Safeway.com reinvents home delivery using stores for inventory
Jul 1, 2004 12:00 PM, By Gary Macklin
Don't write off the future of grocery home delivery just yet. To be sure, the first wave of online grocers such as HomeGrocer, HomeRuns, Streamline.com, and Webvan all are gone, bringing the term dot-bomb into the language to describe their sometimes-spectacular failures. Webvan became the poster child for a seemingly great idea that few wanted and even fewer were willing to pay for.
According to the original plans, online grocers were supposed to supplant traditional grocery stores, providing shoppers pricing, quality, service and convenience without ever leaving the comfort zone around a computer keyboard. Now instead of buying huge delivery fleets and building multiple, highly automated distribution centers, grocery chains such as Safeway approach the home delivery market using a strategy built around use of their stores to provide service. In addition, in this new round of online grocery delivery operations, grocers charge a delivery fee intended to produce a profit.
In fact, Safeway's online grocery operation began while some of the others still were in the process of failing. Early in 2002, Safeway announced that it would provide grocery home delivery on the West Coast through GroceryWorks, an Internet shopping service that is a 50%-35% joint venture between Safeway from the US and Tesco plc from the United Kingdom. Private investors hold the remaining 15%. About a year after starting the new venture, the GroceryWorks name was dropped publicly in favor of Safeway.com.
Serving western cities
Tesco is said to be the most successful Internet grocer in the world. Safeway.com provides service in the San Francisco and San Jose Bay areas, Sacramento, California, the metro area covered by Portland, Oregon, and Vancouver, Washington, and, most recently, Seattle, Washington. In Southern California, the same service is known as Vons.com and operates from stores run by Safeway's Vons subsidiary. Company projections from a year ago suggest that, at maturity, the grocery home delivery service could account for as much as 3% to 6% of Safeway's total grocery revenue.
The service sources groceries from a Safeway store near the point of delivery. Safeway says this allows Safeway.com to offer the full range of products available at any neighborhood Safeway store at in-store prices. The service also makes Safeway's Club Card discounts and airline mileage credits from United Mileage Plus members available to online shoppers. The company continues to depend on parts of the business model taken from earlier Internet grocers including an emphasis on busy lifestyles among its customers, heavy traffic and congested commutes that make traditional shopping too time-consuming.
Using existing supermarkets as the source for orders allows Safeway.com to operate without spending precious capital on distribution center infrastructure. High infrastructure costs are considered to be the primary factor in the failure of the first wave of Internet grocers such as Webvan. San Francisco and the surrounding area provide a good test for the viability of grocery home delivery because the region has the highest per capita rate of Internet usage in the country.
Next day delivery
The service runs seven days a week with orders delivered the following day between 10 am and 9 pm within a two-hour window specified by the customer. Customers also have the ability to set ripeness preferences for ordering fresh produce. Same-day delivery is available for orders placed before 10 am. No minimum order is required, but Safeway.com does charge for delivery. When the service began, delivery cost $9.95 per order. During a past Christmas holiday season, delivery prices in Sacramento were lowered to $4.95 for orders worth more than $150. Other orders carried a $7.95 delivery charge.
Safeway.com started operations in 2002 with 155 refrigerated delivery trucks built by Supreme Corporation in Goshen, Indiana. The fleet was expanded by an additional 75 trucks in 2004. The fleet is designed to maintain temperature integrity for fresh and frozen products as the driver makes a number of deliveries. In any case, product rides in a more protected environment than that of a family automobile, the normal mode of transportation for groceries from store to home.
Deliveries from Safeway.com don't end up sitting in a hot car while the consumer stops to run just one more errand. “Having groceries delivered straight from a refrigerated truck keeps the food fresh while providing a convenient service to Safeway.com customers,” says Terry Meilan, director of retail support at Safeway.com.
Big bodies, small trucks
Supreme Corp has built 230 refrigerated delivery trucks for Safeway.com. They are high-cube bodies mounted on Ford E-350 van chassis. Bodies are 21" 4" long and are divided into three compartments for frozen foods, fresh and chilled groceries, and ambient temperature dry groceries and homemaking supplies. Although the bodies are longer than many dairy or foodservice delivery vehicles, the bodies and van chassis are light weight, under 10,000 lb GVW so that they can be driven by Safeway.com personnel without qualifying for a commercial drivers license.
Each temperature zone in the new Supreme bodies has a dedicated door for delivery access. Each of the two refrigerated compartments is sealed with a swinging hinged door at the rear of the body. The ambient compartment takes up the most space, running from the front wall to just aft of the van rear axle. Delivery personnel access dry grocery orders through a Todco overhead door mounted on the curbside of the body.
Thermo King V-300 refrigeration units provide cooling. The V-300 uses a truck engine-driven compressor with remote evaporators in the temperature-controlled compartments. For the Safeway.com application, the V-300 units utilize a condenser section mounted on the truck nose. Plumbing for the remote evaporators runs through the dry grocery compartment behind protective covers.
Body, chassis, and refrigeration design was a collaborative effort between Safeway.com, Supreme Corp, Thermo King, and Ford. “The vendors and their representatives played an important role in developing a vehicle to provide high quality grocery home delivery service to our customers,” Meilan says.
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