Back in the days of the dot com boom, few segments burned other people’s money like online groceries. Webvan was the poster child for optimism over a well-thought out business model. Ten years later, Peapod and a few other firms have hung on with more limited ambitions and somewhat higher prices. Online grocers have generally fared even worse in France in part because of different shopping habits. The French generally shop for smaller amounts more frequently than Americans which makes delivery surcharges around €12 onerous.
Now, however, Chronodrive is trying a variant of online groceries with a twist (In France, a Drive-Up Grocery Takes Off, Wall Street Journal, Jan 13). Instead of delivering a delivery, customer come and pick up their order but never have to leave their car:
Customers order online at Chronodrive.com—or can even use a terminal outside the store to make quick orders for any of the 500 products it makes immediately available. When ordering online you can choose your time for pickup; orders can be ready two hours after purchase online, and delivery to your car trunk by Chronodrive’s workers is guaranteed within five minutes of pulling up to the warehouse. Orders are held for 24 hours in case something comes up and you miss your pickup appointment.
The company says its 130,000 regular customers buy an average of 40 items per shopping trip—with an emphasis on bulky goods such as bottled water, diapers and toilet paper. The store stocks a full range of fresh and packaged goods. Chronodrive forges partnerships with local bakeries to get fresh bread, and the clerks show the produce to customers as they load it in the car, so the customer can refuse it if it doesn’t look good.
Note that the 500 SKUs are just what can be ordered at pick up. Over the web, you have a choice of at least 5,000 items and some locations push that to 7,000. Those 130,000 are currently spread over 16 stores — about 8,100 regular shoppers per store. The firm has managed purchasing costs by partnering with an existing supermarket chain (which is a majority investor) so they can piggy back their purchasing on the larger firm’s. Here, however, is the real kicker:
The warehouse model means Chronodrive doesn’t need more than a dozen employees per location, so costs are low.
Now they must lose some sales because customers don’t make impulse purchases that they would walking through the store. On the other hand, they may also benefit from customers working through their entire list in the convenience of their home. So far this seems to be working. Chronodrive claims that their margins are comparable with that of a standard supermarket (about 3.3% according to the article). Some competitors are trying to match Chronodrive’s service out of traditional stores which means that they are incurring extra labor costs, particularly if pick up orders peak at the same time as in-store shopping does.
This seems like an interesting model. I am blown away by the idea that you can run this with 12 people. At 40 items per trip, the average tab could easily be pushing €100 if not €200. If only half of the regular customers shop in a week, that very quickly becomes a very high sales per employee number. Further, I don’t think this would be an easy model for standard supermarkets to match. Tesco and other chains tried to do home delivery back in the day by sending employees up and down store aisles but your typical grocery store is not set up for high volume picking even if there are no “civilians” lollygagging about finding the right toothpaste. I wonder how long it will take for someone to try this in the States.