Online grocery shopping services bounce back
Lisa Hildreth of Churchill poses for a portrait at her vehicle in the parking lot of the North Versailles Wal-Mart, one of several locations where she shops for her business, BestGroceryDelivery.net.
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When the tech bubble burst a decade ago, so did a lot of people's hopes that the Internet would mean no more walking through grocery aisles and lugging home heavy bags of milk, eggs and dog food.
But online grocery services are experiencing a revival, both nationally and in the Pittsburgh region, as a mixture of big retailers and eager entrepreneurs try to tap into fear and loathing of this household chore -- in a profitable way.
A medical transcriptionist in Churchill launched her grocery delivery service in February, a self-employed Baldwin audio video contractor began his delivery business in December, and a grocery in Oakland, N.J., expanded its Pennsylvania service last year. All are willing to pick up that yogurt that you like, along with the spaghetti sauce and the deli meats, and get them to your home.
Last year, Right By Nature began offering home delivery within a certain radius of the Strip District grocery store as well as a service that allows customers to order online and pick up their order curbside.
The employees at Kmart's mygofer.com service will take the shopping list you send in -- even if it includes lawn chairs along with the peanut butter and cake mix -- and get it ready for you to pick up at one of their Pittsburgh-area stores.
Will these services find an audience -- and a business model -- that is sustainable?
"I think it's too soon to tell. I think the potential is there," said Kris Schemm, owner of the Pittsburgh version of WeGoShop.com, a service that shops at whatever grocery store customers request and even will make extra stops for an extra $5 per stop.
He's quite flexible about where that extra stop might be. "The other day, I dropped off paperwork at H&R Block for one of my customers so his taxes could be completed."
Online shopping overall has been steadily taking sales from brick-and-mortar stores, according to a report earlier this year from Forrester Research Inc. in Cambridge, Mass., but ecommerce has not done as well in the grocery. Forrester calculated ecommerce accounts for 8 percent of total retail sales, but the number would bounce up to 11 percent if not for the low penetration in grocery retail.
A number of online grocery businesses ran into trouble in the early days of ecommerce, although others continued operations over the years. Peapod, founded in 1989, offers delivery in markets such as Boston, Chicago, Milwaukee and Washington, D.C. Amazon has been delivering dry goods to homes for years.
Perhaps encouraged by growing online shopping trends, the experimentation has begun again.
In the past year, Amazon began grocery delivery in neighborhoods around Seattle, where it is based. And there's been speculation in recent weeks that Wal-Mart could launch an ecommerce service for delivery of fresh groceries in the San Jose, Calif., area.
However those big retailers set up their services, it's guaranteed to be very different from the small business that Lisa Hildreth, a self-described "coupon queen," set up after she decided there might be a better future in grocery delivery than in working as a medical transcriptionist, a field that is seeing less demand as technology changes the industry.
She had started studying computer science at the Community College of Allegheny County and came up with a business proposal that seemed workable.
Her mid-February launch found her dealing with snowy roads as she picked up food and transported it to the four or five customers that signed up early on. The Churchhill resident now claims to have about 60 customers. "Business has doubled every month," she said.
Many of her customers are elderly or disabled, but she also has delivered to international students and expects to do more urban business with people who don't live near a grocery and don't want the hassle of getting there.
Overhead costs stay low because she goes shopping to stores like Walmart, Shop 'n Save and Giant Eagle only when she has an order in hand. "We don't house any groceries at all," Ms. Hildreth said. Startup expenses included the system that allows customers to place orders on her website, BestGroceryDelivery.net, as well as trading in her car for a Kia Soul.
The $5 delivery fee recently went up to $8 because of rising gas prices. She tracks specials for her clients and seeks out the best prices, marking them up about 5 percent so the business can turn a profit.
Mr. Schemm's business also was born of a mix of economic necessity and entrepreneurship. He found the churches that had used his audio/video services were hit by the recession and didn't have funds to hire the services anymore.
He found the WeGoShop.com operation in a franchising magazine and invested in the $650 license to bring the concept to the southwestern Pennsylvania region.
Like Ms. Hildreth, he uses social media tools such as Facebook and blogging to make his website more likely to come up during search engine research. Early on, he was surprised to receive a number of calls from phone numbers out of the region or even the state. He almost didn't call them back, but it turned out many were from people with elderly parents in the Pittsburgh area. Now those clients are among his regulars.
After customers send orders, he calls to confirm the directions and settle on a time to make the delivery from his Chevrolet Astro. The shop/delivery fee is $20 for an order of up to $150, and $25 for those between $150 and $300.
Customers can supply coupons they've clipped -- he charges $5 to pick them up before shopping -- or they can go with the option of using the coupons that he's collected and split the savings.
On a larger scale would be the Netgrocer.com operation. The owners of a ShopRite store in Oakland, N.J., bought the name out of bankruptcy almost a decade ago.
"We said, you know what, this is a great opportunity," said spokesman Drew Vitulano. "The name is a very, very valuable name in the Internet space."
The original owners had been doing a lot of business, he said, but they were not charging enough to make a go of it. In fact, it's still a difficult business to expand because the expenses and infrastructure needed don't always match the price that consumers are willing to pay.
Deliveries are done through FedEx, and states such as Florida, Texas and California are among the top users. One-third of Netgrocer's business is to military customers such as soldiers in Iraq who miss the tastes of home.
Last year, the service expanded the zone being charged $9.99 for delivery on orders up to $199.99 to include Pennsylvania. Mr. Vitulano said the state had been a strong market, although the biggest demand comes from areas that aren't heavy on grocery stores.
Meanwhile, shoppers in Ohio -- further from the New Jersey headquarters where the orders are packed -- pay $31.99 for an order of $199.99. Mr. Vitulano said Netgrocer was looking to add distribution centers across the country to bring down shipping costs.
Sears Holding Co., owner of both the Sears and Kmart chains, has plenty of real estate that can be used to distribute merchandise. That's driving the growth of the company's mygofer.com program, which last year expanded the grocery -- and everything else -- delivery part of its service beyond the company's Chicago base and into markets such as San Francisco, Philadelphia, Denver, Atlanta and Miami.
"When the heat wave hit New York City, we had people using mygofer.com to get wall-mounted air conditioners," said spokesman Tom Aiello.
In the Pittsburgh area, delivery isn't available yet, but customers can send in their orders to a number of the area Kmart stores and let someone else run around and pick everything up. Even if the store doesn't carry an item, it might be available. "If we don't carry it, we're set up to take on new products," Mr. Aiello said.
The customer comes to the store and picks up the load at a service desk. There's no charge.
Shoppers have indicated convenience was really important to them, said Mr. Aiello, and so far use is growing. "The biggest challenge in any endeavor is just getting people to try it out."
First Published April 22, 2011 12:00 am