business news in context, analysis with attitude

by Kate McMahon

Ever since Peapod customers downloaded software from CD-ROMS to place a grocery order on their desktop computer back in 1989, you could consider them “early adopters.”

Given the current fierce competition in the online grocery sector, which is expected to grow five-fold over the next decade, it’s all the more interesting to see what those consumers want today.

Utilizing search data and customer feedback, Peapod last week expanded its Sort Feature, which allows shoppers to create their own digital aisle based on a variety of filters including brand preference, dietary needs, price and sales.

Peapod added four new nutrition filters – Non-GMO, Sugar Free, Vegan and Vegetarian – bringing to 16 the number of dietary preference filters on its site.

Carrie Bienkowski, the company’s chief marketing officer, noted that Peapod added an Organic filter in 2014 in response to key word searches. “It is now our most frequently used filter and all Peapod carts have at least one organic item.”

She told MNB that all evidence points toward increasing consumer interest and expectations in nutritional labeling, particularly regarding Non-GMO products. “People are much more aware not only about the food they eat but its provenance and sourcing.”

Those expectations certainly will play a role in the battle for grocery e-commerce, which includes such heavyweights as Amazon Fresh and Wal-Mart, online competitors Instacart and Fresh Direct, and major retailers such as Kroger, ShopRite and more.

A report from the Food Marketing Institute and Nielsen found that around a quarter of American households currently buy some groceries online, up from 19% in 2014, and more than 70% will engage with online food shopping within 10 years.

But will that grocery e-commerce be click-and-deliver? Or will it be click-and-collect at a brick-and-mortar store, a mini-warehouse or even a 24-hour, automated, refrigerated kiosk, as being tested by Wal-Mart in Oklahoma?

As reported on MNB yesterday, IRI is out with a new study saying that the click-and-collect e-commerce model is expected to be "a core driver of growth in consumer packaged goods” in because it combines the convenience of online shopping with fees or delays and delivery.

Peapod, which is owned by Ahold Delhaize and operates in 24 markets, actually now offers both options, including more than 200 pickup sites at Ahold’s Stop & Shop and Giant store locations. That ability certainly gives them a foothold in the future. Interestingly, its two markets showing the most growth in the past year couldn’t be more different demographically – New York City and central Pennsylvania.

While competitors are duking it out over the immediate gratification market – a basket of ingredients at your door in two hours – Peapod is committed to enhanced shopping tools, convenient meal solutions and the “big weekly shop.”

I think it will be fascinating to watch this sector as both Amazon and Wal-Mart become increasingly aggressive, which will pressure other competitors to match prices and delivery options. I do think that Peapod will have to do a better job marketing itself; both the Content Guy and I live in communities that are Peapod markets, and we were talking just the other day about how little promotion the service seems to get. (By comparison, Blue Apron seems to promote deals every other week.)

Two things are certain – the margins in grocery e-commerce are razor thin and the logistics leave no room for error.

As Bienkowski put it: “You have to deliver – literally and figuratively.”

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