Report: Net Grocers Gaining Ground

Americans are growing more comfortable with buying their groceries online, according to a report released Monday by the University of Georgia.

According to two surveys, taken 18 months apart by the university, there has been a “dramatic change” in the number of experienced online grocery shoppers and the number of people who are willing to buy all of their groceries online.

In the initial survey, only 14 percent of respondents had purchased their groceries online for six months or longer. However, in the second survey, that number had risen to 43 percent.

Similarly, the percentage willing to buy all of their groceries online grew from 48 percent in the first survey to 79 percent in the second.

Slim Margins

“The U.S. food retailing market is highly competitive and has notoriously low profit margins,” said Dr. Brenda Cude, co-author of the study and chair of the Housing and Consumer Economics Department at the University of Georgia.

“That means that online shopping doesn’t have to become mainstream to have an impact,” Cude said.

Cude and her co-author, Dr. Michelle Morganosky of the University of Illinois, will present their findings in April at the annual meeting of the American Council on Consumer Interests in Washington, D.C.

Timing is Everything?

As many e-tailers have found, online grocery e-tailing is fraught with complications, because many consumers are particular about the quality of the groceries delivered and the timeliness of the delivery.

“Consumers are concerned about a lot of things when it comes to online grocery shopping,” Cude said.

Typical consumer concerns, according to Cude, are the organization of the Web site, the quality of the produce and meat selected by the stock person, the issue of what happens when a desired item is out of stock, and what happens when the eggs are delivered broken.

On the other hand, there is evidence that consumers are becoming more willing to let the Web grocers choose their produce and meat. The original survey showed that nearly 33 percent of respondents said they would not buy meat or produce online. However, by the time of the second study, that number had dropped to 15 percent.

The Bottom Line

Despite the intricacies involved in online grocery shopping, analysts believe that the home delivery of groceries and other sundries will survive, but that some current players may not, especially those — like Webvan and Kozmo — that are trying to deliver everything.

One model that is likely to succeed is a brick-and-click partnership between a dot-com and a local grocery store. Many analysts believe that local grocers have an advantage because people feel more comfortable ordering from a familiar name.

E-Grocers’ Slump

Online grocers have been hit hard by the dot-com downturn in recent months. Earlier in March, Peapod announced it was pulling out of the San Francisco, California area and referring its customers to rival Webvan.

Peapod said the decision was “part of a larger business strategy” the company is pursuing through its partnership with Royal Ahold.

Webvan has had its own set of problems, including the departure of its founder, Louis Borders, as chairman of the board in February.

Borders’ departure was followed shortly by the news that the company was slashing 220 jobs in a bid to preserve capital.