Bill Bittner

Publix is Back Online

August 10, 2010

FROM RETAILWIRE:
Publix closed its PublixDirect online grocery and home delivery service in August 2003, just two years after the service launched, due to insufficient volume. Now, the grocery chain is back with a test of an online grocery service, but this one will only include curbside pickup. Will Publix Curbside be successful where PublixDirect was not?      [more...]

Online grocery shopping faces three hurdles which other retail categories do not: critical cold chain requirements, the perishable nature of "fresh" products and extremely low gross margins. Curbside pickup has the potential to address the cold chain issue. Customers may still have to be convinced to let someone else select their peaches. But the low gross margins will continue to be a challenge.

When full-service grocery stores converted to self-service supermarkets, it was a win/win for both retailers and customers. There was a significant increase in sales as operating and labor costs were spread across many more transactions and products. Customers got much wider selections and were able to speed their way through the markets. In essence, online grocery shopping brings us full circle by putting the cost of assembling the customer order back on the retailer. While the online catalog might expand consumer selections, it is unlikely it will ever make up for the handling costs. This means retailers will need to continue to charge a service fee or higher retail for online orders and consumers must see benefit to the added costs. The alternative is to use online shopping as a loss leader...not a good long-term perspective.

This is not all bad. The Publix employee who described the online shopper as the mom with three kids picked the perfect example of someone for whom the service fees make sense. These are also the shoppers who will be back each week. The mistake is to ever hope that online shopping will be the preferred method for everyone.