Online Grocery: The Next Big Thing

Amazon. eBay. Uber. These names are familiar among my fellow students at Harvard. However, when I mention Instacart or Peapod, only a few people have heard of it. I did a quick survey among my peers to see how many people have purchased items on Amazon, used Uber, or purchase groceries online in the past year. Here is the result:

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All of my peers have used Amazon in the past year; in fact 90% have purchased something on Amazon in the past 30 days. Twenty out of thirty of my classmates have used Uber before. However, less than a quarter have ever tried purchasing groceries online. Why?

Reservations for Online Groceries

There are many reasons that my classmates are skeptical about online groceries. Here are some of the top reasons:

– Produce Selection. About half of my classmate who doesn’t purchase online grocery is because they want to pick their own produce. They want to touch, see, and smell the apple to ensure that it is fresh before putting it in their basket.

– Easy Access. Many claim that they live quite close to a grocery store. Some say it’s only at 10 minute drives. Some say it’s just down the street. One person even prefers biking to the grocery store and think that it is greener than having it delivered to his door.

– High Cost.  Many are afraid on the high delivery fees price tag. Some also claim that the grocery price online are more expensive than the price tag at the store. For example, Instacart charges you $3.99 for order over $35.00.

– Enjoy Going to Grocery Stores. Couple of people told me that they actually enjoy going to the grocery store. One said that it is very therapeutic to just walk up and doing the aisle. Another person said that going to grocery stores gives her inspiration for meals.

– Planning. A classmate said that his does not have a grocery list or have the desire to create one. He just likes to go to the store and just pick up things that look delicious to him. Also, he doesn’t want to order something and have to wait for a day or two for it to arrive.

Benefit of Online Groceries

While the majority of my peers are skeptical about online grocery shopping, some of my fellow students are very passionate about online grocery store and believe in the added value

– Time Savings. As you can imagine, graduate school is a lot of work. Our days are filled with classes, team meetings, lectures by famous people, and, of course, “social events”. Grocery shopping can be quite time consuming. You need to get there. Pick your items from the aisles. It can take even longer if you aren’t familiar with the store. Wait in line to pay. It is especially long on the weekend and during the peak time of the day. And, you still need to travel back.

– Convenience. You can grocery shop from your phone anywhere. You can pick your grocery items when you are on a subway to school, on a lunch break, or during a boring lecture. This gives you the flexibility to ensure that you don’t miss any items. You can review your cart at the end of the day before checking out.

– Product Search. Shelf space in grocery store can be very expensive, so you will only see the largest brands products in a more visible area. Online grocery allows you to see more options. It is also easier for you to search for item. For example, if you want to get a banana and peanut butter, you don’t have to walk over 12 aisles. Just type “banana”, click; then type “peanut butter”, click. Done.

– Price Comparison. For people who are price sensitive, online shopping allows you to check the groceries price at your fingertips. You can compare price within the same store or other stores as well.

Cost/Benefit Analysis

For me, it makes a lot of sense to purchase grocery online. On average, it would take me about 1.5 to 2 hours for each grocery store run. Valuing my opportunity cost only at $10/hr, it cost about $15-20 per trip. In addition, since I don’t have a car, I will need to rent a Zip Car, which is about $12-$18 per trip depending on what car is available. With these conservative estimates it will cost me at minimum $27 for each grocery trip. This is very high for a ~$50 grocery bill. With this, it is cheaper for me to pay Instacart $3.99 to delivery my groceries.

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 Conclusion

While there are some legitimate concerns about online groceries, I have confident that the online grocer service providers will effectively address and mitigate those concerns. When I graduate from Harvard two years from now, I expect to see at least a 100% increase in the number of people who grocery shop online.


3 Comments

  1. Kelsey Davidson

    I think you're right that online grocery shopping will become very prevalent in the future. The one thing lacking in companies such as Instacart is the inclusion of specialty stores. When I go to a physical store it is because I want some specialized items (i.e. in San Francisco Bi-Rite Market has specialty cheeses and ice cream). If companies were able to add smaller, more specialized stores they could increase their consumer base.

    • Pitichoke

      Yes! I agree with you. I think that as Instacart expands, hopefully they will include more specialty stores. I personally like Trader Joe's products, but Instacart don't have service there yet. I emailed them, and they said that they will consider working on it.

  2. Nobu Iguchi

    I find your cost-benefit analysis quite compelling; surely young professionals who value time should choose to buy grocery online. What prevents them from doing so?

    From my own experience of shopping grocery online, I think there are a couple other things that could be improved. First, some services require that you are present at home at the time of delivery. Second, the online selection is not as good as physical store selection (at this point in time.) Finally, I think many of these young professionals don’t really shop at Whole Foods often any way; they would rather go to the Spangler cafeteria.

    Having said that, online grocery retailers are definitely improving themselves now. Considering the significant attention big companies like Amazon are paying to this area, I definitely agree with you that many will be shopping groceries online in two years.