eCommerce Still in the Frozen Department for Big Chain Grocers

09/10/2008

Big chain grocers still haven’t warmed to the idea of eCommerce. They may be the last giant niche yet to embrace eCommerce. Data in the Internet Retailer Top 500 Guide shows the combined 2007 sales increase of merchants ranked to be almost $102 billion ($101.7 to be exact). Of this, the Guide reported that food and drug retailers only saw a modest 12% increase in sales by comparison, to $2.37 billion.

Why Are Grocers So Hesitant to Embrace eCommerce

For grocers, brick-and-mortar stores are the ones who prevail, not the Internet. National grocery stores are some of the largest retailers in the country. Sales figures bear this out with Kroger having reported annual revenue of $70.2 billion last year and SUPERVALU Inc. pulling in $44 billion. These are large retailers with thousands of stores throughout the country.

Publix, Delhiaize America and H.E. Butt Grocery Co., are some of the other major food retailers who haven’t embraced eCommerce.

Pointing to the colossal failure of Webvan in 2001, many national grocers haven’t embraced eCommerce because it hasn’t blazed the brightest trail for them. A more recent failure in the industry is the July 2008 implosion of SimonDelivers.com, which went under after almost 10 years in business. Declining customer interest and cost pressures forced its closing.

SimonDelivers.com’s assets were purchased by Coborn’s Inc., which operates such upper Midwest brands as Cash Wise, Little Duke’s and Save-A-Lot Food stores. It will begin operations in Minneapolis in October under the name CobornsDelivers.com.

In spite of the above, there are a couple of large grocers who bucked the “anti-ecommerce trend.” Royal Ahold NV and Safeway Inc. have exponentially increased their online presences. Royal Ahold NV, which owns Peapod, the second largest food and drug retailer in the Top 500 Guide, had web online sales of $339 million in 2007. Safeway had sales of $163 million the same year.

Overall, most national grocers use the web simply for branding purposes. There seems to be no real rush on their part to embrace the totality of eCommerce. They are still taking a sit back and wait attitude when it comes to eCommerce.

This lackadaisical attitude hasn’t lessened the interest of other niche sectors in the industry though. Internet Retailers Top 500 Guide reports that the fastest growing cataloger in 2007 was Green Mountain Coffee Roasters, which saw its online sales grow by an astounding 249.8%. igourmet clocked $13.8 million in sales in 2007. Staying true to its core – food gift baskets – this figure accounted for a 22.8% growth in sales.

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