Explosive change coming in way we buy groceries
Sue Dreyer Raymond has been ordering groceries through Peapod online delivery service for years.
Convenience is important to the full-time personal banker, who lives with her husband and mother-in-law in Palatine. Julie LaJoie of Aurora is new to the online ordering game. She started using Shipt.com, spending about $100 to $125 a week. Having groceries delivered allowed the night-shift nurse to spend more time with her young daughter.
"I buy just what I need and I am not tempted to buy something for my daughter just to keep her busy," said LaJoie, 33, who is learning the process and shopping for delivery options.
As the online shopping industry begins to flourish with the number of shoppers expected to jump 10 percent this year, grocery stores realize they must jump on board in order to compete. Amazon's recent entrance into the market is expected to be a game changer. Amazon Fresh acquired Whole Foods, sending a new ripple through the industry that could lead to a hybrid model.
"Within the next 12 months, Amazon's purchase of Whole Foods will only serve to energize Peapod and the brick-and-mortar retailers who are or can offer online services, since it will mean that Amazon may soon have a physical presence near them," said Bill Bishop, chief architect with Barrington-based Brick Meets Click, a grocery industry research firm.
More competition won't hurt Amazon, and it may make it relatively less important, "because the 'online spending pie' will probably be growing faster than Amazon," Bishop said.
How much of an impact Amazon will have is unclear, but competitors are preparing.
• Brick-and-mortar stores including Mariano's introduced delivery service in Vernon Hills and Oak Lawn, with 13 more stores coming on board this year.
• Itasca-based Jewel-Osco plans to provide online grocery shopping and home delivery sometime this year.
• Walmart offers online grocery shopping with pickup service at a growing number of stores, including Batavia, Woodstock, Plainfield, Gurnee, Wheeling, St. Charles and New Lenox. The company is doing home delivery with its employees at two stores in New Jersey and one in northwest Arkansas.
• Meijer rolled out its online grocery shopping and home delivery with Shipt in six states, and more recently, at its stores in the Chicago suburbs.
• InstaCart.com and Jet.com have entered or expanded in the Chicago and suburban market.
• Even hotels, like Homewood Suites by Hilton, are grabbing a piece of this industry pie by offering free grocery delivery to their guests.
One of the pioneers, Peapod, continues to expand nationwide despite the stiffer competition.
Peapod, which started in 1989, once used floppy disks to provide information to customers' PCs while it shopped at bricks-and-mortar stores.
Now at Peapod, owned by Ahold USA, food and household items are shipped to a large warehouse in Lake Zurich. Employees select items for a customer's order then load it onto a lime-green branded truck for delivery.
Besides Illinois, Peapod is available in Connecticut, Indiana, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Virginia, Washington, D.C. and Wisconsin.
Peapod is taking a closer look at its operations while in the shadow of Amazon.
"We are constantly scanning the landscape to see what is changing," said Chief Marketing Officer Carrie Bienkowski. "We take nothing for granted and we see more competition as a good thing."
She is optimistic about the future and believes more players in the market will only help make online grocery shopping become more mainstream.
"Every time competition has entered into a market, we continue to grow," Bienkowski said.
Convenience and growth
"The convenience factor is what is driving the growth," said Dave Osborne, Instacart's general manager in Chicago. "It means customers don't have to drive someplace to shop and wait in line. They just spend a few minutes online. Saving that time is invaluable to people."
Convenience isn't the only reason for increases in online grocery shopping. They may not drive, work odd shifts or are sick or disabled, experts say.
While Peapod has its own warehouses and food supply, Instacart does its shopping for customers at Costco, Binny's, Petco and other retailers. Instacart employees shop and use their personal vehicle to make deliveries.
"It's a huge market and a huge industry," Osborne said. "All kinds of competition are jumping in. It just validates what we've been doing for a number of years now."
Jet.com entered the Chicago market in April and offers New York specialties to suburban fans, said Joe LaMotta, senior director of Jet fresh operations.
Jet.com does not sell alcohol online, while other services do by requiring ID before finalizing the delivery at the door.
"We're finding that customers order online purely for the convenience," LaMotta said. "Then it's quality, which is a strong second, then assortment and then price."
Meijer, which partners with Shipt, started offering online shopping in Detroit, Cincinnati and elsewhere before expanding the service to Rolling Meadows and other suburbs.
"Some people will make one, two or three trips a week to grocery shop, and that could take one hour or more if you count the driving time," said Art Sebastian, vice president of digital shopping for Meijer. "Some see ordering online as convenient and that convenience is the new priceless."
"At the end of the day, competition is great, but it's ultimately all for the customer," Sebastian said.