In its second-largest acquisition, Amazon buys the company for $970 million.
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The NetGrocer service, which never completely stopped operating, now fulfills orders with more than twice as many SKUs, 35,000, through the ShopRite. Business is brisk, says Bob Clare, one of the principals of the family-owned store, part of the 200-plus store ShopRite cooperative in several eastern states. Although he declines to provide sales information for the privately held business, he notes that a FedEx trailer sits outside every day waiting to be loaded for regular ground shipments. A FedEx panel truck also arrives daily to pick up expedited one- or two-day shipments, he adds.
Clare is also one of 45 retailers with 250 store locations, that use the MyWebGrocer e-commerce system to offer online sales to its local customers; it calls its service ShopRite From Home. As with NetGrocer, ShopRite From Home orders are fulfilled in-store, but instead of loaded onto FedEx trucks, they’re held for customer pick-up or delivered directly for a fee. Other retailers include Lowes Foods in North Carolina, Dorothy Lane Market in Ohio and Roth’s in Oregon.
One of the advantages of working with MyWebGrocer, Clare says, is that, except for shipping and delivery, his store uses the back-end e-commerce system on MyWebGrocer’s web servers to process orders for both NetGrocer and ShopRite From Home. It’s been a learning experience that will pay off in the long run, he says.
Although MyWebGrocer provides and maintains the web-based suite of e-commerce software, including order management, credit card processing, and communications with shippers and e-mail order confirmations with customers, there is still work for retail partners in order to participate.
For starters, merchants need a browser and high-speed Internet access to receive online order information over the web. They also need to place a link on their web site to a site created and hosted by MyWebGrocer. That’s the easiest part.
Getting store operations right
More complicated is arranging store operating hours, staffing levels and physical store layout to accommodate online orders and fulfillment. At Clare’s ShopRite, for example, online order fulfillment starts after the store closes at 10 p.m. And store personnel need to learn, in training over a day or two provided by MyWebGrocer, how to operate the web-based order fulfillment system.
In addition to the one-time fee of about $2,000 and per-order fees of under $5 that MyWebGrocer charges to use its system (fees vary depending on the size of the retailer), merchants must also invest in industrial strength handheld computer devices from Symbol Technologies. The devices, with attached bar code scanners, cost about $1,200 each and are designed with protective cases. Most grocers starting out with online orders get by with one or two handhelds, though some of MyWebGrocer’s busiest clients have a dozen or more, Spindler says. MyWebGrocer provides the software that lets the handhelds download order information from office computers.
MyWebGrocer forwards order information to the retailer’s in-store web-connected computer. Pickers plug their handhelds into the computer to download the order. Because the handheld software includes mapping information on a store’s aisle layout, pickers receive instructions on how to most efficiently find the products to fill each order.
Pickers scan products as they pick them off shelves; the device alerts them if a product doesn’t match what’s on the order. Once an order is picked, the staffer loads the handheld data back in the MyWebGrocer-connected computer to print out a report that shows the customer information and if any ordered products could not be fulfilled. Once the order is packed and ready to be shipped, the packer scans the bar code on the order report, a step that automatically prints out a FedEx shipping label. When FedEx picks up the order, the carrier sends a message to MyWebGrocer confirming the shipment, a step that automatically forwards a bill to the customer’s credit card company and an e-mail order confirmation to the customer.
Once a retailer becomes accustomed to operating the in-store fulfillment system, the system’s automation is designed for ease of operation, Spindler says. “The setup is the key element here,” he says. “Once a store is set up, the system takes over.”
Still, there are other tasks a retailer must undertake to get maximum use of its online operation, particularly promoting the web as an alternative way to shop in weekly marketing materials and training store employees to inform customers of their shopping options. Endless Aisle subscribers also need to compile all their store’s product data, then send it, usually in an FTP file, to MyWebGrocer so it can check for duplicate products in the store and the Endless Aisle selection. Synchronizing product databases can take a few weeks in back-and-forth communications.
MyWebGrocer must still prove, however, that its Endless Aisle and NetGrocer services are scalable to meet growth, analysts say. While NeXpansion took the more costly route of operating a dedicated warehouse, that approach may have given it more control over fulfillment had online grocery sales taken off as many had expected in the mid-1990s, analysts say.
But Spindler and his retail fulfillment partners say they’ll be able to quickly ramp up if necessary. “Should the volume of NetGrocer ever exceed our Oakland ShopRite, there are more than 200 other ShopRites to choose from,” Clare says. Although that assumes cooperation from other independently owned and operated stores, such cooperation is likely, says Hugh Sam of Morningstar. “They’d work it out, because there’s a cost benefit to all retailers doing this, and there’s always room to cooperate if it makes sense for everyone,” he says.
Spindler adds that a retailer doesn’t have to attract large numbers of online buyers to reap rewards. With an online shopping service like ShopRite From Home, he says, a retailer with 12,000 to 20,000 weekly in-store transactions can earn a profit from online orders with as few as 25 web orders per week. “Online customers tend to be big spenders, spending on average $120 per order, and they don’t cherry pick deal items,” he says.