In the early 2000’s, Webvan tried to sell groceries online and failed miserably.  But today’s tech-savvy retailers are trying again.  Both Amazon, with its Amazon Fresh offering, and Walmart are throwing their hats into the online grocery arena.  Amazon and Walmart have invested heavily in their delivery infrastructures in order to increase overnight and same-day delivery offerings.  They are now allocating their significant resources to enhancing their infrastructures even more to accommodate grocery offerings.

Startups are also getting in on the game.  Instacart is a San Francisco startup that buys customers groceries from their favorite stores and delivers them within an hour or two.  The founder of Instacart, Apoorva Mehta, used to work as a software developer for Amazon’s order-fulfillment operations. Instacart is an example of a lean startup that is avoiding the excesses of predecessors like Webvan.  Instacart uses existing fulfillment centers (grocery stores).  Instacart also streams inventory lists from brick-and-mortar stores to its mobile app.  Users can shop the inventory and fill their in-app cart from the list.  The order goes to an offline surrogate who can also suggest substitute products or accept custom requests.  Instacart is saving money in startup costs by not having its own facilities or storing its own inventory.  Furthermore, Instacart uses a “sharing economy” for its labor force.  Workers just use their mobile phones to log into the Instacart system when they are available to shop and take orders.

Walmart, with its aggressive pricing strategy, has become the country’s largest grocer.  This is something that Amazon is trying to change.  Walmart is moving slowly into the online delivery system, though,  in order to work out the kinks.  For example, Walmart has begun offering To Go service where customers place their orders online, the orders are gathered and bagged in store, and the customer picks them up in-store.

Online grocers still have to overcome the tactile components of grocery shopping.  For non-perishable goods like cereal, customers might be more inclined to purchase online.  Yet, many customers will want to feel for the freshness of their fruits and vegetables.  For many customers, grocery shopping is still a pleasure and concerns over quality are high.

Discussion Question:

Why might the “grocery delivered to your door” model work today, when it failed a decade ago?

 

Source: Marcus Wohlsen, Wired Magazine, February 4, 2014; Corbis/SuperStock Extended Credit Required= N Business Unit Rights = MHE World Asset Source= SuperStock