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Peapod Rapidly Expands Virtual Grocery Stores to More Cities

October 2, 2012

Peapod sees a very real opportunity in virtual grocery stores.

The company, which began testing a virtual grocery store using QR codes in train stations in the Philadelphia and Chicago areas earlier in the year, announced yesterday that it is launching more than 100 similar stores at stations in Boston, Connecticut, New York, New Jersey, Philadelphia, Washington, D.C. and Chicago.

"Getting your groceries on the way home from work just got a whole new meaning," said Mike Brennan, COO, Peapod, in a statement. "With schedules that are more demanding than ever and people spending 200+ hours a year in transit, our hope is that consumers will take advantage of our virtual stores and mobile app while they're on the go and enjoy the time saved when they're at home."

Consumers using the PeapodMobile app for Android and Apple devices will gain access to more than 11,000 name brand and private label items covering the entire store.

Peapod is really counting on the consumer desire for convenience to drive the service. Having virtual stores at rail stations also gives the company an extra means to reach potential shoppers

"We all know how challenging it can be to get the attention of consumers in a meaningful way," Mr. Brennan said. "When we piloted the virtual aisles in Philadelphia and Chicago earlier this year, we found that the advertising stopped people, it engaged them. That's what we're after."

Discussion Questions:

Are you surprised by the apparent success that Peapod is having with its virtual grocery store concept? Do you see other retailers, inside and outside of grocery, opening virtual stores in the near future?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely are other retailers in the U.S. to follow Peapod's lead and open their own virtual grocery stores?

Comments:

It would be interesting to know if they are making any money out of it. Being able to stop and engage people is great -- but does it pay out?

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

Not surprised at all. This makes ultimate sense. It is driven by people's lifestyle, technology and convenience. Who would not rather order something using this service than making another stop at a store instead of going home? This is real customer service.

So much for the ongoing death predictions for Peapod.

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Gene Detroyer, Professor, Independent

The best example of how this can work is Tesco's Homeplus, in South Korea. The chain went from getting ready to shutter its Korean operation to being the dominant force in the Korean food market, largely on the scanable back of its virtual grocery operation.

That said, Tesco's experiment was profitable thanks to South Korea's unique demographics -- number of people with cell phones, who travel to work by subway every day, etc. Not sure how that model translates to the U.S. It may be fine in some urban areas, I just don't know.

I think there is a physical and market limit to the number of retailers who can play in virtual space, but I'm pretty sure that won't stop way too many of them from trying to jump in -- the majority after the opportunity has passed.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

I look at the buzz around this and shake my head at the silliness of the press and how they believe this is some technological innovation. There are not 11,000 items on display on signage in a train station. The shopping experience a.k.a. "virtual grocery store" is in the mobile phone. The signage is nothing but a limited product display that prompts someone to start their mobile shopping trip via scanning QR codes.

Although this may be a successful idea for Peapod, it's shocking that so many are duped into believing this is cutting edge technology. It's really no different than any other ad, signage, or magazine spread that has QR codes that move a user to shop virtually. In fact, there are other signs in train stations doing the same thing, although they typically feature one code and occupy much less space. And advertising signage targeting waiting transit passengers is what ... at least 100 years old?

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Ken Lonyai, Digital Innovation Strategist, co-founder, ScreenPlay InterActive

The concept of home delivered grocery staples is the tipping point that will change how we shop for food (and maybe other things) forever. If you've ever used Peapod, you know what I mean. When the consumer light bulb turns on that no one will ever have to shop the center of a grocery store again, the metamorphosis will begin -- and Peapod looks like they'll be the ones to pull the switch.

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Lee Peterson, EVP Creative Services, WD Partners

We've seen success with this concept in South Korea...why not here? I like the double-duty impact of the poster -- shopping and co-op advertising. Slick.

We'll see more of this in apparel, entertainment, et al.

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Liz Crawford, VP, Strategy & Insights, Match Drive

This is another logical advance in the Convergence of Online, Mobile and Bricks (COMB) retailing. In this case, leveraging the mobile access to the internet afforded by smartphones, and potential shoppers "forced" to waste significant time in a non-personal, non-hedonic space.

Here are shoppers with forced time on their hands, with no reason to not shorten their grocery list by picking off items that may then be at home when they get there.

This is really no different than online grocery shopping at home or office, just using the smart phone to leverage otherwise potentially wasted time in transit. As the smart phone penetrates further in the bricks grocery space, the convergence of all three location based purchases will be complete: online-mobile-bricks. It's all the same thing.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Shopper Scientist LLC

I am not surprised by the early success. Why?

1) They can create virtual stores where people want a way to optimize their time. Bus and train stations are a great place to start.

2) Posters are less expensive than actual stores and more effective than online advertising.

3) 11,000 items at your finger tips sounds pretty good to me.

4) Overall convenience.

The bigger question is, what other retailers will start testing this type of approach?

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John Boccuzzi, Jr., Managing Partner, Boccuzzi, LLC

BTW, Ken is right of course. This isn't cutting edge technology, nor even a cutting edge application of old technology. It's not even original thinking.

That said, this is retailing after all, so one has to be patient.

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Ryan Mathews, Founder, ceo, Black Monk Consulting

Providing the opportunity to make commuting time into something productive is a great alternative as evidenced by the South Korean example provided. There are only a select number of markets in which there is a lot of subway or train use for commuting. In those markets, it seems to have great potential.

The idea of pop-up stores has become quite popular and they generally include some type of Internet or wireless option to a larger inventory, so using QR codes is just an extension of the concept.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

I'm more surprised others have not picked up on the virtual store concept in lieu of impression advertising at people hubs (train, plane, bus, events, etc.)

These virtual shopping walls are a major candidate to use big data to determine to create recommendations and impulse buys to add to the Peapod mobile shopping basket.

Anybody can appreciate action-orientated advertising that may deliver better ROI than display/impression advertising.

Ed Dunn, Founder, (Stealth Operation)

Although some of my RetailWire contemporaries have suggested that this is neither new technology nor cutting-edge retail, I believe it to be a game changer for Peapod. It puts their name -- and some of their merchandise -- within the reach of more consumers. It's simply smart retail and very good use of otherwise vacant, non-engaging space. (And it may be new breath for Peapod's model.)

I personally believe it will be a success ... and we ain't seen nothin' yet.

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Dave Wendland, Vice President, Hamacher Resource Group

Tesco is supposedly successful with this in South Korea. This is still on the road to somewhere, not the destination. The goal of technology should be to simplify shopping. This addresses dead time, but I imagine the selection is severely limited so you still need to do a fill in. Not really simplification yet.

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Joel Rubinson, President, Rubinson Partners, Inc.

I am not surprised with Peapod's success. It's a great concept for consumers considering the busy schedules that everyone has. This concept has been underway in New York City thanks to Fresh Direct and has been successful -- order groceries online and have them delivered to your door. The idea of marketing in train stations is a good one that takes advantage of being eye catching and taking advantage of the wait time of commuters. This evolves the concept of online shopping to a new level and will hopefully continue to expand throughout other retailers.

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Zel Bianco, President, founder and CEO, Interactive Edge

As people feel more pressed for time, the chance to do something while waiting becomes almost a compulsion. The thing I hate most about arriving early for an appointment is the "wasted" time. Even a good magazine rack at a dentist's office can ease the anxiety. Now, put an opportunity to get shopping done while I am waiting for a train and you have "made my day." Not only have you made my wait time useful, you have reduced my daily anxiety about getting to the station. You've become a retailer who is really helping me out.

The biggest issue I see is not getting an order done in time for the train. I have never used Peapod. I assume there is a way to spread the shopping over multiple visits. This would allow customers to shop over multiple visits to the station and schedule a single delivery when they're ready.

How could this fail?

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Bill Bittner, Principal, BWH Consulting

As consumers adapt to new technology and uses of their mobile devices -- tablets and smartphones -- this type of purchasing behavior will continue to grow. Convenience, service, simplicity, and time-savings are important elements for all of us.

In a consumer-centric world, retailers will do well to keep an eye on the growth of this sector. In many cases, the consumer relishes the opportunity to venture to the bazaar. In other everyday, necessity-driven shopping experiences, applications like the virtual store will be a welcome partner.

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Roger Saunders, Managing Director, Prosper Business Development

Not surprised -- it is a great idea! Consumers are time starved more than ever today and it makes perfect sense to optimize your down time. Why not shop this way for anything that you don't need to touch or feel? Baby food, diapers, paper towels, and laundry detergent should all be on auto delivery.

This would be good for any take-out restaurants as well. Buy it on your way home and it's delivered shortly after you arrive.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

Ken has his "high beams" on.

Gary Chatman, Business Development, estorerunner, Inc

What is innovation in retail but the application of some technology against specific social trends? All the pieces exist: QR codes, Smart Devices, Billboards, Internet, Secure Payments, etc., combined with customer demand for ever more convenience and add to that predictable high-traffic spots and voila, you have the ingredients for new and innovative processes and business models.

Kudos to Peapod for bringing these together in the US. Is it original? NO. Will others try to copy? You know they're thinking about it!

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Tom Redd, Vice President, Strategic Communications, SAP Global Retail Business Unit

I'm not surprised. These are all heavy commuter cities where the service will be a welcomed addition to the commuting routine. I definitively see the opportunity for other retailers to do the same.

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Carlos Arámbula, Managing Partner, MarcasUSA LLC

This looks like a solid growth strategy -- helping time starved commuters make the right connection. Stopping for even a quick trip on the way home after a long day is ... just one more thing to do. Making better use of time and planning purchases seems to make a lot of good sense for retail in days ahead.

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

No to be a wet blanket here, but how is success "apparent"? The only thing -- to me -- that's apparent is that Peapod is completing a project they started earlier this year. I suppose one could say if the test sites had been a (complete) disaster, then the concept would have been stillborn, but that's a low threshold. If expanding on a concept is "success" then Fresh-and-Easy must be one too.

'notcom'

Apparent success are the key words here. Yes, virtual stores have an opportunity in some areas, but grocery is just a limited one. The ability to drive fresh products through a delivery style channel, using QRs or other unique technologies is still a confined and limiting concept. It is great to see Peapod pushing the boundaries of this technology, but it does not appear to have the demand or profitability to deliver enough operating income to the bottom line to truly make this model a profitable one.

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Kai Clarke, CEO, American Retail Consultants

Providing the ability to order online groceries at points where convenience-focused consumers can make purchases using their phones should driving incremental volume to Peapod. However, they must back it up with strong customer service, quick delivery turnaround and very high quality products, particularly produce.

The greatest advantage they will have is that convenience-focused consumers are less price-point sensitive when they just have a few minutes to shop, providing for higher margins, which will hopefully be used to improve the customer experience.

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

I think this is the right move in acquiring a new customer base in addition to giving add-on services to the existing customers. Now, in this competitive environment, it highly makes sense to do things differently (whether the technology used in cutting edge or not) and retain/acquire more and more customers.

This will be a way to go forward for all the high performing retailers to keep their steps in all the possible channels (bricks & mortar, online, mobile, roadside kiosk just to place order seeing the catalogue, vehicles roaming around the streets to get orders from individual houses, customer service desk for order placement, and what not). And the retailers not moving in this direction will lose the game at some point in time compared to others.

Aditya Ranjan Samantara, Senior Business Analyst, Accenture

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