Thursday, November 5, 2009

Why Online Grocery Shopping Doesn't Take Off

I've been using for the past several months and now I know why online grocery shopping is still an extremely small percent of total e-commerce revenue and 90-95% of Internet users have never bought groceries online.

In fact, I worked for a major online grocery client about 4 years ago and it's fair to say the market share and the user experience have not changed very much...quite disappointing!

Online grocers tout the benefits of:
  • Convenience - saved shopping lists, home delivery
  • Larger product assortment - in theory, they can stock some things your local store may not carry
When Webvan flamed out with its hub and spoke distribution model years ago, it seemed like it would open doors for Safeway and Peapod, among others, to take over.

Sure, online sales have grown, but it still equals the sales of a handful of its 1700+ offline stores. However, my recent experiences, compared to 3 years ago, have shown little progress in its multi-channel shopping experience.

Unlike other e-commerce sectors, is dealing with some unique challenges:

1. Pickers Because Safeway "pickers" are actually fulfilling your online order from local store inventories (unlike Webvan who had centralized warehouses), you're beholden to what that local store has in stock at the time before your delivery window. does not have adequate inventory management systems to ensure what you ordered will be available at time of fulfillment. Some brick and mortar stores have overcome this similar issue with "order online and pickup in-store" capability that shows stock availability. (One of my favorite examples was Circuit City. --- R.I.P.)

2. Perishables. We customers are very picky with groceries, especially meats and produce. Webvan had pretty good quality and Safeway is more spotty. Their pickers don't scrutinize produce as much as you would. But look at it from their perspective. Despite their best intentions, if a picker selects nothing for your order, you're p.o.'ed. If he selects something below par, you're upset. But sending something lets them recognize revenue; sending nothing doesn't.

But selling perishables online also means inventory can vary a lot and advanced ordering fulfilled by a local store makes order management quite difficult operationally.

3. In-person Home Delivery and Receipt. Unlike receiving a non-perishable item from, you do need to be present when arrives. For Safeway, this means they must deliver what they have in stock at that time. There is no telling the customer it's on back order and will be there the next day or week.

4. All or Nothing. With online grocery, there's kinda an all or nothing outcome, especially if you are relying on for all your household's weekly needs. And you don't know what you will get or not get until the driver arrives at your door with your order! On one of our recent orders, all the meats we ordered (a week's worth) were not available! So we ended up having to go to our other preferred grocery store during the work week in order to prepare dinners for the week, thus defeating the purpose and convenience of online ordering and home delivery to begin with. Recipes can be screwed last minute if you were counting on a key ingredient!

Overall, the concept is great, but the inventory issue does suck. Here are some of my recent substitutions or mistakes Safeway made:
  • Cinnamon raisin bagels, instead of plain bagels
  • Blackberries, instead of blueberries
  • Yogurt, single single serving sizes got replaced by the economy size. How am i supposed to bring that to work?
  • Moldy garlic
And then we had some delivery issues:
  • 2 yogurt containers arrived broken and open. We got charged for them anyways
  • Gin bottle from another order cracked and spilled on my order. No reconciliation or discount code for next order. The driver tried to wipe it off all our food products but you can only do so much with a wet cereal box!
As well as customer service problems:
  • A discount promo code they mailed me didn't work online. After submitting an online customer support form, it took them 2 days to reply with a form letter telling us to try the code again. Clearly, I had abandoned my cart 2 days ago and got my grocery needs met elsewhere! Surprisingly, they didn't even offer me a new discount code to encourage me to try them again!
In the past 3 months, I've probably had 6 deliveries and NOT ONCE did my order get filled 100%.

I keep hearing Safeway commercials that claim: Get what you want, when you want it. That's our promise. Isn't that false advertising?

One kudo: Despite having unfilled orders every time, my driver is always very nice and friendly. I tried tipping him initially a few times but he says it's against company policy and gives me a warm smile. Don't shoot the, delivery man...for inventory issues.


1 comment:

  1. You nailed it. In NYC we had Fresh Direct years ago, but I never ordered as I buy a large amount of fresh produce, and I don't trust anyone to pick the best quality. Most folks I know used it for huge bags of kitty litter they didn't want to have to carry up the 5 flights of stairs. For that, they're great!