Many observers who think about the future of home shopping predict that it will start to really take off four or five years hence, and, during the next five years thereafter, perhaps start to capture 10% or so of all food-at-home dollars.
Further, it's generally predicted, most of the home-shopping business will center on products such as grocery staples, paper goods, cleaning supplies and the like. The reasoning is that the home-shopping sector would settle on products that trend toward the commodity side and that are consumed in a predictable fashion. That's because consumers need such items, but most don't particularly care where they are sourced or what they are called.
This line of reasoning seems correct to me, but there's an article on Page 21 of this issue of Supermarket News that calls some of this conventional logic into question. (By the way, a news feature about the experiences, or expectations, of a few supermarket chains concerning home shopping starts on the same page.)
The news article in question is based on a Cornell University survey of 60 chain and independent operators in North America, findings of which were presented at the annual meeting of the New York State Food Merchants Association.
Let's look at the most unexpected finding: Shoppers making use of currently available home-shopping or delivery services are ordering perishables with great frequency and in considerable volume.
The news article, written by SN reporter Lisa A. Tibbitts, specifically mentions the experience at King Soopers, Denver, where it was discovered that 21 of the top 25 items ordered for home delivery are perishables. More broadly, nine of the 10 items most frequently ordered through Peapod Interactive are fresh produce.
Maybe this makes good sense when you think about it: After all, it's perishable products that have the briefest shelf life and must be replaced most often. What does this perishables focus mean? It first brings to mind the possibility that retailers with a favorable perishables image should be able to leverage that image even more by offering delivery. That's because customers who plan to allow a retailer to pick their perishables will channel business toward companies they trust.
Secondly, there's also danger to be considered by delivery providers, the danger of muddying a favorable image and threatening their shop-at-home business: Should it happen that shoppers are disappointed by remotely ordered perishable items, they aren't likely to order more perishable products sight unseen, nor continue to think kindly about the source of unappetizing products. Another downside factor is that the picking of high-quality produce for home delivery is a highly labor-intensive activity.
Now that we're deep into the topic of home delivery, let's take a quick look at a few other findings of the study that might be surprising:
Market penetration of the home-shopping style is moving quickly. About 40% of companies surveyed had some type of home shopping or delivery service in place and another 18% said they would start programs next year. That means that well over half the chains in the survey may offer some permutation of home shopping by this time next year. This suggests the business may mature more quickly than is usually thought.
Home delivery is a high-ticket business. Delivered orders average $77, double the average in-store ticket cited by survey respondents.
Perhaps further demonstrating the price inelasticity suggested by high-ticket orders, many of the respondents who posted lists of products available for home delivery -- whether by means of printed or electronic catalogs -- didn't mention item prices; electronic catalogs were more likely to include item prices than were paper catalogs. In any case, the relative lack of pricing information underscores how convenience-driven the business sector is and suggests what margins might be generated.
All in all, the study shows clearly that a solid, high-end business is in the making when it comes to home shopping.
