The Online Grocery Industry
By Prof. Karen Clay
Major Players in
Online Groceries
Firms
Locations served
HomeRuns
Boston
HomeGrocer
Streamline
Seattle, Portland, Orange
County CA
Austin, Boston, Chicago,
Columbus, Dallas/FW,
Houston, LI, SF
Boston, D.C., Chicago
Shoplink
NY/CT, Boston
Webvan
S.F.
Peapod
A Sample Front Page
Basics
• Consumers sign up online with grocery
company
• Can shop anytime anywhere that they have
access to web interface
• Log in, select a basket of groceries, pay
using a credit card, and arrange for delivery
A Sample Signup Page
A Sample Grocery Store
Online Groceries
• Who are the customers
– “Streamline.com, Inc. ("Streamline" or the
"Company") simplifies the lives of busy
suburban families … Our typical customer
tends to be a dual income household with at
least one child and access to the Internet.”
(Source: Streamline, 10Q, Nov. 1999)
Online Groceries
– Peapod’s slogan is “Smart shopping for busy
people”, which tells you something about who
their customers are.
– “Peapod's typical members are females
between the ages of 30 and 54, households
with children and dual income households.
… Median income exceeding $60,000 per
year.” (Source: Peapod, 10K 1999)
Online Groceries
• How to they attract customers
– Referrals (Webvan, Peapod: $20, Homeruns:
$10, Streamline)
– School programs (Webvan donates a
percentage)
– Group affiliation (HomeGrocer)
– Word of mouth (all)
– Media advertising (all)
– Direct mail (all)
Online Groceries
• Value added
– The basic value proposition is having your
groceries delivered
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Books/magazines/office supplies
Stamps
Flowers
Gifts/toys/games
Nonprescription drug items
Online Groceries
• Additional value added
– Not having to be home for delivery
• Streamline and Shoplink install refrigerators and
shelving in your garage, so they can deliver any time
– Other services
• Dry cleaning, film processing, shoe repair, packages
(SL, ST)
• Videos (ST)
• Bottle and can redemption (SL)
• Alcohol and Tobacco (WV, PP)
Online Groceries
• Sample prices for some markets
– Per delivery
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Webvan (free > $50, $4.95 otherwise)
HomeGrocer (free > $75, $9.95 otherwise)
Homeruns (free > $60, $10 otherwise (min $30))
Peapod ($9.95)
Online Groceries
– Subscription
• Streamline, $30/mo weekly, fridge and shelving
• Shoplink, $25/mo weekly; $39/mo weekly fridge
and shelving
• Peapod ($4.95/mo + $5/delivery)
• Peapod ($19.95/mo + free delivery on orders >$60)
Online Groceries
• Trying the product
– Experience good
– Offer various promotions to get potential
customers to try
• Free delivery (Homeruns $60, Homegrocer 1st
order, Webvan until Jan 31)
• Free months of service (Shoplink, Streamline)
• Free groceries (Streamline, Webvan, Peapod)
Online Groceries
• Turning one-shot customers into repeat
customers
– On monthly plans, customers are committing to
an ongoing relationship
• Satisfaction guarantees
– In per order relationships, firms seem to be
banking on excellent customer service to bring
people back