CSD: Taking Convenience to a New Level
By Erin Rigik
Through a special arrangement, presented here for discussion
is an excerpt of a current article from Convenience Store Decisions magazine.
The milkman is making his rounds in Mountain Top, Pa. Good2Go
is enhancing its convenience offering by providing residents the option
of having fresh, all-natural and organic products delivered directly to
their front doors.
When partners Awais Ahmad, V.J. George and Thomas Job opened
the store in September 2008, they had no idea how popular their fresh,
glass-bottled milk from Hillside Dairy would become with consumers.
“We started using their milk in our store and it was
a big success, so that’s where the idea kind of sprung up about doing a
home delivery.” said V.J. George, senior partner and president.
The delivery service is a first for the area and began at
the end of May in Luzerne and Lackawanna counties, “where we feel
the market will demand this home delivery,” Mr. George said. Customers
seem happy to pay the $3 delivery fee. The company’s fleet of 10 trucks
makes the weekday deliveries.
The delivery service is allowing the store to expand its customer
reach without having to open additional stores. Once the delivery service
gets underway, the partners plan to consider extending it to more routes
in various nearby counties.
“Already we have 150 people signed up, and every day more
and more customers are inquiring or signing up at the stores,” Mr.
George said.
As evident by the number of people who have requested the
service already, consumer feedback has been very strong.
“Today, if you look at the lifestyle of a family both
the husband and wife are working, so it is very difficult to (find time
to) get the right products, and not all stores have organic products, so
that is the convenience proposition we are providing,” Mr. George
said.
In addition to milk, the service also offers organic ice cream,
butter and cheese, organic beef from grass-fed cattle, free-range organic
chicken and fresh baked bread from local bakeries. As time goes on, the
company may also begin offering regular products alongside the organic
and all-natural options.
“We feel it will be a successful venture and hope to
double our business to at least 300 customers by the end of this year,” Mr.
George said. Three hundred may be a modest number considering the popularity
the delivery option is currently generating. But, Mr. George noted that
as they gain new requests, he also estimated about two percent of the original
customers will cancel the service during the same period.
Discussion Question: How would you rate
the opportunity in home delivery for convenience stores? What are the
inherent challenges in making such as service work?
The challenge with home delivery has been and will always be the same–the “last mile” problem. Customer density is critical if you want to be able to make cost-effective deliveries.
For one convenience store serving a very local population with no competing home delivery choices, I can certainly imagine the service breaking even, but scaling will be difficult. How many areas will have the combination of affluent customers willing to pay $3 per delivery, enough density to allow for efficient routes, and proximity to a distribution point? And if they are able to build enough of those routes, where are the economies of scale? Will they build a separate pick-and-pack facility (a la WebVan), or will they keep picking from their convenience locations?
It will be interesting to see how things develop.
Emotionally, I love the idea. Practically, I’m a bit less enthused. Who doesn’t warm to the idea of fresh milk being delivered to your door (and in your mind, probably by a horse-pulled cart!).
The practical considerations are a little more daunting. The logistics and staffing required for a convenience store to make this happen with enough scale to warrant the initiative are what make this nothing more than a lukewarm idea for me. While every little bit helps a small business survive, I’m not so sure this is the ‘bean’ that will grow the magical bean stalk for them.
Good luck anyway!
How often have we been reading these stories over the past few years and seen one failure after another? Seems the only food delivery that has been successful is pizza. If this company thinks having 150 delivery customers is a success, well that’s great. I would think most companies would need to have the number into the thousands in order to be profitable.
I really like the uniqueness of their offerings and having home delivery is a great add on service, but I don’t think it should be the primary focus. You want your customers in your store buying more stuff. Delivery is nice but it’s not retail.
I’m with Kevin on this. The thought of have fresh produce and dairy products delivered to my home sounds great, but it’s not practical. If Good2Go can break even or turn a profit with 300 customers, they will be in good shape and will have succeeded where a slew of other companies have failed. Remember WebVan?…
There are several reasons why I do not foresee this being a meaningful opportunity for the c-store industry. The article does not provide a great deal of information about the store, but it does not appear to based on the typical categories. First, it is based on organics–a category that is at best minimal in the industry. Second, as part of their services they are offering organic beef and chicken neither of which is carried by most c-stores organic or otherwise. It sounds more like a Whole Foods than a c-store.
In looking at the just the delivery aspect, the article does not indicate how (or even if) they would handle age restricted items such as cigarettes. Beer is a large category for the c-store industry, but PA has some very different rules and by and large, c-stores can’t sell it.
The industry operates on relatively thin net margins and the $3 delivery charge is not likely to cover operating costs. Quick math indicates even with 300 customers getting an order once a week it generates less than $50,000. Given the cost of a vehicle, fuel, driver, insurance, etc. I just do not see it being a winner.
Differentiation dose not mean different! It means familiar. Consumers young and old are demanding more choice. This is a proven avenue of distribution that is successful and consumer friendly. It will prove to be will worth the effort. Positioning consumer friendly options directly for the consumer is always a win-win. The grocerant sector is booming and this is yet another signal of a company that gets it!
The concept may initially seem intriguing; the practicality of execution, long-term consumer receptivity and program scalability is proven to be a financial disaster.
Those consumers who sign on and enjoy having their milk being delivered–savor the experience because the over/under odds in the grocery home delivery industry is one year.
The big question I would have involve making sure the competencies of the food/c-store and that of a delivery organization mesh. It would seem to be a little more complex than a pizza/Chinese delivery process, but if they are cognizant of the risks in ordering, fulfilling, return processing, etc, it may be a unique offering. The questions remain; many have tried this in the past and most are small fractions of what they once were.
Good Luck.
I love the idea and actually believe it has a chance to do better than break even.
I would encourage Good2Go to divide their market into zones and open one zone at a time to help build a larger more condensed market area. As a zone builds momentum, open the next zone. Have a map in the store showing the zones and encourage customers to sign up to be notified when their zone opens. This would generate a buzz around their delivery service.
Another way to make this work is to educate the consumer on your assortment and build their shopping basket.
Finally, it would be great to see Good2Go use a fleet of vehicles that were electric. Customers that believe in organic items and fresh milk also tend to be energy conscious.
Good luck Good2Go, I hope you have started a trend that makes its way to Connecticut soon!
Genius idea, and I think that time-starved parents will love it. In addition, people have shown that they’re happy to pay a premium for organic products, and for service.
Now, if we can also get back glass bottles for Coke (keeps the drink colder), and televisions with knobs instead of impossible-to-find remotes.
Years ago in Minneapolis, two delivery concepts fell flat on their faces: The Grocery Wagon, which delivered groceries to homes for a premium, and Bringers, which picked up meals at nearby restaurants and delivered them to homes. That was before the Internet. That was before text messaging. That was before businesses could take advantage of technology and connect with their consumers on the business’s schedule. Back then, consumer purchases were largely pre-meditated and it was consumers who initiated the sale.
Today’s technology has changed our buying culture. It allows businesses to be in touch with consumers, to build trust, and take advantage of consumers’ ever-expanding array of impulse purchases. One way a store or business can stay top-of-mind with potential customers in the immediate area is to be on top of cell phone technology: The fact is that young African American men are our culture’s earliest adopters to phone technology. They’re already comfortable sending and receiving messages via cell phone, so why wouldn’t a local business make a point of communicating sales and the like to them? Properly presented, a store, restaurant, or business could set up a network where they let consumers know that something is available right away (and perhaps at a special price) for respondents.
Logistics would certainly have to be worked out. But taking into account cell phone technology, young people’s (especially young African Americans’) openness to it, and the increasing rate of impulse purchases makes me think that it’s a business model that has some merit. I’d love to hear what anyone else thinks.