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Woodmans chooses own-branded online grocery via GrocerKey



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Woodmans chooses own-branded online grocery via GrocerKey

More and more retailers are talking with Instacart (as we saw in Minneapolis recently), but some are choosing a different path. Janesville, WI-based Woodman’s weighed the pros and cons and ultimately decided to offer their own branded online grocery shopping services instead. This is the kind of decision many independent grocers will be facing soon, if they haven’t already.

Bucking the Instacart trend

Here’s how Woodman’s worked it out, according to the Milwaukee Sentinel.  

Employee-owned Woodman’s is known as low price leader in its market. It operates large stores (200,000+ square feet), with most of the space devoted to food and groceries. They were already looking at using Instacart to offer online grocery shopping when GrocerKey made a persuasive presentation. The pitch: We’ll build Woodman’s its own ecommerce platform to sell groceries online at in-store prices.

That got Woodman’s thinking differently. In fact, they thought the concept was so good that they decided to lead GrocerKey’s funding. Importantly, GrocerKey had grocery bona fides. Its founder, Jeremy Neren, was already running a successful online grocery delivery service called Munchie Delivery that was operating out of Capital Centre Market in Madison, WI. (Neren founded that service in 2006.)

Woodman’s new service – shopwoodmans.com – is priced higher than most of its marketplace competitors. Neren acknowledges that some customers will balk at the price, but he believes others will see the value of the time saved for a chore they would rather not do.  

BMC POV 

Should a grocery retailer partner with a third-party provider like Instacart or offer their own branded online shopping platform? There’s no right or wrong answer, so contrasting the key considerations in favor of each option is worthwhile. 

  • Going with a third party makes sense in two situations: (1) when a retailer doesn’t see online shopping as critical to their business, and (2) when, for whatever reason, they are not prepared to make the commitment needed fund and/or operate their own online grocery service. Either way, the third party can generate some additional sales – but, they will probably be just one of several grocer’s on the third-party provider’s marketplace site.  
  • Choosing to host an own-branded site and service is the better option when a retailer believes that online shopping is now (or soon will be) important to the future success of their business. This choice means the retailer maintains a direct relationship with customers, so it can ensure that the online experience reinforces their brand (rather than the third party’s).

For now, the working hypothesis is that retailers with a strong price reputation – such as Woodman’s – may have a greater ability to charge for and recover the costs that go with offering online grocery services. This is because the absolute cost of getting the product (price + fee) meets the needs of shoppers who expect maximum value for the service received.

*We apologize for the editorial error in the orginal copy published October 5, 2015 that stated both home delivery and pick-up were the same price.  That is not the case and the copy has been corrected. 

Related Posts

> When Instacart comes to town, expect some changes

> Publix & Shipt: One way to balance the costs and benefits of online grocery

> Wegmans and thinking about how much to charge for online grocery service

 

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Past Tense said:
Home delivery is a significantly more expensive service to provide than in-store pickup; thus I find it surprising they are charging the same price for both.
Cindy Christian said:
Hi Past Tense, Thanks so much for catching that editorial error. The fees are actually different for home delivery ($14.95) and in-store pick up ($9.95). The copy above has been corrected. Have a great day!
BlackBeltPJ Stafford said:
It is exciting to see the new development in ecommerce platforms tailored specifically to grocery stores and chains.

While Instacart and Google Shopping Express are tempting options in the limited markets where they are available, there are significant risks to a retailer who rely on them as their medium or long term partner. You can be on those 3rd party shopping platforms while also having your own online home base to build from.

While My Web Grocer has been around a while, Grocery Key shows promise as does freshop.io and an ever newer platform Storepower.com What is clear is that a traditional ecommerce store like Shopify or Big Commerce or Magento do not have the back end controls tailored for Click and Collect or Home Delivery. Nor the essential role of enhanced search, digital path to purchase, digital coupons, shopping lists, etc that are just a few of the essential features of a robust grocery ecommerce platform.

I am looking forward to seeing the integration of a module for DIRECT TO HOME shipment via UPS/USPS so that grocers can add tens of thousands of items in an "extended aisle" for categories and brands they have no intention of stocking in their brick and mortar stores (by relying on drop ship partners like UNFI and others).

PJ Stafford
VP eCommerce, United Natural Foods (UNFI)
Bill Bishop said:
PJ,
Thanks for sharing your forward looking perspectives. Our work indicates that shoppers are increasingly expecting the ability to have an expanded choice from an "extended aisle".

At the same time, questions have been raised about the challenges of integrating/coordinating orders that are drawn from both in-store and extended aisles. How manageable is this from your experience?
BlackBeltPJ Stafford said:
The key issue is to manage expectations so that the consumer visually sees that the non perishable item will arrive by UPS/USPS and is not available that afternoon for pick up at the store with the rest of their order. That can be done with an icon or other way to indicate that a specific item will arrive separately from Click and Collect order or a local van delivery from the store.

The other issue is the additional cost of shipping the item to the consumers home. If you are already charging a $9.95 click and collect fee it may not be feasible to add a $3.95 ship charge...so the extended aisle items need to be chosen to have sufficient gross margin dollars to absorb the additional shipping charge...or the total size of the order is considered when setting a charge, if any, for the additional USPS or UPS package to the home for the extended aisle items not available from the store.

Whatever the case, not having the consumer go to Amazon to buy the items you don't stock in the store is a good thing since once they are at Amazon they are likely to buy other items you also sell and the grocer experiences the slow drip of products away from its own basket.

PJ Stafford
UNFI
Bill Bishop said:
PJ,
Thanks for the additional background.

Think your focus on managing expectations puts a bright light on what every business needs to do if they're going to be successful; i.e. help customers understand and grow to appreciate their value proposition.

As you point out, there are a lot of good reasons for food retailers to work hard to make this case.
Dave Makar said:
I believe there is a third option that can be appealing to both consumers and retailers. This option is for a co-branded solution. When introducing a new outside solution to a community there can be an automatic hurdle put in place that can severely limit adoption and growth. The customer base has a steep learning curve to understand the relationship between this outside third party solution and the store. Who selects the groceries? Who makes the deliveries?

At the same time, developing and hosting an in-house service can be just as confusing to customers. Now my favorite store is developing software? I know them for their ability to be grocers and I have to hope they can also be software developers.

With a third option - a co-branded solution, customers very quickly can understand a new service with the naming convention that matches their favorite store. They also can quickly recognize that the co-brand (the software company) is an outside expert in grocery delivery and has experience getting the logistics of delivery right.

We've seen this strategy be incredibly successful in various markets throughout the country. Most importantly, the people who need to be served by delivery can quickly 'get it' and start to reap the benefits without a lot of questions of understanding.

I recognize that there may be a fourth or fifth option too.
Bill Bishop said:
Thanks for sharing your thinking and offering a "third way". Co-branding, if we can use that term, has worked well in many situations. It might just be a good way to help more customers "over the hurdle" of trying a new way to grocery shop.

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