10 Reasons Why Online Grocery Shopping Is Failing

By Jason Steele | July 20, 2011 AAA

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.)

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