Publix supermarkets to offer online ordering
Can Southeast-based grocery succeed in profiting where so many others have failed?
Wed, Aug 11, 2010 at 01:02 PM
Image via Wikimedia Commons
In Tampa and Atlanta, Publix customers will soon be able to order their groceries online for pick up at a store location of their choice. A boon for busy folks who don't want to spend time shopping for groceries but still want fresh food, the new service is set to debut at the Toco Hills store in Atlanta on Aug. 9. No minimum is required, though a $7.99 handling fee will be tacked on to every order, regardless of size.
For now, this service is a test, and considering how many companies have failed at the seemingly simple idea of grocery delivery in the past (including Publix itself, with its now-defunct Publix Direct service), it's a wise move by the grocery giant to take it slowly.
Huge losses have made the online grocery business a cautionary tale; Kozmo, founded in NYC in 1998 by venture capitalists, promised home delivery within an hour via bike, car, truck or foot for urbanites in Portland, Boston, San Francisco, Atlanta and other cities. After allegations of racism surfaced (the company was later exonerated), the company spectacularly flamed out. It was only able to capture the not-big-enough student and young professional market. The company lost $23.6 million, despite initial heavy capital investment of $250 million and plenty of promotion. The failure was blamed on the dot-com bubble bursting, but some analysts said the model itself was flawed; there was just no way to make money delivering small-value items to disparate populations, even in urban environments.
Similarly, WebVan, based near Silicon Valley, went bankrupt in 2001 because it couldn't profit from its 'credit and delivery' service which promised drop-off within 30 minutes. At its peak, WebVan also operated in Atlanta, Dallas, San Diego, Los Angeles and others. Also WebVan was initially well-invested, critics say the company spent too much in infrastructure investment before the business got going, and when it never did, major losses ensued. But companies keep trying the idea, and with millions more people online in every age group, and high-speed Internet widely available, perhaps it was just an idea ahead of its time.
Fresh Direct is probably the most successful version of the grocery-delivery biz, but the company only operates within the lucrative (and very concentrated) population of New York City, where hauling the basics home can be a strain, and delivery services are commonly used in other categories. Zifty.com delivers DVDs, magazines, snack foods and restaurant to-go orders, but not groceries, and Peapod by Stop & Shop (which has a minimum order of $75 and a fee of $11.95) serves the Northeast, New York, New Jersey, parts of Maryland and Virginia, and Chicago. Interestingly, the bulk of the delivery services that have been successful existed before the rise of the Internet. Peapod was founded in 1989, and Mr. Case in Toronto started up in 1984 and both still profit today.
Publix runs more than 1,000 stores in Florida, Georgia, South Carolina, Alabama and Tennessee. The chain operates 145 stores in the Atlanta area alone. Perhaps the time is finally right for low-cost home delivery of groceries ordered online. Considering Publix has already tried and failed in this area, they could be poised to do it right this time around.
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