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[21 comments]

Is curbside pickup a better solution for online grocery?

May 1, 2014

Harris Teeter hopes its new $99/year subscription service will drive more customers to use its Express Lanes online shopping service. Just four hours' notice produces handpicked grocery orders ready for curbside collection.

The mid-Atlantic grocer will continue to offer a $4.95 per order option as well as a $16.95 monthly option. The service, first offered in 2000, is now available in 150 of its more than 200 locations.

Food retailers continue to expand and experiment with curbside pickup:

  • Shop & Stop and Giant Food, through their partner, Peapod, began rolling out curbside delivery last year and offer the service for no charge with varying minimum orders (although some orders are picked at a depot rather than the store where they're collected);
  • Hannaford continues to expand its Hannaford To Go curbside service, which charges $5.00 per order (free for orders over $125);
  • Wegmans in February began testing curbside service at its store in Pittsford, NY, charging $10 per order;
  • In its continuing test of Walmart to Go, Walmart in the Denver area this January began offering a complimentary local curbside pickup option for general merchandise and some groceries.

One encouraging sign for curbside delivery, according to TechCrunch, is Walmart's finding that 55 percent of shoppers prefer an in-store pickup option over home delivery because they are able to grab a few things they missed with their online order.

Still, the majority of supermarket chains, including Harris Teeter's new parent, Kroger, don't appear to offer any curbside delivery. HomeShop, from Kroger's King Soopers, has done home deliveries for $10 in Denver for many years but the chain doesn't think the economics justify expansion. Publix abandoned a test of a curbside service in early 2012.

So is it better to stay at home waiting or to collect orders while out? What is each choice worth?

Harris Teeter's $99 curbside is cheaper than AmazonFresh ($299/year) for same or next day home delivery. But Instacart's $99/year provides two hour, scheduled deliveries free for a $35 minimum spend. The service makes use of Personal Shoppers who visit a range of local stores (including Whole Foods, Trader Joe's, Costco and Safeway). Walmart charges only $5 to $7 for home delivery with Walmart to Go.

Etailing Solutions' December 2013 study of reasons why shoppers do or don't buy their groceries online was covered by Internet Retailer. Of 151 participants who could access Peapod, FreshDirect or ShopRite, 53 percent said they would shop more often if delivery cost less. At the time of the study, FreshDirect's fee was $5.99 with a $30 order minimum; Shoprite.com's fee was $19.95 for home delivery, or $5.95 for store pickup.

Geographic areas covered by these companies sometimes overlap, providing more choice, but often don't. Meanwhile, the consumer's dilemma remains unchanged: how to achieve convenience cost effectively.

Discussion Questions:

Does curbside delivery have to be offered at a significant savings to home delivery to be successful? Are annual delivery subscription options an enticing incentive for consumers considering home delivery and/or curbside pickup for their online grocery orders?

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:

Which online grocery option do you think will experience greater growth over the next five years?

Comments:

In an ideal, consumer-focused world, there would not be any charges for curbside or home delivery. Stores that offer the most service for the least price will have a strong competitive advantage. Therefore, the model of free with minimum order size, provided that the threshold is reasonable, should win customers. Just as free shipping is almost a requirement for online retailers, so too will it become a must for brick and mortar stores.

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Max Goldberg, President, Max Goldberg & Associates

As a male grocery shopper who can't find things in a store, having someone do the picking and packing is a big deal. More than happy to go pick it up if someone already has it in the bags waiting.

None of the economics have been totally tested on a national scale. The labor costs with curbside pickup have to be a whole lot less than home delivery. Home delivery takes population density of large metros, but curbside delivery could work in most any market.

One thing is for sure, consumers are increasingly looking for choice in services. It will not be a question of either one or the other. The real winner may be "all of the above."

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Chris Petersen, PhD, President, Integrated Marketing Solutions

Not sure that the price tag is what motivates people, so probably not the key driver. This is, though, the perfect situation for an A/B test.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

I wonder how many annual charges the average customer will go for before they say enough. Between the warehouse clubs, Amazon, and now these, you can spend quite a lot before you actually get a single product.

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Peter J. Charness, SVP America, Global CMO, TXT Group

This is the solution for the suburbs. The challenge for home delivery is scheduling. With today's lifestyle of limited time at home and many activities or work during the day, this alternative makes convenience convenient. Make an online order, tie the pick-up into your schedule and when your pass the store, swing in. Done. And, if those fees stay, it is incredibly cheap. The annual fee makes the process even more convenient. Now, pick-up can be used for fill-in shopping.

The biggest finite issue we deal with today is time. Anything that saves time has great psychic value and often financial value. The one caveat is that the products must be available and ready to go. No queues. No waiting.

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Gene Detroyer, Professor, Independent

Personally, yes because with home delivery there is less that I have to do. Curbside still requires me to get into my car and drive to the store. Amazon has shown that annual subscriptions can work with Prime, but there has be to be some savings associated with them. While I have never shopped at a Wegmans, and have heard its a great store, it's still hard to imagine that $10/curbside pickup is going to significantly grow its curbside pick up business.

And am having trouble swallowing this: "One encouraging sign for curbside delivery, according to TechCrunch, is Walmart's finding that 55 percent of shoppers prefer an in-store pickup option over home delivery because they are able to grab a few things they missed with their online order." At some level this defeats the purpose of curbside pickup.

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Bill Davis, Director, MB&G Consulting

There was an earlier article here about Publix performing a test trial of curbside pickup and the facility was less than a mile from me here in Atlanta. I realize the problem after several trials.

Curbside pickup is being approached as a drive-thru solution and this is the flawed approach that keeps repeating itself over and over. As the article stated, if I'm driving to the store, I want to go inside the store and pick up a few things anyway.

Curbside pickup can only work at a separate stand-alone location that can accommodate a stream of cars like a 1950s drive-in restaurant. The parking lot at the main store was crowded with cars lined up for curbside pickup and people had a hard time leaving the lot as well as finding a suitable place to park.

Ed Dunn, Founder, (Stealth Operation)

Realities of labor costs be hanged -- consumers are going to expect curbside delivery for "free" (minimum orders will be tolerated) as the cost of home delivery continues to plummet -- and it will. Amazon will see to that.

Though I tend to agree with Stephen Needel that the real motivator is whether consumers prefer to sit at home or have their deliveries sit outside versus being able to pick them up when they want. After a year of pick-up laundry service in our new address, we just went back to drop off and pick up at a local laundry on our route to work. Proving to be less hassle than dealing with scheduling pickups, missed times, etc.

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Ben Ball, Senior Vice President, Dechert-Hampe

Free home delivery for supermarkets is a pipe dream, unless the margins are artificially built into the price of the product.

Free is the most overused word in business, and customers for the most part know better. Time starved people will pay the fee for delivery, and curbside pickup has its niche as well. If the service is outstanding, and on time, than the market will sort out the fees as consumers will have choices.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Charness makes a good point - there are so many subscriptions that people will soon wonder what to cancel and what to keep. The curbside has an edge on home delivery in specific markets - like the burbs. Why? People usually have times where they run errands and this approach makes that time shorter - meaning more time at home. The price is the issue and a possible "last minute" need that they did not include on the list. Maybe add the feature of Pick-Up Plus. The store will send runners to grab up to 3 to 5 items that you forgot to list. Just pull up to the Pick-Up Plus area and the grocer makes your visit even more worthwhile.

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

This satisfies one of consumers' primary needs - choice. I can shop in-store, get it delivered to my house or drive by and get curbside pickup

I think it has to be priced right and maybe the per-order charge is the way to go for now but ultimately, the consumer will need to understand what the fee is for. When shopping online, delivery is routinely free. For curbside pickup, it should be as well.

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

I think that for people who are using curbside or home delivery, price is not the only factor, it is the convenience based on their lifestyle. For certain items, like grocery, where perceived freshness is important, curbside appeals to certain group who wants to save some time, but wants control and the feeling that "they went shopping."

It is more of a style preference, I think, whether people want curbside or home delivery rather than curbside. The trick with the success of curbside is the physical layout and tracking of the orders to make sure you don't have congestions or errors at the curb.

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Kenneth Leung, Director of Enterprise Industry Marketing, Avaya

The plethora of examples cited here is all the proof we need that the supermarket business is determined to solve the order/delivery/pick up model. I suspect the chains will need to offer a full spectrum of choices, working out the terms and prices from shopper response.

Like so many interactions in this business, the choice is situational for each purchase occasion. Shoppers will assemble their own solution set - a mix of store visits and delivery options. Suburban working people may prefer curbside pickup on the drive home. Busy moms may like delivery better for staples, but prefer to select their organic produce at another store entirely.

In urban settings, a doorman building might be a great fit for delivery, while curbside pickup could be near-nightmarish on busy streets.

Distance and travel time might make costs prohibitive in low-density settings, but non-perishables might work well using common carriers like UPS or USPS. This may not be a good slice of the business for supermarkets that lack designated fulfillment centers, but great for Amazon.

Then there are a host of trade-offs between central picking and store picking that must be figured into the equation, including labor costs, the distance/time equation and geographic obstacles like bridges.

Overall I'd be wary of generalizations about curbside or fast-lane pickup. Set pricing might be the wrong way to think about it. How about relationship pricing, that rewards more frequent (high RFM) shoppers with decreasing fees or even rebates toward that annual subscription fee?

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James Tenser, Principal, VSN Strategies

You question should be, can it be successful, period? We have a Harris Teeter that offers online ordering, but I don't think they have ever delivered. They have in-store boxes set up (may be refrigerated) in which to store bagged orders until picked up. They have removed prime parking spaces and reserved them for pick up, but I don't ever see anyone in one of those spots.

This is a service that might serve household staff best. Those ordering food for preparation for their employer and his family and guests. Those who aren't concerned too much about a budget. This may help the uber-rich cut back on domestic staff (I see many "staff" lollygagging around in store visiting with "staff" from down the beach.

If this is successful, I don't think "SAVINGS" is a part of the equation. This is a SERVICE and those wanting to take advantage aren't too worried about cost. Is that population large enough and concentrated enough to make this expense viable for Harris Teeter? Time will tell!

Ed Dennis, Sales, Dennis Enterprises

Not for me, i.e. significant savings not necessary for home delivery to be successful. I believe convenience will trump cost and at-store pick-up. I believe in getting the delivery as close as possible to the end-line; I think at-store pick-up defeats the purpose of convenience if people want to run in and pick up additional items.

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Naomi K. Shapiro, Market Communications Manager, Upstream Commerce

Most people don't find shopping all that difficult, so paying extra for a service that offers only a few additional utils of life enjoyment is not worth it. And there are actually people who like to see the food and then make selections from the offerings so for them, these alternative shopping options have no value. And for some, even if they don't love grocery shopping, it serves as a way to get out of the house, away from addictive glow of the pc or tablet.

Now there are a few groups that may prefer curbside or home delivery: people who recently had a child, physically challenged, etc. But even these groups don't seem willing or able to pay the extra fees associated with home delivery or curbside pickup. Retailers need to keep an eye on the potential of alternative delivery/shopping methods that fit their model and satisfy their shopper, but the continuous improvement of the in-store shopping experience should continue to be the highest priority.

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Larry Negrich, Vice President, Marketing, nGage Labs

I disagree with Max: on the contrary, in an ideal world, nothing would be free - unless it's really costless, of course - and people should expect to pay for what they get. But years of Amazoning the public have largely made this idea seem quaint.

Back to the issue at hand, I'm still unconvinced there is much of a demand for a return to the bad old days of retailing, where a clerk was necessary to handle every element of shopping (from merchandise selection to delivery). All the different examples and testing going on, far from convincing me that someone will eventually find the right one, makes me think there isn't one.

'notcom'

Please understand. This is not male/female issue to me. But I can see this as an effective tool for many men who have no idea what they are doing and are lost in a grocery store. For me, yes help me select the best fruits and vegetables because I can't.

As far as the possibility for a long-term thing, the cost is going to come into play quickly. Using me as an example, once I have learned the best way to shop, I am going to do it myself.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Curbside delivery is something in between the in-store experience and the home delivery service. Sure there has to be a savings over home delivery, but the bigger question is if the premium paid is a reasonable amount to pay for the convenience of not having to go into the store. The key will be to train customers to use the service. I think about how the airlines trained passengers to book their trips online - and even check in on line. It took several years to get the passengers to use the service. The result was a better experience for the passenger and a reduced cost for the airline. While they don't charge for it, it isn't too far off of what retailers will have to do to get a critical mass of customers to use the service.

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Shep Hyken, Chief Amazement Officer, Shepard Presentations, LLC

Both curb side pickup and home delivery services for grocery shopping target customers with "convenience" and "time value" benefits. In my POV, markets and geography will dictate what gets favored where and when by the customers - both have great use cases.

The bigger question is - can grocery chains deliver these solutions at a mass scale while they are operationally viable and cost effective.

*Mass scale is very important because that is when inefficiencies start surfacing up, which is precisely the reason current players are still either piloting/correcting the solutions or focusing specific markets with urban lifestyle and less price conscious customer base, and not started larger rolling.

*Grocery logistics is much more complex problem compared to shipping dry goods, apparel, etc. due to temperature requirements, and shorter life of the product. Curbside pickup eliminates logistics, making it much more appealing to retailers with physical store locations.

*From an economics side of things, the service has a cost which has to be fulfilled by one of grocery chains or customer or some combination of two. There isn't enough margin in grocery for retailers to carve it out of the product cost.

Anurag Rohatgi, Director, Omnichannel Solutions, SCA llc

As more and more retailers are considering a form of delivery, the idea of a service which picks up from multiple stores and either delivers or makes available your purchases at curbside makes the most CONSUMER SENSE. And yeah, I'd pay a reasonable annual fee for this service.

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Jerry Gelsomino, Principal, FutureBest

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