Second chance for online grocery deliveries

May 20, 2011

Online delivery could become the next battleground, as retailers court convenience-minded shoppers.

The second coming of online grocery delivery will succeed.

We believe this at The Lempert Report for several reasons:

  • Retailers savvy about food and food handling are behind it.
  • Operators have more consumer insights and technology tools available to help advance the service and grow transaction size.
  • Consumers seek convenience more than ever, as they scramble in this period of slow economic recovery.
  • Shoppers increasingly use the computer to plan shopping trips, so click-to-order is less of a stretch from their weekly habits.

Supermarkets are also motivated to blunt Amazon’s encroachment into the food channel.

Retailers are trying different approaches, as they experiment to find winning formulas for their shopper bases and trading areas. Among them:

  • Walmart. The nation’s largest grocer launched a one-market test of Walmart To Go in San Jose, California. Shoppers can order food, health and beauty care, medications and household goods online, and add home delivery for as little as $5, according to an account in The Wall Street Journal. The retailer has experience with home delivery in its Asda division in the UK.
  • Meijer. The large-format store operator has an Order-to-Store program, which online shoppers can use to buy groceries, health and beauty care, and many categories of hard goods. Meijer assembles and delivers orders to a local store designated by the shopper for pickup - usually within three days and usually at the photo or electronics department, notes Internet Retailer. Meijer notifies shoppers by e-mail when an order is ready, and imposes no fee for the order-assembly service.
  • Coles. The Click & Collect program of this Australian supermarket chain has shoppers place orders online and pick them up at a Shell gasoline station, the Sydney Morning Herald reports. Currently, 23 Coles stores and 620 Shell stations participate in the program.

To make this work and have shoppers perceive real conveniences in these services, order accuracy, timely execution, refrigeration and high quality of foods are musts. Beyond that, we think Coles could add some differentiating value by offering discounts on gas purchases with order pickups over a certain dollar threshold.