Online grocery shopping services bounce back - East Valley Tribune: Business

Online grocery shopping services bounce back

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Posted: Tuesday, April 26, 2011 7:15 am

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 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.

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.

The employees at Kmart's service in 34 states -- with more on the way -- 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 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 , 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 and 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 e-commerce has not done as well in the grocery. Forrester calculated e-commerce 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, although others continued. 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 in Pennsylvania came up with a business proposal that seemed workable.

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.

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.

On a larger scale would be the 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.

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