Online grocery shopping seems to be one of those excellent ideas that has never made anyone any money.
Some businesses in this province are betting that’s about to change.
When Edmonton’s Home Express went belly up roughly a year ago, it was just the last in a line of failed online grocers in Alberta. That’s why, with Calgary Co-op’s announcement last week that it is entering the online grocery business, you might be forgiven for asking what Co-op’s management has been smoking.
But the move is not as foolish as some might think. In fact, it’s a sign of the maturation of Internet commerce.
Today, Alberta’s online grocers are using business models based on realistic assumptions, incorporating ideas that take advantage of the web’s strengths.
Counter to what you may think – and what one newspaper reported – a computer-savvy populace is probably the least of the factors that make online shopping succeed. Most importantly, customers must trust the proprietor.
I, for example, am very particular about who touches my tomatoes. Of course, it also doesn’t hurt if customers are willing to shell out a little for the extra service they’ll receive.
But the potential upside of online grocery shopping can be considerable for some consumers. The elderly or infirm can save money on cab rides. Busy professionals can have groceries delivered to their office.
My wife, expecting her third child, is dreading the day milk and diapers run low while one of our kids is sick and I’m at the office. When I showed her some of the online options, she was thrilled.
According to Paul Morrissette, director of operations for Alberta’s longest enduring online grocer, Sunterra Market, online orders tend to pick up markedly when inclement weather strikes. Sunterra also has two staff members and a driver dedicated to this end of the business much of the time. So some grocery companies have already found an Internet niche.
Online shopping is not going to radically alter grocery stores as we know them. Obviously, some of the pleasures of dealing with people in person are impossible to replicate. Wilf Harms, vice-president, marketing and operations for Calgary Co-op, also told me that impulse purchasing is key to their business. He also said in-store selection will still be much greater than the online options.
But none of these disadvantages to virtual shopping mitigates the obvious benefits for a faction who could use, or even need, online grocery stores every once in a while – assuming the trust factor, price and convenience are right.
Grocers would be wise to follow Sunterra’s lead. The online arm of this small, high-end chain has been around for more than three years, outlasting most, if not all, of its local competitors. This is likely because the idea was built around an already-thriving business.
Sunterra is living proof of the efficacy of some online models. Basically, the store does not rely on online sales for sustenance. (Sunterra has a presence in Edmonton, but their online service only applies to Calgary, so far.)
Morrissette said that for his company, the website shopping was about adding value. Sunterra has never done a comprehensive cost-benefit analysis: “But even if the costs were exceeding the benefits, I think the intangible benefit is that we’ve created loyalty to our customer.”
It’s hard to imagine how they could be making much, if any, profit from the online business, charging only a $5 surcharge for delivery anywhere in Calgary. With database maintenance, delivery costs and other administrative expenses, I would guess that Sunterra’s online arm is a loss leader.
The same cannot be said for Calgary Co-op or Bateman’s Foods, which runs six IGA stores in Edmonton. These two Alberta businesses have transferred most of their financial risk on to a small Saskatchewan operation, with eight employees and growing, called Pic’n’Del Systems Inc., based in Saskatoon.
Pic’n’Del administers the database and online orders that the grocery stores themselves simply fill out of their regular stocks. Pic’n’Del’s trick is to strike deals with the traditional grocery operations, a not-inconsiderable feat. Co-op’s Harms told me that his chain has had many suitors over the years. Pic’n’Del was the one that met their standards.
Using Pic’n’Del, there is no need for either Bateman’s or Co-op to set up their own e-commerce division. Essentially, Pic’n’Del is a contract e-commerce company, hardly visible to the Co-op or Bateman’s customer.
In other words, the Pic’n’Del service does not involve eliminating a middleman – something we heard so much about in the early days of the Internet. On the contrary, it makes room for an additional middleman. In a sense, Pic’n’Del uses sophisticated, efficient technology that allows you to pay someone to do your shopping for you – an idea that is hardly new, just newly economical for many of us.
Bateman’s has been partnering with the Pic’n’Del people for a little over a year now. According to Pic’n’Del’s president, John Courtney, the Edmonton service now serves hundreds of customers per week. Up until last week, Edmonton was the biggest market for Pic’n’Del. (It also operates in Winnipeg, Victoria and Saskatoon.) But with one of Calgary’s biggest grocery retailers on board, it has made a giant leap forward. Co-op operates 18 centres in the Calgary area.
One of the surprises for Courtney is that the people who most use his service are busy professionals aged 30-50.
I can certainly attest to the inclination I have towards such systems.
It remains to be seen how seriously we catch on.
