While many direct-delivery online grocers have failed, this service is expected to do well because of an alliance with Stop & Shop.
10/24/2002
PROVIDENCE -- Soon, shoppers will be able to buy Pepsi on their PCs, oranges on their Apples. Peapod Inc., the online grocery delivery service, on Saturday will
expand its alliance with Stop & Shop into the city and surrounding
metropolitan areas. It will be the first time Stop & Shop will offer local consumers
a chance to order their groceries through Peapod. Stop & Shop has
been using the service to deliver groceries in the Greater Boston area
since 1996. Locally, it will deliver to 17 zip codes in Providence,
East Providence, North Providence and Pawtucket. "That area's just a huge area for Stop & Shop and very important
to Stop & Shop, so it just makes sense," said Peg Merzbacher,
marketing director for Peapod's Stop & Shop operations. Peapod, founded outside of Chicago in 1989, serves five markets,
including Chicago, Washington, D.C., Long Island and parts of
Connecticut. The Providence Journal Co. made an investment in Peapod in
the mid-1990s but later sold its interest. Through its agreement with Stop & Shop, Peapod serves roughly
30,000 customers, according to the company. This success has made it a
bit of a stand out, since many Internet grocery businesses have failed
in the past decade. "The direct-delivery companies have all largely failed," said Burt
Flickinger III, managing director of Strategic Resource Group, a retail
consulting agency. "The reason (Peapod) works that well is that Stop
& Shop's got great consumer confidence, has the highest volume
superstores in the country, on average, and Peapod historically has had
the largest order sizes." Many of Peapod's Boston customers, for example, are city dwellers
who do not own cars and are happy to pay as much as $10 for groceries
to be delivered. It helps that Peapod, along with Stop & Shop, is owned by
Netherlands-based grocery giant Royal Ahold. Peapod operates its
distribution facilities in the backs of several Boston-area Stop &
Shop locations, creating a considerable cost savings. This savings, coupled with the results of a test run of Peapod on
Cape Cod this summer, convinced the company to make a go in Rhode
Island. "We can travel what would seem like a considerable distance and
still have it work out," Merzbacher said. "The incremental
transportation costs are not prohibitive, they are very manageable." Customers who use Peapod access it through the stopandshop.com Web site and click on the Peapod button. From there, enter a location (Providence, RI) and start shopping. Peapod offers less than half of everything that typically can be
bought at Stop & Shop. But it does carry the most popular products,
Merzbacher said, and updates its selection weekly based on customer
feedback. And while customers can't smell the melons, they can choose the
ripeness of their bananas and select from 16 different tofu products. The process can be slow, depending on the user's online server. If
the shopper has a Stop & Shop card and enters its number, previous
shopping lists will be saved and that can shave time off the process. Peapod does not offer same-day delivery, but can bring the items the
next day. Deliveries typically are offered morning and night. A
delivery fee of $4.95 is charged for orders of $75 or more and $9.95
for orders of $50 to $75. The minimum order is $50. Many shoppers are willing to pay the fee if it saves them time, but it might not be for everybody. "I'd use it but I don't necessarily consider it convenient. You have
to wait and what if something comes up? I have to stay home because
someone's coming to my apartment," said Sean McAdam, who lives on
College Hill. "As far as the city goes, I'd rather just walk to a market or walk to a store." Merzbacher said that Peapod serves about 12,000 customers in Greater
Boston and that a lot of deliveries are to blue-collar communities as
well as suburban markets, and to the elderly and handicapped. "We really are trying to become an offering that Stop & Shop can provide in all of its trade area," she said. Lisa Fasig covers retail and consumer behavior. She can be contacted at lfasig@projo.com.
