As More Markets Go Online, Checkout Begins Behind the Computer

As technology is becoming an increasingly important part of society, the Internet is becoming an increasingly unavoidable part of business.  However, Joe Porricelli Sr, the vice president of the Porricelli food stores, warns retailers that the Internet is still in experimental stages for both shoppers and sellers.  Online grocery sales are still very small, making up less than one percent of total supermarket sales in the US in 1999; clearly there is significant potential for growth. 

  According to Virginia Harte, associate editor of the Food Institute Report, it is to soon to tell what long-term effects the Internet will have on the way people grocery shop.  Furthermore, there is no real accurate way to tell what kind of impact online delivery and discount services will have on ‘brick and motar’ supermarkets. 

  A number of barriers exist that must be overcome if companies are to succeed with online services.  Money is a major factor; start up and online delivery costs for grocers are astronomical.  So far, few online grocers have even come close to breaking even.  Obviously the risks are greater for smaller players who are unlikely to be able to recover from a significant loss.  Other barriers include:

·        Consumer’s resistance to change, possibly limiting adoption rates of online services.

·        Many consumers don’t like the idea of not being able to touch or see items before purchasing.  This presents a challenge to retailers in changing consumer’s perceptions of grocery shopping.

·        Privacy issues: some consumers object to using credit cards online.  Others are reluctant to use online services because they know that everything they buy is recorded, and in most cases the information is easily accessible to manufacturers.

·        Some consumers complain about the limited number of brands available from online stores, and the amount of time it takes to search different categories to place an order.

·        Consumer unfamiliarity with technology and frustration with slow modems and computer glitches.

·        Integrating the Internet into a business is a major process, requiring considerable investments in both money and time.  For example, staff need to be trained to cope with the new technology. 

  The article proposes that the Internet and its growing number of online home delivery services haven’t revolutionised grocery shopping, they’ve brought it ‘full circle’.  The Internet has re-introduced the personal factor to retail service as an increasing number of grocery deliveries are made to a customer’s front doors, a common feature of grocer’s service pre World War II.  The use of technology to return to the past is catching on with consumers, with online services becoming increasingly popular.

  The power within the supply chain has shifted from the retailer to the consumer, a trend which is forcing companies to compete with both price and non-price competition.  Consequently consumers are now faced with more and more choice in the market.  On-line retail options for consumers now include:

·        Online coupons that can be printed our for in-store use.

·        There are Internet sites not built around stores, which allow customers to bid on the price they want to pay for groceries which they can get from existing markets.

·        Priceline customers can pay for grocery items online with a credit card, and then go to a participating store with a print-out of their order to pick up.

The intangible benefits the Internet can bring to consumers lives are also of importance.  For example, some online-grocers strive to make their websites as creative and fun for consumers as possible, in an attempt to ease the stress from people’s lives.  Others realise that time is an increasingly finite resource and focus on providing time saving online delivery services.

 From the supermarket’s point of view the rise of online grocers is increasing competition within the industry and is even threatening the existence of some companies.  “There was a time when you had to worry about a new grocery shop store opening down the road.  Now, you have to worry about the grocery stores that are available in people’s homes” (Porricellli).