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Online price check Hawaii's online grocers
By Betty Shimabukuro
Star-Bulletin
THERE are lots of reasons to hate grocery shopping: lugging heavy bags, playing bumper cars in the aisles, dragging kids through the store, forgetting the list ..."I generally never liked the shopping experience," Bill Sankey says. "I look at it as a big marketing trap."
This is ironic, as Sankey now shops several times a day on behalf of other people. His company, Hawaii Online Grocery, averages 20 deliveries a day of foodstuffs ordered via Internet.
Hawaii Online was one of three shop-for-you services that entered the retailing scene in April. Where once there were none in this line of e-commerce on Oahu, in a single month three independent services were online. Nine months into it, all are looking to the new year with some form of expansion in mind.
These are small businesses at the smallest level. Hawaii Online and Akamai Grocery Shopping and Delivery Service are owned and operated by husband-and-wife teams, with the husbands doing most of the leg work and the wives still working other jobs. At Online Grinds, Ruth Sheets runs the show alone, while working full time as a clinical nurse practitioner.
To get an idea of the premium you'd pay for delivery, we priced a market basket of goods from Sam's Club, including Spam, laundry soap, paper towels, fruit juice and frozen meats: Price check
These new entrepreneurs are no Web magicians, nor are they even experienced retailers. Sankey is a cabinet-maker; his wife Julie is project engineer for a construction company. Akamai's owners, George and Jackye Peacock, are a waiter/waitress couple.
But next month, Foodland Super Market raises the profile of the young industry with an online ordering service operated out of its Beretania Street store. "I think our customers are ready for it," Jenai Wall, Foodland's president and CEO, says. "We think it's a natural extension for us."
Where once there were none, soon there will be four, with different approaches to online shopping.
Akamai and Online Grinds offer Web sites as a point of introduction to their companies, but customers order by e-mail, fax or -- mainly -- by phone, making up their own lists and specifying stores. The customer pays the shelf price, plus a delivery charge, and the groceries are brought to the door.
Through foodland.com, shoppers will order by clicking their way through the Web site and pay through an online account. Their items will be collected and bagged, but they will have to drive to the Beretania store to pick them up (the service will expand to Hawaii Kai later in January and possibly to other stores from there, Wall says). Service fee will be $4.95 for any size order.
Hawaii Online offers the most amazon.com-like package. Customers click through an order form. Prices are based on Sankey's purchasing agreements with Costco, Sam's Club, Tamura's Wahiawa and several wholesalers. Final cost is generally a few dollars per item over retail, with no delivery fee for orders of more than $40.
Wall says Foodland's research shows customers prefer to pick up their groceries and just aren't comfortable with having someone come to their homes to deliver. The other companies, though, say delivery is the key to their market base. Their customers are people who can't drive or are too busy to make it to the store.
At Akamai, the Peacocks have the special needs of their 45 regular customers virtually memorized. One young mother has too many kids to take to the store, others are elderly or disabled, or just hate shopping. Some needed help just when recovering from an illness or accident.
Gail Frieborn is a typical customer, shopping twice a week through Akamai. She lives in Waikiki, doesn't have a car and lives up three flights of stairs.
Paying to have her food delivered saves time and trouble, not to mention the strain of carrying bottled water up the stairs, Frieborn says ("George is very strong").
"Why should you go out and fight traffic when somebody else can do it?" she says.
"And you only get what you need. When you go to the store, you're tempted to buy."
Going into the business, George Peacock thought his main customers would be the well-to-do. "But it doesn't seem to be the people who can afford it, it's more the people who need it."
Most Akamai customers shop ads and clip coupons, then call in with their store-specific requests. He will visit two stores per day per customer.
"One thing that I've found is customers are very store-loyal and they are familiar with what the stores carry. I have customers who send me their lists with the aisle numbers."
Sankey reports similar experiences. Many of his customers are college students and young professionals, with all kinds of reasons for needing delivery. "Some people order 10 cases of soda at a time just because they don't want to carry them."
What's the potential? Jupiter Communications, an Internet research firm, placed national online grocery sales at about $200 million in 1999, less than 1 percent of the $440 billion in total supermarket sales. Jupiter estimates a bump up to $800 million this year and $7.5 billion by 2003 as the industry expands.
A national pilot study for grocery retailers released in November anticipates even more growth -- up to $10 billion in online grocery sales in the same period. "Getting a Fix on How Consumers Value Online Grocery Services," by Willard Bishop Consulting and Pedi, Moestra & Associates, will continue over the next six months to evaluate the buying habits of online shoppers and those who prefer the old-fashioned way.
Online shopping is not for everyone, the report emphasizes. Many prefer the tactile experience of a trip to the market, the joy of browsing, of planning meals based on what they find, of reading labels. "If the online service attempts to re-engineer the entire grocery shopping experience, it runs headlong into routine behaviors consumers have grown up with, and it will be relegated to the sidelines by most consumers."
Online regulars spoke of the convenience of being able to check their pantries as they shopped, the lack of the tempting impulse buy, the peace of shopping from home. Few said they were actually saving much time, though, as they had to set aside time to focus on their needs and negotiate Web sites.
"We also saw sporadic patterns of use because the new services have not yet set down solid roots in the mindspace of users."
Locally, Sankey is thinking nothing but growth. He recently began warehousing wines and liquors for direct sale to his customers. He's also added an online pharmacy and fresh seafood, and would like to move into restaurant-made meals that buyers would heat up at home.
Sankey estimates that 70 percent of first-time users stay with his service and spend more than $40 each time -- above the national average of 65 percent; $27 per order. His No. 1 sellers, by the way, are wine, canned soups and frozen dinners.
He may do anywhere from five to 50 deliveries per night, sometimes enlisting his wife or, on very heavy days, a courier service. He's aiming for 250 deliveries per day, with warehouses around the island and several refrigerated vans.
The Peacocks plan to build Akamai up to 60 regular customers over the next year so that Jackye can quit her night job waiting tables.
"We could survive off 60," George says.
"If we're greedy, 90," Jackye adds, "and everything after that ..."
"... is icing on the cake," George completes the thought.
But that's just the beginning. They hope to continue to build, eventually moving the business out of their home and taking on employees to help with the deliveries.
The smallest player on this scene is Sheets at Online Grinds, who makes just a couple of deliveries each week. But she, too, is looking toward a bigger 2001. She retires from her day job this month and says she'll turn her focus to remaking her business plan.
"I absolutely will stick with it," she says. "I'm quite confident once we get the marketing end beefed up it'll pick up. A lot of it is word of mouth."
HAWAII ONLINE GROCERY
AKAMAI GROCERY
FOODLAND.COM
ONLINEGRINDS.COM
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