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Old 11th June 2008, 01:47 AM   #1
lawrencethomas3
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Default Online Grocery Store?

Greetings, all.

I have been mulling an idea around in my head for awhile and I thought that I should finally get some real input and/or suggestions from some business minded people... and this seems like a good place.

A bit of background: I have worked in a local grocery store for about 3 years total, most of that time during the later years of my college education. Long story short, the store was recently sold by the owner and I am now compelled to move on. I was a mere stocking/carryout so I have a good overview of the grocery business, but none of the specifics.

Now, my idea was to open a Online Grocery Store to serve the greater NorthDakota area. A online store where people could order foods (including dairy, meats, produce) and have them delivered to their houses.

My first thought was to have it located near the center of the state so we could cover the most area. A delivery schedule came to mind, taking the form of: Minot and surrounding area deliveries on Monday, Bismarck and surrounding area deliveries on Tuesday, Dickinson Area Wednesday, Jamestown area Thursdays, and some other area Fridays. This way, orders could be stockpiled and delivered in an efficient manner. By charging a $5 flat fee for shipping, we could essentially off-set any fuel costs with 15 or so orders on any given day.

As for structure, I worked at a SuperValu store in a small town and considered that being supplied by them would be a good route to go. Anyone have any insight on this? I have the potential to learn more about SuperValu markup by getting ahold of my former boss, but I'd rather not do that until I am a bit more researched in this idea.

I figure the major needed structure to a business like this would be: A professional website (hopefully with some sort of bar-code scanning support and inventory tracking --- A storage warehouse (including shelving/Freezer/Cooler) with attached office space --- Delivery truck, perhaps the size of a U-Haul along with stackable boxes to transport deliveries in.

I figure 3 employees are more than adequate, 2 to go on deliveries in the morning and one to come in and prepare deliveries for the following day and answer phones. To avoid monotony, these 3 could freely switch duties as needed. Also, perhaps a part-timer to fill in on sick/vacation days.


Sorry I'm just kind of writing these ideas as I remember them. The basic idea is that without the sales floor overhead and everything that goes with that (including the dozen or so employees needed to efficiently run and maintain an open store)... there would be a sufficient room to cut prices enough persuade people to order their groceries online and have them delivered. As ND is a largely rural state with many small towns, I figure that there may be enough untapped potential for something like this to work.


Well this is just a rough overview, but I would definitely like some feedback and suggestions.

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Old 11th June 2008, 07:59 AM   #2
K&G
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We've done something similar, but with dog food. I have a small but well-established pet store in a small town. When the gas crunch hit our sales went up because our customers are no longer driving to the pet superstore in the next town - they are shopping locally. This was great for us.

We decided to take it a step further by offering delivery in our area to include our town and two other towns close by. End to end driving time is only about 40 minutes. Now we might even grab more of those superstore customers.

We found that online advertising to a small local area is expensive and difficult so we have dropped online advertising altogether. We use fliers, newspaper ads and local projects and events for advertising. At this point, we don't even think about SEO - we just focus on opportunities in the community.

We have found that weekly deliveries aren't enough - second day is about the most our customers will tolerate. If we force our customers to visit a pet store between deliveries we lose sales because they stock up while they are there. And when we schedule a delivery several days away we get complaints and cancellations.

If you have a lot of start up cash you may be able to tackle an entire state, but we decided to focus on our area, get it established, and when we can afford more staff and another truck we will tackle two larger cities on either end of our current area. We also want to make sure we have all the kinks worked out before we move on.

As long as gas prices are increasing I thing the demand for delivery will increase but delivery cost also increases, and large vans and trucks really drink the gas. A plan like this in a rural area has to be carefully thought out and I think you will have trouble covering the gas cost for $5.00 per delivery in a rural area. I'm doing a small geographic area. I fill up my van for about $100 and at the end of the day it's empty, so it takes 20 deliveries to cover the cost. And like I said, the entire area is 40 minutes end to end. Don't just look and your miles per gallon, but a lot of stopping and starting and slow cruising down residential streets. Our vehicle is paid for, but we have to consider maintenance costs and driver's salary too. And we've had 3 consecutive days (today will be the 4th) of 100+ degree weather and the air conditioner sucks even more gas.

Also, with your small staff, you have to consider time off. If someone is out for a week with the flu can you still deliver? I have a small staff too, and if you give each employee 5 vacation days per year, then allow for 5 sick days - and remember the kids will get sick too, and they will wake up to emergencies like busted water pipes or a car that won't start. There will be deaths in the family and other unexpected problems. Figure that with 3 employees you are going to be short of help about a month and a half to two months out of every year.

All things considered, I think any business that can save a customer time and travel these days will do well, and I know I would take advantage of a serviced like this if the selection was good, everything was generally in stock, and the delivery schedule met my lifestyle requirements. Good luck.

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Old 11th June 2008, 06:45 PM   #3
lawrencethomas3
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Thank you! This is exactly the input I needed.

Alright, you are probably right with about the plan being a little too ambitious. So, we'll start small around our main city first (Bismarck and surrounding areas) delivering on Monday, Wednesday, Fridays. And the perhaps cover another city and its area on Tuesdays and Thursdays. Is this still over-reaching for an initial start-up?

That brings us directly into shipping prices. I am almost loathe to charge tiered shipping rates based on how much you purchase. But then, charing a flat $10 may be a bit too expensive for customers who are buying less that $100 worth of groceries. Any further input here? My guess is that some percent of the cost of delivery is going to have to be built into sales while only partially being covered by some sort of shipping charge.


As for the small staff, with the cutback in the reach of the store to begin with, I don't even know if 3 full time employees are required. Regardless, let us assume 3 anyway and then throw 1 or 2 part-timers in there (highschool or college students needing extra work, say 15-20 hours per week each) and I think there would be plenty of room for sick/vacation/emergency days.


Anyone have any further input? I am especially interested in the price of setting up a website that would provide the needed features. I am quite computer and web-design savvy, but I don't have the expertise for something like this.

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Old 11th June 2008, 06:49 PM   #4
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Also forgot to mention, K&G, do you do any sort of Radio or Television ads?

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Old 11th June 2008, 07:08 PM   #5
K&G
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We don't do any radio or TV, just newspapers, local magazines, fliers, etc.

Right now our delivery fee is $5.00. We are advertising it as an 'introductory price' so that our customers will expect an increase and we are studying the actual cost to see what we should be charging. We advertise that our customers will save time and money by not having to drive to the store, but they seem to be more interested in saving time. We sell high end dog foods, and our customers are already paying a premium price, so I don't think the money is an issue. It will probably be different with groceries.

We just have a cheap Go Daddy shopping cart. Most of our sales are by telephone.


Last edited by K&G; 12th June 2008 at 11:59 AM.
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Old 12th June 2008, 11:51 AM   #6
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Default Online Grocery Store Research

Hi,

It looks like you have a good hold on the development of this idea. I thought I would list some Online Grocery Sites for you to review. When our company is building any website one of the first things we do is check out the competition for ideas.

http://www.peapod.com/
http://www.citarella.com/
http://www.netgrocer.com/
http://mybrands.com/default.aspx
http://www.aulsuperstore.com/
http://www.groceries-express.com/
http://www.shopfoodex.com/
http://www.basic-ingredients.com/
http://www.expatexpress.com/
http://shop.lundsandbyerlys.com/
http://www.amazon.com

Hope this helps spark some ideas for your website.

Jeff

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Old 13th January 2010, 12:26 PM   #7
jax829
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I was wondering what type licenses or permit, if any would i need if i open a online grocery. can i have a operation in my house? or actually store is needed

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Old 4th March 2010, 03:32 PM   #8
wradi
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I don't know if lawrencethomas3 ever got his online grocery going. jax829 you would most likely need a retail sales and use tax license from your state treasuers office so that you could collect and pay sales tax on non grocery items, such as, aluminum foil, toilet paper, paper towels, soda, etc. You might want to check out a fairly new online grocer that is going to be hard to compete with at http://www.myharvestamerica.com/MHAGrocer
Good luck,
Wayne

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Old 10th March 2010, 06:32 AM   #9
MySmallBiz
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I really dont know about this..in a grocery store your customers should be able to acquire the products they want immediately. Or I think this should only be based within the locality. The customers order through the internet and it is just readily available for pickup

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Old 11th March 2010, 01:41 PM   #10
NobleRiver
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Default I didn't do it.

Hi ,

I designed and administer the website for a local specialty grocery store in Richmond,Va. At one point of time, we considered selling online.

Sorry, but the numbers just didn't add up. You are glossing over all the little details that add up to make your venture still born.

You charge $5/- for shipping.

You need trucks/pickups. You need gas. You need to pay your delivery boys extra since they will be delivering far and wide. If something breaks down, you need to fix it or lose customers. Alternatively, you need a stand by truck.

You need to pay for warehouse.
You need to pay salaries; even when you don't have customers.
You need to pay for electricity to keep the meat frozen.

You need to stock in large quantities in order to meet the needs of different people.

Grocery margins are not very high. Since you are not manufacturing/packaging your own brand, you cant get the prices you like to get customers to buy from you.

You dont have the clout to get good prices from the manufacturers since you are too small; at least in the beginning.

People often buy grocery on the way home from work. I know of a billion dollar corporation that considered selling groceries online, but then pulled out.

All these reasons prompted me from not going into the venture. If you do, good luck to you. Let us know how it works out.


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