essential for perishables?

The answer hinges largely on the state of the economy, the value equation for consumers, the ease of ordering on mobile devices, cost controls, and the quality of execution by delivery services, believes The Lempert Report.  

So drama may unfold as Amazon and Walmart compete on their massive scale, including in same-day delivery of perishables.  Amazon Fresh, limited to Seattle since 2007, is California-bound and could be in as many as 40 major urban areas by 2014, notes Reuters.  Walmart To Go Delivery is in beta, but the chain’s head of e-commerce Neil Ashe said recently the chain “aims to do $9 billion of its 2013 revenues on the Internet,” reports Forbes. Clearly, that includes food.  Also, the new Google Shopping Express is piloting same-day food and other product deliveries in the San Francisco area. 

On a more regional scale, Peapod has learned how to intercept commuters on their train rides home to secure delivery orders.  And FreshDirect has a new 500,000-square-foot operating facility in the South Bronx, giving it “the capacity to more than double the size of its business,” says Direct Marketing News, which reported Philadelphia is FreshDirect’s first expansion market outside of New York.

Entrepreneurs are also moving ahead with distinctive business models.  According to the San Jose Mercury News, Bay Area engineers are behind many new services, among them:  Instacart hires personal shoppers to buy and deliver groceries from Safeway, Whole Foods and Trader Joe’s; ShopRunner coordinates shipping for retailers.

According to IBISWorld, online grocery shopping will continue to grow 9.5% annually to reach $9.4 billion in 2017, up from $6 billion in 2012.