Groceries To Go - online grocers with delivery services - Industry Overview

Kiplinger's Personal Finance Magazine, August, 2001 by Kimberly Lankford

FOOD | Online ordering had a rocky start, but don't write these services off: The PRICES AND CONVENIENCE may surprise you.

ON SUNDAY NIGHTS after she puts her 4-year-old and 5-year-old to bed, Kelly Hatfield of Quincy, Mass., fixes a cup of herbal tea, sits down at her computer, and shops for groceries. It takes her about 15 minutes on HomeRuns.com to buy a week's worth of provisions. The next morning, a delivery person carries the large containers of food into her kitchen and unloads them wherever she wants. The produce is fresh, the bananas are the color she likes best, and the meat is cut to order.

Hatfield doesn't consider HomeRuns .coma luxury. "We end up spending the same amount as we did at the grocery store," she says. And talk about convenient: No more juggling kids in the aisles and lugging the groceries into her kitchen--which will become even more challenging now that she's pregnant with her third child.

HomeRuns.com is one of about a dozen online grocery-delivery services that cropped up in the past few years. About half have died from dot-com fever--in this case blowing their wad of start-up money on advertising and warehouses before gaining enough customers. This string of failures has left the impression that the services must be expensive or inconvenient. But prices are comparable with bricks-and-mortar supermarkets, and ordering is a breeze--in fact, it has advantages over traditional shopping.

Some established grocery chains see the potential in online services and have pumped cash into their operations. The services themselves are learning from the losers' mistakes and winning over new customers--among them parents with small children, busy professionals, city dwellers who don't have cars, elderly people who can't carry big bags (their children sometimes order for them), people with disabilities and anyone who hates to stand in a grocery-store line.

Down to a science

THE CONCEPT of grocery delivery isn't new. In fact, Groceronline has been delivering for nearly a century (without the "online" part of its name)--first by horse-drawn wagon to coal miners in Colorado. Many urban grocers and supermarkets offered home delivery throughout the 1950s and 1960s.

What makes today's version different is the technology. HomeRuns .com--founded in 1996 by Hannaford, a Maine-based grocery-store chain--started by mailing catalogs and asking people to call customer service to place their orders. But as Internet accessibility improved, the process became much more efficient.

Most online grocery-delivery services make it easy for you to view your old shopping lists online, compare prices, add and delete items, and place a big order within minutes. You can browse the aisles by category (with several brands for each item, like they'd have in the store) and see descriptions of and nutritional information about each product. (One service, Webvan, even includes photos of almost everything.) Push a button and your order automatically goes to a distribution center.

HomeRuns.com has one big distribution center for the entire Boston area, which looks like a giant grocery store without all the people. It's located in Somerville, a working-class town across the Charles River from some of the most densely populated and wealthiest neighborhoods of Boston.

After all the next day's orders are in (they must be submitted by 10 P.M.), the computer system begins to sort out the best way to fill and deliver each order. The system uses logistical software, like that used by UPS, to plot the most efficient routes, stringing together deliveries so they're all made within a two-hour window chosen by the customer without having to use too many trucks (HomeRuns.com had a 95% on-time delivery rate last year). In a densely populated neighborhood with a lot of orders, such as the upscale townhouses in urban Beacon Hill, one truck could make about 60 stops before it came back in mid afternoon to be reloaded.

Meanwhile, another computer system maps out routes for the pickers, the people who fill your order in the distribution center. The dry-goods picker, for example, goes up and down each aisle once, filling as many orders as possible without doubling back. Each picker pushes a huge metal cart that holds 12 blue bins (each bin is the size of a portable filing cabinet and contains an individual order).

No items you order should ever be out of stock, which was a problem with delivery services that picked from actual store shelves. HomeRuns' inventory system ensures that the Web site shows only in-stock items; if all the items are gone, the item is immediately taken off the available list.

In another room (a bit colder than the dry-goods area), a produce picker travels up and down the aisles doing the same thing with fruits and vegetables. Customers can specify the ripeness of the fruit, including the color of their bananas, and the pickers check these specifications when they add the items to your bin.

There's also a huge freezer room where pickers in parkas, hats and gloves spend the day filling orders and placing them in delivery coolers, where they'll stay cold until they reach the customer's house. The meat is all cut to order as late as possible (usually about 3 a.M.), so it's fresh when delivered. The entire distribution center is busiest from about 4:30 a.M. to 6:30 a.M., just before the first trucks leave.