When Groceryworks.com approached Lakewood mom Shari Nelson about testing their new system of ordering groceries online for home delivery, she had no idea she was about to help re-define the “Express Lane” concept. Now it seems like second nature.
“I’ll log on and go: Oh, that’s right — we do need more orange juice. I hadn’t thought about it, but it’s on my list,” says Nelson about the site’s carefully refined Fast Shop feature. “And you think about buying cat food and diapers and things. You know, you might not have to have them right now … . But guess what? If you go ahead and add them to your order, someone else is going to be carrying it all in.”
It’s no small coincidence that Dallas is one of a handful of cities at the rising crest of this particular e-wave. Or that the East Dallas/Lakewood/Lake Highlands areas are among those who contribute the most active surfers.
“Our top sales areas in the Dallas area are Lakewood/Lake Highlands, Plano, Coppell and the Park Cities,” says Groceryworks founder Kelby Hagar, whose vans with the funny vegetable animals on the sides have been peppering the neighborhoods. “Demographically … there was not another city in the country that compared with Dallas, that had all the pieces we were looking for to start up.
“And our top selling item is — bananas.”
So who’s ordering all those bananas? The number one possibility, says Hagar, is a two-income family with children. Second place is divided between the elderly and disabled, “20-somethings who are used to running their lives over computers,” and stay-at-home moms.
But, with all their research, Hagar admits that the “carrying the heavy stuff” angle was something they hadn’t entirely anticipated.
“One of the things we found in the process is that people buy bigger sizes than they typically will in the store,” says Hagar. “This is contrary to what we thought — we thought with the access to home delivery that people would order smaller quantities more often. But it’s actually just the opposite; they buy very large ‘stock up’ products.”
So far Hagar says that his first-time users have pretty much always come back. And that the “first time” is most of the work. Hagar says: “Shopping for groceries online for the first time is very similar to going into a new grocery store. You’ve got to figure out how the aisles work and where they put products.
“Your first trip online takes about an hour. After that — five to 10 minutes.”
Nelson introduced neighborhood Lisa Meara to the service, who says: “The prices seem comparable to the grocery store. And I’m more likely to use coupons, and notice specials and sales (without other customers waiting behind me).”
Of course, Groceryworks isn’t the only game in town. How about the vans with the big fuzzy peach?
“I’d seen them around the neighborhood and thought I’d try it,” says stay-at-home neighborhood mom Rachael Eichstadl. “I used the Home Grocer website (www.homegrocer.com) and am a happy customer. Prices seemed pretty competitive and even better than what I have been paying for Matthew’s organic baby food — I was impressed that I could find that online.”
“Dallas is a very wired city,” says Homegrocer spokesperson Stacy Drake. “And that’s typically what is looked at along with the type of demographics you have in those particular neighborhoods.
“Dallas fluctuates, but it’s usually been one of our top two — a very high market for us, and one of our newest ones. Our market in your area is households with children and annual incomes over $70 thousand, and our sales figures really say something about what’s going on there.
“It consistently is a great performer for us. And the ones that do the ordering? Women — 92 percent.”
Drake says their average customer orders 2.5 times a month with an average order of $105, but so far Eichstadl only orders about once a month when “Freddie” is out of his 20-pound bags of dog food: “My true motivation was that I’d just had a baby, and I thought that instead of taking him to the store, I would use the Internet. And then it became real handy for whenever I order heavy things.”
“I love it!” exclaims neighborhood homemaker and corporate writer Alesia Ritenaur, who is a Groceryworks customer. “I’ve been very happy with them. It took awhile the first time to get everything in the system, but you know they have your standard — the Fast Shop.”
Ritenaur had some of the same motivations as Nelsons and Eichstadl: “What I like to do is buy my big dog food, and Cokes and bottled drinks that are heavy and I don’t feel like bringing in myself. I load up on that stuff and let the driver bring it in. That’s the big benefit I think, that they’re bringing it to your countertop.”
She says that besides keeping their golden retriever, Allie, fed, shopping online has advantages with her two children, aged nine and six: “Going to the store … they’re still at the age where they’re throwing things in my buggy, and I end up at the checkout counter not knowing I’m buying a bag of M&Ms and two packs of gum.”
Meet the players
Groceryworks’ Hagar was a 29-year-old lawyer with a Harvard education when he embarked on his second career as a grocer. “I thought it sounded like a fun thing to do,” he says. “I was on a plane, thinking about how I could get into e-commerce. I thought it was going to be an extremely interesting part of our culture and the business world.
“It came to me sort of instantly in that thought process: groceries made the most sense. There’s a large segment of the population that doesn’t enjoy going to the grocery store, and we can use the internet to do this so much better than other types of products.”
So it was that in March of 1999, Hagar launched his e-venture; his first round of venture capital financing totaled $48.5 million. As a result, in less than a year Hagar was able to establish additional fulfillment centers in Fort Worth and Houston, and hire the former vice chairman of EDS, Gary Fernandes, to be his CEO.
Hagar points out that going to the grocery store is something most of us have to do, and that our buying habits tend to be repetitious: “You and I and every average family in America buys roughly 200 items over the course of our ‘grocery lifetime’ — we buy the same exact products, the same brands. The Internet has clearly the computer power to retain that list for you — so instead of walking down the same aisle every week, you can simply push a button — we can eliminate some of the drudgery of every day life.”
Groceryworks has received such a large proportion of their favorable feedback on the “Shop Fast” feature that they are expanding its capacity on their new website.
“The first list will have the top 200 items that consumers buy,” says Hagar. “The second list will show the most frequently purchased 50 items. We also save any past order you’ve placed.”
In other words, remember last year when you threw your annual Christmas party with all Grandmother’s traditional recipes? If you used Groceryworks, this year you can just call up your grocery list from that event and instantly order all the ingredients you need once again.
A fourth Fast Shop feature has been added since the site’s partnership with Safeway/Tom Thumb in June 2000. “When you come onto our new website, you’ll be asked for your Loyalty Card number,” says Hagar. “We will then review your history with Tom Thumb and create your Fast Shop lists for you.”
Hagar says that Groceryworks expects to meet their target of being profitable within 14 months of beginning operations, and that they plan to be in all Safeway market areas within the next two years.
The dot.com grocer refers to Dallas as the “third coast of the dot.com industry,” and adds: “When we first started, Texas in general and Dallas in particular weren’t viewed as new technology hotbeds, which we thought was absolutely crazy.
“It was certainly a personal goal of mine and some of the other dot.com companies that were starting at that time to change to focus of the west and east coasts to look at the things that Dallas has to offer. I’m not putting that kind of weight on Groceryworks itself, but I think with broadcast.com and some the wireless technologies that have taken place within the past 12 months … Dallas is certainly much more respected as a ‘new tech corridor’ than it was when we were out pounding the pavement for financing.” All this from February of 1999 to now? “It’s been a wild ride,” laughs Hagar.
Seattle-based Homegrocer is one of the online grocers in flux, although its “flux” is somewhat more optimistic than that of, for instance, the defunct Peapod. The group, which began in June ’98 and only came to Dallas this past June, has already been snapped up by Webvan, a national online grocer with a merchandize list closer to a Sam’s or a superstore than a rank-and-file food store. Drake says Homegrocer plans to expand into Texas cities other than Dallas are “on hold” until the companies re-formulate their game plan.
Webvan was, however, planning to come to Dallas on its own; apparently purchasing Homegrocer filled that need among others. Currently Homegrocer operates out of a gigantic warehouse in Carrollton; Groceryworks’ similarly mammoth warehouse is also in Carrollton.
When asked if she could be lured from Groceryworks by the superstore itinerary of Webvan, Ritenaur conceded she could be tempted. “I would definitely shop for other items. I’m a firm believer in buying over the Internet, open to buying office supplies or Target-type items and toiletries that we need.”
Homegrocer’s top products are (in order) milk, chicken, bananas, baby food and stamps. Unlike Groceryworks, Webvan/Homegrocer offers flowers and will be expanding into non-food items such as Old Navy clothing, electronics, garden supplies and cutlery.
Both Homegrocer and Groceryworks are proud of the response to online produce: “We were concerned from the get-go that we would have a hard time selling the perishable products,” says Hagar. “We built our campaign around the idea that we have high quality fruits and vegetables.
“It turns out that we’ve been able to prove ourselves wrong, which is great with us.”
In fact, number two on the Groceryworks’ bestseller list is strawberries; Hagar says that eight out of the top 10 most ordered items are in the produce area.
Drake says that fruits and vegetables purchased through an online grocer are likely to be fresher than even those at an open-air farmer’s market: “There are a couple of reasons. First, we order every single day. We have new produce brought in and we don’t have to have it sitting on display. It comes in very quickly and goes out very quickly.
“Also, supermarkets are kept at the right temperature for people — not necessarily the right temperature for vegetables. The other thing is there’s no handling. We don’t even take them out of their packing boxes until they get put in your order as opposed to produce on display that gets handled quite a bit.”
With a comment possibly aimed at quasi-competitor NetGrocer, Drake adds: “And instead of having items shipped to you Fed-Ex, we come right to your door in a 30-minute window.”
NetGrocer actually does not ship perishables and their Fed Ex deliveries show up anytime within a four-day period and are left at the door — no bootied unloading at your kitchen counter. Consumer Reports gave them a neutral rating with a positive nod to their “fairly wide and deep” variety of products that included organics and special diet foods. Described as “more bare bones than others,” NetGrocer does retain the advantage of delivering to areas not yet served by the other vendors; they even overseas to military bases and embassies.
Webvan, Homegrocer’s purchaser, rated first among the six online grocers analyzed in the same Consumer Reports September 2000 article; however, Webvan and Albertsons were the only Texas vendors the publication reviewed. Like Groceryworks’ Fast Shop feature, Homegrocer/Webvan tracks recent purchases to make subsequent trips easier and quicker. Good marks for product choice and service.
So how are traditional grocers responding to the online initiative? Albertsons was actually the first brick and mortar store to offer the online grocery option (Albertsons.com), launching in January 1998 in Dallas. Their web site and operations are structured much like Groceryworks and Homegrocer — large fulfillment center, home delivery in short time frame (a 90-minute window in their case) and about 16,000 items in stock.
However, Albertsons does give their customers the added option picking up their online order at the store. Currently their deliveries are limited to Seattle and Dallas, but non-perishables are available via UPS throughout Texas. While they don’t appear to have the online market saturation of either Groceryworks and Homegrocer, the Albertson’s name recognition may gain momentum as the competition steps up.
Dallas-based Minyards still hasn’t joined the home delivery game, but, like Kroger’s, they are participating in the Priceline.com program, which allows consumers to go online and bid for the price they would prefer to pay for certain groceries.
“We deliver savings, not groceries,” says Jay S. Walker, co-founder of Priceline WebHouse Club. “Our customers save an average of $10 to $15 per grocery order.”
Priceline customers can bid on two or more products in as much as 240 product categories; about a minute later, the service advises whether or not a bid has been accepted. To take advantage of the savings, participants must pre-pay with a credit card on-line and print out a Priceline list to take to the participating store. Then, at the checkout line, Priceline items must be separated out from other purchases and processed with a Priceline WebHouse Club card.
Although it’s clear that Priceline actually increases the amount of hassle involved in grocery shopping, for bargain shoppers who are glued to their keyboards anyway, it’s a sort of competition for the online home delivery grocery services.
The key is whether the technophile in question is shorter on time or money.
For Eichstadl and Ritenaur, it’s time.
“I plan to continue to doing it,” Eichstadl says. “Even though I honestly love to grocery shop — I know that sounds strange —but I almost did not do Internet because of that.
“I thought maybe I might save money because I wouldn’t be tempted … but I’m still tempted by different things I see online.”
Ritenaur says: “Between work and the children and … you know, just busy everyday life. I decided to try it one time and see how I liked it and I got hooked right away. I think it’s just easier than going to the grocery store.”
Nelson also laughs when she remembers how personable and attractive her first delivery man was, and laughingly accuses Groceryworks of using male models to deliver the first orders to housewives in the area. “I opened the door and Wow!” she says.
“But that one never came back.”
In all fairness to the computer gods, I should have known better than to place my first online grocery order to be delivered on Saturday between 1 and 2 p.m. — an order that would contain everything that I needed for my Saturday evening supper club party. That’s right — 20 people. 7:30 p.m. My house.
I decided to seal my fate by deciding not to run out for the wine or flowers until after the groceries arrived. Let’s face it — I was asking for it. The first mildly nervous phone call to Groceryworks Customer Service at 2:15 p.m. involved seven minutes on hold, which culminated in a mellow customer service representative telling me that she was “looking right at my order on her screen” and that the vans were just running “about 45 minutes late” and “not to worry.” The second abusively panicked phone call at 3:45 p.m. (still flowerless and wineless, the pots and pans thirsting for ingredients) rendered a conscientious but beleaguered young person who called the warehouse to check on the exact status of my order. Twenty minutes on hold.
I won’t drag this out any longer — you know what happened. The computers were down, the warehouse had no record of my order. It happens.
As I tore brutally down the aisles of my neighborhood market in sweaty gym shorts, I had to admit that this wasn’t really a wholesale indictment of Groceryworks — I spoke to plenty of perfectly happy customers. But all of us who live and die by the computer know its capricious capacity to either perfect or destroy any given aspect of our existence. We know not to save the only copy of our first novel on the hard drive with no back up. We know better than to wait until the last minute to key in that stockholders’ spreadsheet — during a thunderstorm.
And now we know better than to order food online to be delivered within hours of a party, don’t we?
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