Publix Abandoning Curbside Service
In August of 2003, Publix Super Markets announced it was closing its online grocery and home delivery business, roughly two years after launching the service.
In August of 2010, Publix came back with a test of a new online service allowing consumers to drive to a store for a pickup at curbside for a $7.99 service fee in addition to the cost of groceries. Now, the grocery chain has announced it is abandoning the test.
Publix spokesperson Shannon Patten said the reason for the move was straightforward. Publix Curbside, while having some fans, did not generate enough business to warrant going ahead with the service.
"The number of consistent customers who chose to use this service was considerably less than required to meet our predetermined expectations," Ms. Patten said in an email. "The majority of our customers love their Publix and still prefer to have the interaction with our associates."
A RetailWire poll at the time of the Publix Curbside launch found respondents split on performance expectations for the service. Fifty percent said it would be very or somewhat likely to succeed, while 43 percent thought it somewhat or very unlikely to succeed. Seven percent were not sure or had no opinion.
Discussion Questions
Discussion Questions: Does the decision by Publix to drop its Curbside service have broader implications for online grocery as a whole? How confident are you about the future of online grocery in the U.S.?
In the US we have learned that online grocery shopping works where there is dense vertical population, limited auto ownership, and high household incomes. For the most part, the marketing area for Publix has none of that. The broader implication is that online grocery shopping will probably not be successful in the near term where people live in houses, drive cars, and make less than $250k per year.
David nails it. Extra-store delivery only works where there is high density. Lacking these two factors, it’s a cost without a sufficient bump in retail to make sense.
Not a surprise that they dropped it; what is the customer paying for? To not have to go into the store. The customer doesn’t save enough time. I think online grocery and delivery to the home is worth paying for and more convenient for the customer. I’m seeing more Peapod trucks in the Northeast!
More local home delivery is on the move, even local farms delivery to the home. I’ve recently seen the milkman coming back, delivering local organic milk.
My experience in this space tells me that there must be critical mass volume for this type of service to break even and those who try and then drop the service do so as fixed costs involved are just too high to overcome. In addition, Publix has a reputation of pulling the plug on initiatives if they do not achieve pre-determined goals. They seem to be very pragmatic about this.
It should also be noted that curb-side service and home delivery have two very different customers and business models. My guess is that the Publix shopper, which likely skews older and more upscale, is not yet compatible with this type of service in the numbers necessary to make it viable. Perhaps a to-the-door home delivery service might have been a better trial for Publix given their shopper base.
Other supermarket retailers who offer curb-side pick up (that I have spoken with) have not been overwhelmed with monetary success of this type of service, but are looking at this service in the long view, knowing that having an online option for shoppers will become increasingly important.
I for one, would not project the decision at Publix as a judgement on the general viability of online grocery shopping. I think there will be tweaking and adjustments along the way to find the right program for each retailer who chooses to enter the fray.
I agree with David’s explanation above. The message here is that online grocery has yet to develop enough karma with most people to cover the service charge.
Curbside pickup is a retailer invention, not a consumer need, desire or want. Retailers thought they could compete with home delivery without the trucking cost. The consumers view each differently. If I have to drive to the store I might as well pick out my own produce and meat. If a retailer provides a poor in-store experience then curbside pickup might slow the time it takes to declare bankruptcy, but it will not cure the ills.
The hallmark of great supermarket chains — like Publix — is the in-store experience. Fresh departments and restaurant-quality hot meal departments. Pizza, Chinese, Barbeque, etc. How is that relevant to home delivery or curbside pick-up? Without the in-store pizzazz, supermarkets are all pretty much the same.
Online grocery shopping for home delivery is for those who can’t get out of the house. That makes sense in high-income neighborhoods with older populations. I live in one of those neighborhoods, and the Schwan’s home delivery truck cruises our streets like a crack dealer in South-Central L.A.
But curbside pick-up? Our Raley’s chain (Sacramento, etc.) recently began offering “ecart,” with one of their test stores in my neighborhood (Lincoln, CA). Lots of signs and a designated pick-up area in front of the store. I shop the store several times weekly, and have yet to see any orders staged for pick-up or orders being picked up. The check-out kids say there’s no action. Having been the marketing VP for that chain and a supermarket junkie, you know I’m watching and asking questions.
What is the benefit to a supermarket to encourage shoppers not to come inside? How does that increase impulse sales, or fresh department sales, or sushi sales? I’d love to see the ROI for ecart. I’d like to see how curbside pick-up increases sales. I don’t see how it can.
I never understood the idea of charging someone $7.99 to have to leave their house, drive all the way to the grocery store and have someone already selected your groceries and bag them for you to pick up. What in the world value is that to a shopper? It may be faster, but I would argue that it’s definitely not easier. In fact, that sounds like an expensive hassle to me. The better solution would be delivery to the home — that would be worth the extra fee and shoppers in large cities around the country do it every day via Peapod and similar services.
That said, I don’t think Curbside would have benefited Publix that much in the long run and the abandonment of the rest shouldn’t hurt them either. Online grocery service will need to be continue to up the ante for shoppers to truly define and deliver a reason to engage. I’d be interested to see stats on the number of people who use online grocery sites from a frequency standpoint as well as a regional saturation perspective. I’m guessing the B and C counties are not where this phenomena is going to take off.
Grocery retailers have moved in and out of the online grocery/pick-up/delivery offering as long as it has been an option. Few, if any, are actually successful unless they are in a very dense urban demographic. Even in those cases, it has not captured much of the market or even likely to at any level of those involved expectations.
Online grocery retailing to the masses will achieve success in specialty niches. While I rarely say never, in this case, it will never be the market that its hype predicted as something grocery retailers HAD to do. Successful grocery retailers selling online will exploit a unique offering for products and services that are not necessities but desirables that can’t be found in their normal tours of shopping their regular stores. I have taken this opportunity for these types of items via Amazon. I assume that many others have also. It is in this area that the market will continue to chip away at traditional supermarkets.
The issue is one of utility. Is the utility gained by the time saved (what they get) in ordering their groceries from home greater than the inconvenience of the curbside pickup (what they give)?
It may be worthwhile to consider a program which seems to be working for Walmart called “site to store.” It allows customers to shop online, order/pay for their product online and have it shipped to their local store…for free (they avoid having to pay the cost of shipping their purchase to their home). Customers are notified when their items are ready for pickup and drive to the store to pick it up themselves (note that this service does not currently include perishable items).
The purpose of this comparison is to consider how customers value the services (the relative utility) in terms of cost and benefit. In this case they are happy to drive to the store (they give personal time) to pick up the items they purchased online (they get free shipping). So the value of free shipping and convenient ordering was greater than the cost of their time to drive to the store to pick up their purchase.
The retailer who is able to successfully determine this utility equation relating to online grocery shopping will be the one who determines the future of online grocery in the US.
As a mom with two little ones, I would have paid the $7.99 for the convenience of ordering online and picking up. However, that is because my tot can be quite a handful in the store and sometimes it’s not worth the headache. That being said, I love the experience of being inside the grocery store; touching, smelling, and choosing what I want to purchase.
We have had the Schwan truck around here for years, but that isn’t the same. I perceive Schwan as pre-packaged, and necessarily organic or healthy.
Much of my purchases for the house are made on eBay or Amazon. I believe there is a market for grocery purchasing. I know that keeping me out of the grocery, and having me order my items online would also probably help us (other families) stay within the grocery budget.
David nailed this one solidly, as he so often does. But I read all the comments we geniuses posted when Publix launched this (the link is just above the “discussion questions” box), and Ryan wins the “psychic” award, hands-down.
At least they have “failed fast” and so got the learning from the trial quick enough. Clearly the comments made by many would question the logic of a trial like this in this geography in the first place.
This therefore should have implications to other retailers considering similar paths….
If this operated as I believe it did (i.e. as Ms. Minor has described) then the primary cost to be covered was the labor for item selection and packing (and perhaps standing on the curb with a bag or two…or ten in hand) in which case a flat fee made little sense, since the labor would fluctuate wildly with how much was ordered; then again, maybe this is a feature of all online grocery concepts. Whatever. Having seen for the n’th time that this is one area where the ‘net probably has limited application, I think we’ll eventually see those “very and somewhat confident” numbers down into the low double digits. I know RW readers are a big fan of online in general — and rightly so — but I think in this area it’s time to wave the white flag (even if only a YouTube video of one).
The value of curbside service is perceived in the areas well discussed by David, but also in consideration of the shopper groups involved. For Publix, with many South Florida stores that serve a very high proportion of seniors, this wasn’t an important service — they are not usually online shoppers, preferring the excellent store experience at Publix, don’t buy large quantities of heavier/bulk items at Publix, and are price conscious; the $7.99 would be considered expensive in view of their shopping habits. There are shopper groups where online is growing, but there is more for grocery retailers to learn to make it useful for their core shoppers.
Another issue Publix has is that they have cool stores with very friendly people. Why would someone pay not to experience the store? I work for their competitors and I always leave Publix feeling better about myself. Imagine if I was a customer?
I think this is an interesting development and would assume that the decision was made based on careful consideration of the experience to date and opportunities seen in the future. Bottom line, it wasn’t profitable enough either in direct sales/profits or in terms of driving customer loyalty to warrant continuation.
I do think that online grocery and home delivery will get here, but there is still much work to do in terms of optimizing distribution, transportation, logistics, and quality. Will be interesting to see if over the next five years, companies like Amazon and UPS will be able to create the right compelling value proposition to tip the market. My prediction, they or some partnership like them, will.
Wow. 2000 retailers have been making a profit, and doing very nicely with online grocery shopping in a store pickup model.
The facts do not support the comments below.
There is no question that the grocery consumer is using an array of online and mobile tools to better meet their needs drivers. There is no question that more consumers used these tools this week than last, and more will use them next week than this. There is no question that the available tools are in their infancy and will improve in their ability to meet consumer’s needs drivers.
Publix competes today against sellers who offer online and mobile tools for closing the deal with consumers who increasingly want those tools. You cannot win if you do not play.
I am familiar with a couple of Raleys Stores that offer the eCart service (free with $100 order) and have yet to see any activity for the service. It is my understanding if they do get an order, they have a courtesy clerk go out and pick the order.
Another piece of this is how well the website interface interacts with the consumer. Raleys won’t let me see their eCart website as a guest. What a shame, because I don’t want to sign up. If you are making the customer’s “experience” with you via the computer and via the parking lot, that website better have a tip top interface, easy navigation, and the parking lot better be pristine with a friendly clerk to bring your order out and load it into your vehicle.
The key issue is, and will continue to be, the customer experience — namely, online versus in-store. “Going grocery shopping” is a social activity, even in the digital age. I usually run into someone I know at the grocery store and it’s part of the experience. What we’re learning about e-commerce is that social-shopping adds value — just ask Amazon. Online grocery services should consider the customer experience, not just pushing products from point A to B.
How about a real-time virtual store environment that functioned like a MMORP? Customers would create avatars, walk around the store to select items, meet other shoppers in real time, allow manufacturers to create demos or “mini-games” where customers earned discounts and coupons. Now that would focus on the customer experience.
What was interesting to me with regards to the pilot in the Atlanta area, is that many of the senior citizens who used the service really enjoyed it and found it to be incredibly helpful. Use Case: Wife was driving and husband had difficulty walking. Unfortunately, the comments of those who really liked the service were buried at the bottom of the AJC article, and I’m not sure those insights ever made their way back to the team who organized the pilot.
Perhaps, a tailored offering for a segment would have been a good pilot. Or, piloting a segment of buy online items which ship from store in subdivisions that have over 1000 homes. Or piloting in areas where the nearest grocery retailer is 20 minutes away would have delivered a different outlook on the opportunity.
Here’s an example of a grocery retailer in Singapore that is doing well, and with a population of 5.2 million, maybe the economies of scale play out better in Singapore than in Atlanta.