The following column, which appears each issue, looks at new and emerging trends in direct response marketing. Alternating columnists are David Foley, a specialist in database marketing programs, and Fransi Weinstein, an award-winning creative director.
Convenience can be costly when it comes to shopping for basic grocery and household items, yet it is the price that many time-starved people – those who clutch a mobile phone, carry a pager or, unthinkably, both – are willing to pay, simply because their time has value.
Many businesses have been created just for such consumers, including the ubiquitous variety/milk/convenience store (sprouting up daily at a gas station near you!) and, more recently, specialty Internet sites. Among the latter, Peapod and netGrocer are well established in the U.S. Now, Canadian-developed Grocery Gateway enters the fray.
Grocery Gateway launched officially in Toronto recently, following eight months of beta testing by about 400 households. Log onto its Web site (www.grocerygateway.com), browse the virtual aisles, place your selections into the shopping cart, pick your ‘delivery window’ (a three-hour time block on a specific day), and your grocery shopping is done. Grocery Gateway does the grunt work for you – its ‘selectors’ pick your order, check it out and cause it to be delivered to you during the requested timeframe.
Customers pay by cheque, debit card, Visa or MasterCard when their order is delivered. With wireless technology, cash is neither necessary nor desired.
‘Our job is all about pulling down the barriers to Internet grocery shopping,’ says Bill Di Nardo, the company’s 30-something president and former business unit manager in the packaged goods world.
It costs nothing to sign on or order and grocery prices are identical to shelf prices at its partner retailer, including its advertised weekly specials. All orders are backed by a 100% satisfaction guarantee. The only constraints (if they can be described as such) are a $45 minimum order and $6 delivery charge. ‘To be successful, our business model requires critical mass and route density, so we are serious about attracting and retaining customers,’ Di Nardo says.
In the Greater Toronto Area, Grocery Gateway’s retail partner is Longo’s, a fresh fruit and produce store that has mushroomed (no pun intended) from a single out-of-the-way location into nine conventional supermarket locations. Longo’s has a solid reputation for quality and innovation, too – for some time, its customers have been able to fax an order to a store location and pick it up later – so it seems appropriate that it should join this new venture.
‘Longo’s is a partner in every sense of the word,’ Di Nardo says in reference to Grocery Gateway. ‘They are helping us all learn about grocery merchandising.’ As well, Royal Bank, Compaq, IBM, Balisoft Technologies and Environics are participating. ‘We have been able to launch without spending millions by attracting partners which offer products and services that we need to grow our business,’ Di Nardo says.
And the growth potential looks very appealing – perhaps $5 billion in online grocery purchases in Canada by 2004 – largely because it saves people so much time. On average, consumers spend 156 hours a year grocery shopping compared to only 20 hours a year if they did it online. That’s 136 hours saved – in Toronto or anywhere else for that matter. Di Nardo acknowledges that the company is talking with potential retail partners in other parts of Canada, and in the United States as well.
But can Grocery Gateway make money? Is it a business model for e-commerce? On the surface, the company has just a single revenue stream, the $6 fee it charges to pick, pack and deliver a grocery order. However, Di Nardo says Grocery Gateway is also ‘fully rewarded’ for bringing a customer to Longo’s. (Whether this ‘reward’ grows over time, as the value of a single customer’s purchases and the number of repeat orders grows, is another question.)
In addition to the revenue streams, there are costs avoided. The company enters the Internet-based grocery business without having to build a warehouse, or buy a single case of soup. It benefits from the reputation of its retail partner. And, it is ‘scalable’, not only in terms of the number of markets served, but also within the delivery area of any particular store location – it can add or reduce the number and/or hours of pickers and drivers as the volume of orders dictates. Currently, there is a core group of about twelve employees and, of course, a computer!
David Foley is a marketing consultant and an instructor in database marketing at York University in Toronto. He may be reached at (416) 253-1224; by fax at (416) 253-4637 or via e-mail at dfoley@idirect.com
