Your shopping cart looks full. Skim milk? Check. Bananas? Check. Candy? Shoot--you forgot the chocolate bars! Thankfully, there's no need to create a stir at a checkout line if you need your sugar fix. With a click of the mouse, you're on the candy page, scrolling through your options: milk, dark or white chocolate?
The increasing value of convenience among consumers has created a robust online grocery industry. According to market research firm IBISWorld, online grocery shopping is estimated to grow by 9.5 percent annually and is on track to become a $9.4 billion industry by 2017.
Kari Gordon of Hoboken, N.J., bought groceries for herself and her boyfriend at brick-and-mortar chains before her Jeep flooded last year during Hurricane Sandy. At first, she rented a car for trips to the store. But when rental costs started adding up, Gordon tried FreshDirect, an online grocer that launched in New York City in 2002.
Gordon says the service fulfilled her desire for quick, easy, cost-efficient grocery shopping--and she doesn't have to leave her apartment, let alone carry heavy bags to her third-floor walkup. Now a regular FreshDirect shopper, Gordon says she makes fewer impulse food purchases, which helps her stick to a weekly grocery budget of $100. "I do a good job of keeping the budget low. Sometimes, though, I look at my [online] cart and find there are cookies in there," she says. "My boyfriend always finds a way to sneak things in."
While FreshDirect appeals to consumers like Gordon, its target customers are working moms, according to David McInerney, the company's co-founder. "Moms have high standards and high food values," he says, adding many are strapped for time. FreshDirect customers can choose between a one-month ($13), six-month ($69) or one-year ($119) unlimited delivery membership. In many locations, they can place an order by 11 p.m. and have it delivered the next morning.
Another long-standing player in the online grocery business is Peapod, which delivers to 13 states, including New York, Massachusetts and Illinois. Peapod's shipping charges vary by region and the size of the transaction (e.g., Northeast delivery fee is $7 for purchases above $100). Peapod spokesperson Peg Merzbacher says the website makes it easier to shop for healthy foods than a brick-and-mortar store, since customers can sort products by nutrition facts, such as sodium, cholesterol, fat and fiber.
Mobile apps are also fueling the growth of the online grocery industry. Merzbacher says about a third of Peapod's orders have a "mobile touch," meaning the customer uses a mobile device at some point in the purchase.
Leveling the playing field. One challenge for online grocers is establishing credibility. While consumers are looking to save time and money, shopping for groceries online isn't worth it if it puts them at risk of buying expired or unsafe foods. "Online grocery shopping is kind of like banking: It relies on trust," says Merzbacher. "You don't want to take a lot of chances."
To gain consumer confidence, many online grocers reimburse for subpar products or goods damaged during shipping. For example, when one of Kari Gordon's orders arrived damp--as a can of seltzer water had ripped open--FreshDirect deducted the cost from her next purchase.
[Read: 7 Foolish Grocery Shopping Mistakes.]
As was Gordon, a lot of first timers are skeptical of buying produce online; they're used to being able to touch the items before purchasing them. Traditional supermarkets can also offer a more personable experience, as friendly cashiers make grocery shopping more enjoyable. However, many online grocers say they aren't looking to replace physical stores--they're aiming to win over a portion of brick-and-mortar consumers.
To do so, some companies, like Peapod, offer rotating deals on items and will match printable coupons from websites such as Couponing.com. Peapod also has a "My Specials" feature, which saves a list of the shopper's past purchases and shows if any of those items are on sale. Of course, an added perk of online grocers is consumers don't have to battle seasonal obstacles. (Peapod's Merzbacher says sales spike during the winter.)
More opportunities for startups. While the brick-and-mortar grocery industry has long been dominated by major chains, the online marketplace has fewer barriers to entry. Even small, online-only businesses such as Good Eggs, a San Francisco-based company that launched in February, have room to flourish. The website partners with some 150 Bay-area food producers to connect consumers with small, sustainable-food suppliers.
"We have food entrepreneurs representing every aisle of the grocery store: farmers, fishermen, butchers, bakers," says Good Eggs CEO Rob Spiro. Food purchased on the site is made to order; a pie purchased Monday night, for example, is baked on Tuesday and arrives at the buyer's doorstep on Wednesday. Spiro says the company's system eliminates waste, since everything brought to the Good Eggs warehouse has already been bought by a customer.
Rewards vs. drawbacks. The benefits of online grocery shopping include accessibility, budgeting tools and convenience. Meanwhile, brick-and-mortar stores offer a familiar, personable experience, which some consumers don't have a desire to stray from.
Delivery fees are also worth keeping in mind. If you choose a service that charges shipping costs for each order, consider your shopping habits. If, for instance, you plan to order food each week, you may be better off buying your groceries at a supermarket instead of paying a delivery fee each time. Meanwhile, paying a flat fee to sign up for a six-month free delivery package could be worth the cost if you shop often and can save money on gas or other expenses by eliminating trips to the store.
Consequently, consumers should weigh their options when deciding whether to make the switch to online grocery shopping.
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