During the first dot-com boom of the late nineties, online grocery shopping was supposed to be the next big thing. Indeed, one could have made a fortune in this business, but only if you were able to short sell one of the many companies that went public and subsequently failed.

TUTORIAL: The Dotcom Crash

Years later, there was a resurgence of interest in this service, but history repeated itself. Although some companies still continue to develop offerings, observers ponder the question: Why does online grocery shopping continue to fail? Here are 10 reasons why.

1. Grocery Shopping Is a Social Experience
Families go to the grocery store together to browse the aisles and plan their next week's meals. Single people even visit specific stores in order to attract potential dates. None of these activities are feasible with the online shopping experience. (For related reading, see Tips For Keeping Your Financial Data Safe Online.)

2. Purchasing Produce Is a Tactile Process
Shopping for fruits and vegetables online would be as useful as picking out paint colors over the phone. Internet grocers couldn't possibly spend the time and money necessary to take a picture of each actual piece of fruit, but even if they did, you couldn't hold it, shake it or tap it to determine its quality.

3. Fish and Meat Are Best Purchased by Sight
When buying a steak, shoppers want to see the cut they are getting. They can determine freshness from the color and the odor. Once again, online pictures, even if feasible, can't communicate the nuances a customer is looking for in a nice cut of meat or piece of fresh fish.

4. Freshness Matters
Local supermarkets bake bread each afternoon so that shoppers can return home with a fresh loaf. Shoppers rush home to ensure their ice cream won't melt and their lettuce doesn't wilt. Grocery delivery requires that you stick to a schedule in order to be there when your food arrives. If you can't immediately cool your ice cream or lettuces, this all-important freshness is lost. What is supposed to be a convenient service becomes an inconvenience for many who would rather maintain a flexible schedule.

5. The Right Technology Hasn't Yet Been Applied
We can envision a day when supermarket websites show virtual products on shelves that can be visually browsed. But so far, no store has created a more innovative interface than your typical web merchant. Until a grocer makes shopping online faster and easier than browsing the aisles, people will continue to visit the supermarket instead of ordering online. (For related reading, see Technology Sector Funds.)

6. Grocery Shoppers Do Not Use Recurring Lists
Online grocers tout the ability to let customers create a list of items to be purchased on a recurring basis. But that is just not how most people shop. People like to try new things based on the current prices, their changing appetites or just on a whim rather than order the same food over and over again.

7. No Cost Advantage
The premise behind internet grocers was that shoppers would pay more money for goods delivered to their door. However, the opposite is true. Most shoppers will only order groceries online when they can be assured of saving money. Amazon and other web retailers cut consumer costs by centralizing their products in out-of-state warehouses. This way, they can use national shipping infrastructures, minimize their locations and save consumers the sales tax.

In contrast, an internet grocer must have a warehouse in every metro area along with their own fleet of specialized delivery vehicles, all while charging the same sales tax as a competing supermarket. Due to these expenses, grocery delivery services could cost more than food purchased at a local supermarket. (For related reading, see Online Banks: Lower Costs And Little Sacrifice.)

8. Consumers Dislike Delivery Time Windows
The last thing anyone wants to do is replace their spontaneous supermarket shopping experience with an ordeal similar to waiting for their cable television service to be installed. Most would much rather make a quick stop at their grocer on the way home from work than be forced to stay home between the hours of 3pm and 5pm in order to meet a delivery truck.

9. Supermarkets Are About Much More Than Just Food
When visiting a typical supermarket, it is hard not to notice that less than half the space is occupied by actual food. Supermarkets offer flowers, balloons, greeting cards, event tickets, magazines, books, movie rentals and much more. Other services often located inside or adjacent to a supermarket include banks, photo printers, coffee shops, liquor stores and dry cleaners.

10. Speed Matters
In Europe, shoppers typically purchase ingredients for their meals the day they prepare them. While this is a less common practice in the United States, customers often do shop for food at the last minute. This is why grocery stores are always open on Thanksgiving Day. Since the use of a grocery delivery service requires advance planning, it can't accommodate impulse purchases.

TUTORIAL: Stock Basics

The Bottom Line
When a new technology is invented, the road to mass acceptance is not always a smooth one. The world is still waiting for the widespread availability and use of flying cars, jet packs and commercial passenger space ships - even generations after their invention. Other inventions, like the computer itself, took decades of refinement and reinvention before finally becoming a household necessity.

Given both the promise and pitfalls, it remains to be seen whether online grocery shopping will become as widely accepted as mobile phone technology, or if it will remain a niche curiosity. Until then, there will always be a grocery store in every town. For related reading, see The Pros And Cons Of Internet Banks.)

Related Articles
  1. Investing

    Procter & Gamble Restructures, Sheds 100 Brands

    All businesses face adversity, and Procter & Gamble is no exception. We take a look at recent developments affecting this global giant.
  2. Economics

    Explaining Manufacturer’s Suggested Retail Price

    The manufacturer’s suggested retail price (MSRP) is just what it describes – the price manufacturers recommend that retailers charge for their goods.
  3. Economics

    Calculating Cross Elasticity of Demand

    Cross elasticity of demand measures the quantity demanded of one good in response to a change in price of another.
  4. Personal Finance

    What to Collect: Apple Watch vs. Luxury Watches

    The "iWatch" is a new player in the luxury watch world. But will it stand the test of time? Some points for collectors to ponder.
  5. Stock Analysis

    The Biggest Risks of Investing in Amazon Stock

    Find out which risks are most important to Amazon's shareholders. Learn which operational risks impact share prices and which financial risks affect investors.
  6. Investing

    The Quinoa Quandary for Bolivian Farmers

    Growing global demand for quinoa has impacted Bolivian farmers' way of life. Should the American consumer be wary of buying this product?
  7. Stock Analysis

    2 Reasons PepsiCo's Snacks Division is Crucial to Its Growth

    Understand the recent trends in the North American snacks market. Learn about the top two reasons why PepsiCo's snack division is crucial to its growth.
  8. Stock Analysis

    How Does Jet.com Work and Make Money?

    Learn how Jet.com is taking on retail giants Amazon, Walmart and Costco by promising to save customers an average of 10 to 15% on over 10 million items.
  9. Personal Finance

    Alpaca vs. Cashmere: Which Luxe Wool Is the Best?

    Winter is coming. Which of these luxury threads is most worth the price (and how to distinguish true luxe from cheap imitations).
  10. Stock Analysis

    Top 3 Stocks for the Coming Holiday Season

    If you want to buck the bear market trend by going long on consumer stocks, these three might be your best bets.
  1. What does marginal utility tell us about consumer choice?

    In microeconomics, utility represents a way to relate the amount of goods consumed to the amount of happiness or satisfaction ... Read Full Answer >>
  2. How can I invest in electronic retailing (e-tailing)?

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>
  3. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  4. What are some common ways product differentiation is achieved?

    There are many ways to achieve product differentiation, some more common than others. Horizontal Differentiation Horizontal ... Read Full Answer >>
  5. What economic indicators are important to consider when investing in the retail sector?

    The unemployment rate and Consumer Confidence Index (CCI) rank as two of the most important economic indicators to consider ... Read Full Answer >>
  6. What factors make it difficult to compare performance ratios between retail stocks?

    Companies that operate in the retail sector significantly differ in terms of their profitability and efficiency, making stock ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  2. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  3. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  4. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  5. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  6. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!