Why Aren’t There More Grocery Stores On-line?
I predict one day soon shopping for groceries online will be as common downloading songs. It just makes sense. Read my recent encounter with Grocery Gateway and you will understand why I see it this way.
I recently had the opportunity to meet with John Charleson, IT Director of Longo’s. Since 1956, Longo’s has been serving the Greater Toronto Area (GTA) with high service, high quality grocery stores. Longo’s has participated in the online grocery business since 1999. At first, they were merely the supplier to Grocery Gateway, where their shoppers would come into the store on a daily business and pick orders for their online customers. After Grocery Gateway made a brief departure using their own central distribution, Longo’s purchased the near bankrupt Grocery Gateway in 2004, and brought personal shopping back to their stores. The rest, as they say, is history. The online business was profitable within 6-9 months and has seen phenomonal growth at a pace of 15-25% per year.
A few more stats about their online business:
- Fills 4,000-8,000 orders per week in the GTA from about 6 stores.
- Regular customers order every 2nd week (supplemented by a few visits to the store in the interim)
- 8,000 SKUs available online
- Average online order is $140 vs $30 in-store
- Online sales account for about 5-10% of total sales.
Sales continue to grow as they add more stores for Grocery Gateway shoppers, expanding their customer reach, while increasing the number of SKUs available online.
What a great service. I remember my mom calling the local grocer placing an order over the phone, and having a delivery man show up later that same day with fresh goods, well packed, and carried right into our kitchen with a warm smile. Longo’s has been long on customer service and now has the ability to provide this kind of service to its customers once again, en masse, through the use of technology. While technology plays a significant role in this service, the personal and human touch is what makes it such a huge success.
Online Order Process:
Orders are placed online, and then picked at a nearby location by real people. Using handheld devices, the ’shoppers’ walk the aisles picking out the best produce and fresh products with a caring and discerning eye, as if they were buying groceries for their own family. If a product is not available, then the shopper will pick an appropriate substitution. Orders are packed in re-usable cartons and then picked up by the delivery trucks first thing in the morning. Longo’s uses their own well-trained delivery personnel, as this ultimately becomes the only ‘face’ to the customer. Delivery personnel provide friendly, high level service, carrying all cartons right into the customer’s kitchen for convenient unpacking.
Longo’s prides themselves on customer service and they are pleased with the satisfaction their customers get with this service. Many have said they could no longer live without it. Longo’s is always trying to improve upon this.
Even with their great service and an award-winning e-commerce site, they have plans (vision) for numerous improvements:
- Improve fill rates by showing available inventory by region and making more intelligent automated substitiutions, when the item is not found.
- Give customers the option of picking up their order at the store (with attendant putting packed groceries right into vehicle) or receiving it at home.
- Add more SKUs and specialized SKUs, depending on region of purchase.
- Offer promotions and specials while shopping online.
- Offer product suggestions based on purchase history.
This shows Longo’s desire to continually improve the overall online shopping experience. I think they can take this even further with more social interaction by adding such features as online product reviews, ’shopper’ feedback, and online discussions.
Why Aren’t More Grocers Providing This Service?
I think this is the ideal online business for for brick & mortar retailers. Tesco has been doing this for years with continued and growing success. It’s a time-saver, it’s ecologically friendly (less travel, re-usable cartons), and is a huge convenience for your customers. I understand that this is not a simple service to add and will be difficult to make it profitable, but nonetheless it is a great service to your customer and can give you an edge over your competition. Yes, it will eat into already tight margins, but as we have seen with other industries - adjust to the online world and make it work (profitable) or potentially lose altogether.
I am curious to hear what others think? Do you know of any grocers that are already providing this kind of service? Do you think you would use this type of service if it was available in your area? What other improvements would you recommend for online grocery shopping?