Webvan

Failure Often Ends: Online Groceries Return

Webvan

Way back in the early days of the internet, one of the great ideas of web-based retailing was shopping for groceries online and having the order dropped at your home. Peapod, the first online service, actually began in 1986, before the internet had commercial businesses, and was on the web by 1996. Webvan, the idea of Borders Group co-founder Louis Borders, also was launched in 1996 with lots of expected success.

The idea, of course, never survived the Dot-com disaster. Webvan raised over $800 million in investment and was building a billion dollars worth of warehouses. But it was out of cash by 2001 and died in bankruptcy. Peapod was saved from complete collapse in 2000 when it was acquired by Royal Ahold, which took it back to handle orders and deliveries for its chains, Giant and Stop & Shop.

Still a bad idea need not always stay dead or even bad. In a day when most of us use lots of retailing on the web for things we need, the online grocery story is back and growing fast. A study by Nielsen finds shoppers around the world are searching for more services from grocery online delivery companies.

Nielsen table

The Nielsen survey gave considerable expectation for a lot more online grocery delivery. The global data found most of the choices generally in the low teens for regions except for delivery of online orders of groceries, which already totals 25%. There is a wide spread in different regions, with 37% in Asia-Pacific currently taking online-based deliveries, while only 13% making such a choice in Europe and 12% in North America. But the “willing to use” category in all regions in the future is close to the global average of 55%.

There is evidence of the return of online grocery shopping. Most older shoppers–except perhaps for the oldest who have trouble getting to the grocery store on their own–are used to the stores. (Personally, I am fond of a trip to our Korean market at least once a week for its excellent produce and seafood.) But times are changing, especially with moves from suburbs to cities where driving and parking troubles help online shopping win.

It shouldn’t be a surprise that, all over the world, the move to online shopping should be growing fastest among the relatively young. In the U.S. at least, they are frequently choosing to live in cities. They often don’t own cars. And they have been used to buying everything they needed online since they were children.

Not surprisingly, other retailers are trying to get into the game. Amazon has jumped into a market it has avoided for a long time by launching AmazonFresh. It started in Seattle as a very small test in 2007, but began serious moves opening in the biggest California cities and, most recently, parts of New York and Philadelphia. A number of other companies, mostly in New York and other crowded cities, are starting or expanding quickly.

I don’t think online grocery service will put grocery stores out of business any more than Amazon has put retail stores out of business. But it is likely to gain shoppers from computers or, more likely, mobile devices. The next fight, and a big interest for the grocery stores, is a growing one between online and delivery systems sponsored by existing chains and online specialists.

Published by

Steve Wildstrom

Steve Wildstrom is veteran technology reporter, writer, and analyst based in the Washington, D.C. area. He created and wrote BusinessWeek’s Technology & You column for 15 years. Since leaving BusinessWeek in the fall of 2009, he has written his own blog, Wildstrom on Tech and has contributed to corporate blogs, including those of Cisco and AMD and also consults for major technology companies.

6 thoughts on “Failure Often Ends: Online Groceries Return”

  1. I’ve been buying most of my groceries online for over 10 years now…on the website of my neighborhood supermarket. There were a few early pure-play new entrants early on, they got steamrolled after a while, the old players have better service (home delivery, drive-through…), better web sites, more choice, better prices, local customer service… In France, Amazon does offer some dry goods/household items, but moving to fresh/frozen would be an ambitious and expensive move.

    Doesn’t Walmart offer home delivery ?

Leave a Reply

Your email address will not be published. Required fields are marked *