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Traditional grocers poised to join e-commerce boom

A Peapod worker at one of its online distribution facilities in Lake Zurich, Ill.
Tim Boyle | Bloomberg | Getty Images
A Peapod worker at one of its online distribution facilities in Lake Zurich, Ill.

Buying bananas, milk and chicken online has little in common with adding shoes, a cellphone or books to an electronic shopping cart. Books can sit on the stoop for a few hours, cellphones don't melt, and in all but extreme circumstances, no one waits at home for two hours hoping the delivery van pulls up with a box of shoes.

The differences add up to dismal online sales for grocers, who have so far been left behind by the e-commerce revolution. But reluctant shoppers may finally be coaxed to point, click and scroll their way through their grocery lists as big-name stores have figured out an innovative technique, called "click and collect," to meet them halfway—literally.

Grocery shopping has struggled to gain a footing online since the dawn of the Internet. There have been celebrated failures, such as Webvan. And there have been consumer frustrations—waiting for the grocery truck all afternoon can feel a lot like waiting for the cable guy.

Outside a few urban areas, such as New York, and some regional exceptions, e-groceries have largely been as popular as rotten tomatoes. That might finally be changing as U.S. grocers turning toward a model that's a hit in Europe.

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Rather than wait for a delivery van, online shoppers select items on a store's website and then set up a time to rendezvous with their purchases at a designated pickup center. In the past 12 months, the Stop & Shop and Giant grocery chains have set up 70 such locations in the Northeast with delivery partner Peapod. Specialty food stores such as Harris Teeter are also experimenting with click and collect.

Shoppers enjoy no delivery charges and no time wasted waiting at home. The stores boast that customers don't even have to get out of their cars, as grocery bags are loaded right into the trunk.

The chains like the concept because pickup centers—some tucked neatly inside branded gas stations—can be set up at a tiny fraction of the cost of a store, and give the company a presence in new neighborhoods. It also cuts down dramatically on delivery costs, and less moving around also reduces damage to the merchandise.

Early click and collect adopter Kate Minnehan says it has made her life easier.
Source: Kate Minnehan
Early click and collect adopter Kate Minnehan says it has made her life easier.

Kate Minnehan, who lives outside Boston, was an early adopter. The 32-year-old mother of two young boys says online ordering and pickup from her local Stop & Shop makes her life much easier.

"I can just pull up and don't even have to get the kids out of their car seats, and they put the bags in the trunk," she said. "I prefer it to delivery because it's free. It's easy for my husband to swing by on his way home from work and pick things up."

Minnehan said she has even convinced her skeptical mother to start using the service.

Traditional grocers hope to convert a lot of busy parents with click and collect in the next few years.

The grocery business is under siege from several directions, according to grocery chain analyst Bill Bishop, founder of consultancy Brick Meets Click.

Amazon is making noises about grocery delivery (potentially enhanced by its instant delivery Amazon Locker service). The online retail giant currently offers home delivery in Los Angeles and Seattle. And a number of smaller alternative food-buying models have popped up. Upstarts such as DevilGrocery.com are offering quick delivery to college campuses and other densely populated areas. Yummy.com is offering similar services in Southern California.

"It's a Rubik's cube—there are many different new dimensions being offered here," Bishop said. Chief among those dimensions: selling prepared meals instead of groceries, something that appeals to the young, urban professionals who are most open to online grocery shopping.

"The very definition of buying food is changing from grocery shopping to buying meals," he said

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Click and collect makes sense for suburban families who have so far been reluctant to try the combination of online shopping and grocery delivery, he said. "It will make a big difference," he added. "It eliminates big barriers. ... It's a way to modify the model to accommodate a whole boatload of people."

Boatloads of British consumers flocked to click and collect when it was first widely introduced in 2010. The British had been inspired by French grocers, who adopted the concept much earlier. The Leclerc chain says drive-thru shoppers will account for 5 percent of all it grocery sales this year, and sales at the locations were up 68 percent in the first half of this year.

Those numbers have caught the attention of U.S. grocery executives, whose online food sales are a modest 3 percent, Bishop said. His firms expects that figure to grow to 10 percent during the next decade, using a conservative model, or as high as 16 percent if e-grocers catch some breaks.

Click and collect is a way for conventional grocers to "hold on to [their] business model and effectively defend it," he said.

Peapod said it's too early to predict the outcome for click and collect.

"It will be interesting to see how the American audience behaves," said Mike Brennan, senior vice president and chief operating officer of Peapod.

Consumers will probably switch between delivery and pickup services, he said, adding that click and college will be a "fit for certain people, in certain days or times of the year."

To be clear, Peapod's service—and most others'—is not about satisfying impulse buys. For example, a recent order placed on Saturday afternoon would not have been available until early Sunday evening, roughly 24 hours later.

The service makes more sense for a family that buys 30 to 40 items weekly and wants to save an hour or so of shopping time, Brennan said.

"This is about doing it on your schedule. … It's not designed for you to pick two items, though it is free to do that," he said. "We are pursuing ways to shorten that time frame, but the question is, how do you do that and maintain quality?' "

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Consumers get a one-hour window to pick up their food, and while there's no penalty for being late, "you don't want your food to melt," said Minnehan, the young mother. Perishable food is packed in coolers, but they can only delay the inevitable.

Still, for Minnehan, click and collect is a godsend, saving her both time and money.

"I only go to the store once a month now, when I need something new," she said. "And I always end up spending more when I'm at the store."

Bob Sullivan is an author and consumer reporter. His columns can be found at http://BobSullivan.net, or you can follow him on Facebook or Twitter @RedTapeChron. You can learn about his books at http://PlateauEffect.com

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