Research Reports

Online shopping and delivery, which followed the dot-com boom and bust of the early 2000s, is steadily gaining ground.

And with retailers like Bentonville, Ark.-based Wal-Mart Stores Inc. possibly throwing its hat into the mix and consumers’ enthusiasm for Community Supported Agriculture, now is the time to evaluate your strategy.

Ross Gillanders, director of account management for MyWebGrocer, Colchester, Vt., says loyalty card data show purchases increase by 20 to 25% for existing customers who begin shopping online.

“Right now, the home delivery platform is almost like adding a new store without having the overhead of a physical location,” says Arthur Ackles, director of marketing for Roche Bros. Supermarkets Inc., Wellesley Hills, Mass.

Ackles says 75% of the chain’s online shoppers are not regular in-store customers. Online shopping attracted a whole set of customers who otherwise would shop elsewhere.

E-commerce appeals to the shopper who sees grocery shopping as a chore to be completed as quickly as possible.

“The person who wants to dilly-dally goes into the store,” Gillanders says.

Some shoppers go to the store not to dilly-dally but because they like choosing their own perishables. Mark Winslow, director of marketing for Cosentino’s Food Stores, Prairie Village, Kan., says the fresh produce share of basket is lower for online orders than for in-store orders. Cosentino’s has offered online shopping for one store, Cosentino’s Market in downtown Kansas City, Mo., for about 18 months.

Gillanders says that online shoppers tend to buy fewer perishables for the first few purchases but that buys often increase after that. At Roche Bros., online produce buys are the same percentage of sales as in stores, Ackles says. Roche Bros. first offered online shopping in 2005.

Marketing online

MyWebGrocer develops software and mobile applications for online grocery shopping and planning. It hosts shopping sites for about 50 clients, including Cosentino’s and Roche Bros. Stores can list entire inventories online and can update products and prices daily.

MyWebGrocer’s software sends orders to in-store hand-held picking devices, which instruct pickers on which items to pick and where they are located in stores. Pickers check their accuracy by scanning items with the devices. Data then are uploaded to the retailer’s inventory system.

MyWebGrocer charges a $2,500 set-up fee. Optional staff training is available for an extra charge. The retailer pays an ongoing fee of $4 per order.

FreshDirect, Long Island City, N.Y., and Greenling Organics, Austin, Texas, are two companies that use technology to manage their distribution systems while maintaining direct relationships with suppliers and customers.

FreshDirect delivers to customers in New York City and the surrounding tri-state area. It works with local growers, artisans and fisheries to source fresh foods, says Monica Woo, chief marketing and strategy officer.

Greenling is an online ordering and home-delivery service featuring local and organic foods. Mason Arnold, co-founder and chief executive officer, says Greenling sources locally whenever possible and supplements with nonlocal organic foods as necessary.

Greenling delivers to about 2,500 customers in the Austin and San Antonio areas. About two-thirds of its food is local — defined by Greenling as being from within a 150-mile radius. Greenling delivers about 1,000 baskets of food per week.

In February, Greenling partnered with Austin-based Whole Foods Market to install electronic kiosks in Whole Foods stores in Austin and San Antonio. Whole Foods customers can sign up for Greenling deliveries at the kiosks. If Whole Foods elects to expand the program, Greenling will work with it to build local supply relationships in other locations.

Greenling is looking to form similar partnerships with other retailers throughout the U.S.

Building community

Arnold says Greenling’s success largely is based on relationships with suppliers, customers and the community. It works with nonprofits to promote local food events and to help customers engage directly with local producers. It also presents its own food events, samplings and demonstrations.

Arnold says Greenling is a partner, rather than a competitor, to community-supported agriculture groups. When CSA members have bumper crops, Greenling buys the extra supplies. It also buys small amounts from CSA growers early and late in the growing season.

Arnold and Gillanders say that it’s important to interact personally with online shoppers. Gillanders says retailers should make phone calls to online shoppers to inform them of delivery times or to let them know about item substitutes. Retailers should include gifts or personal notes with orders, and make a special effort to talk with each customer at pickup or delivery time.

“Sense of community is extremely important to our success,” Winslow says. “We have been a part of the Kansas City community for over 50 years by being responsive to our customers’ needs. Online shopping is an example of that responsiveness.”

Woo says FreshDirect uses technology to get to know its customers while they browse and choose items. It uses data to personalize shopping experiences. FreshDirect also has a new online community called MyFd, where shoppers can exchange tips and learn about products.

FreshDirect makes regular donations to area food banks and works to maintain a positive physical presence in its neighborhoods, Woo says.

Successful online grocery sales are not just about relationships, though. Efficient and accurate order fulfillment is crucial. A website must be easy to use and quick to load. Gillanders says he thinks a site should offer everything that a retailer has in stores. If it doesn’t, shoppers might get frustrated.

Pick up or delivery

MyWebGrocer recommends offering pickup services instead of home delivery. The average cost to the store for home delivery is about $15 per order, including driver, truck and insurance, and retailers’ fees rarely are high enough to cover that, Gillanders says. If a retailer provides pickup services for a fee of about $7, that fee is likely to cover its order-picking costs.

An online-only retailer with lower overhead expenses can charge less for delivery. FreshDirect charges an average of $5.99 per delivery, with required minimum orders based on delivery location, Woo says. FreshDirect customers can buy DeliveryPasses with unlimited deliveries for a period of six months or a year.

Arnold says Greenling charges no delivery fees and keeps its prices competitive with area supermarkets.

Some customers prefer to pick up orders because they don’t like waiting at home during a two-hour delivery window.

“It’s like waiting for the cable guy,” Gillanders says.