September 13, 2007
Peapod Stops and Shops for Business
Peapod and Stop & Shop are looking for new business and they’re going to companies, schools and other institutions in the Boston area in search of it.
According to a press release, the two Ahold companies have opened a dedicated facility to serve the business market.
“Peapod by Stop & Shop is excited to provide enhanced delivery options and product selection to organizations who wish to provide high quality groceries to their associates and clients,” said Andrew Parkinson, president of Peapod, in a press release. “This is a high growth potential area of our business and we believe we can offer a unique value proposition — supermarket selection at supermarket values — with no subscription or high minimum order requirements.”
The new service will make deliveries Monday through Friday between 7:00 a.m. and 4:00 p.m. Business customers can choose from morning and afternoon delivery windows when placing an order. Peapod will deliver catered items along with 4,000 fresh, refrigerated, frozen and shelf-stable products found in Stop & Shop stores.
“A growing trend in the workplace today is to provide convenient, nutritious food and beverages on-site for employees,” said Mr. Parkinson. “Peapod by Stop & Shop makes it easier for companies to do so by offering the convenience of online grocery shopping and delivery.”
Discussion Questions: What do you think of Peapod and Stop & Shop opening a business dedicated to serving the needs of business customers? Is it filling a need that isn’t currently being addressed by retail? Is this something we will see others doing?
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It makes all the sense in the world for a “self distributing” organization to find other customers for their distribution network. Using schools and small businesses as consumers of their services can only reduce the portion of costs that must be covered by the retail outlets. The trick here is to not overly homogenize the operation so that you introduce inefficiencies in either serving the stores or the businesses. While a totally separate operation would allow complete independence it also requires its own overhead. Combining the purchasing, negotiating and storage operations makes sense. The outbound order selection and transportation operations must be specialized.
Minimum order for Peapod/Stop & Shop Boston delivery is $75, and service charges are $12 or $18, depending on the size of the order. The website is careful to note that prices online aren’t necessarily the same as prices in the stores. So they’re trying to make some kind of margin on a very costly method. Labor to pick and pack combined with the trucking cost will probably exceed the service charges.
Note that Peapod is running similar business delivery services in the Washington D.C. area (with Giant) and in Chicago/Milwaukee. Generally, when a retailer’s strategy is profitable, you can tell easily, because it’s rolled out very quickly. Online grocery delivery in general, and Peapod in particular, doesn’t fit that description.
This is an interesting target market. I think it hits all the major requirements for a successful online grocery business today–the concentrated population in particular. The question, though, is how far in advance people have to place their orders. If it’s not next day, it may be tough for workers to know whether they’re going to need that service or not.
If the logistics work out, I like this idea because it could be taken to any metropolitan area, where home delivery has been limited to pretty densely populated urban areas. Here in Denver, the University of Colorado Health Sciences Center is relocating from very near downtown to a brand new campus way out in Aurora. The area is very under-developed. I think by spring, there will be 30,000+ employees on the campus–and all of about a dozen lunch places within walking distance. I think that would be a huge opportunity for an online order/next day delivery service, especially of prepared meals.
It of course makes sense to take the business in a new direction. But there are a lot of foodservice distributors out there who do the same thing. Plus, you’re never going to make money on school foodservice. These are the people whose mandate is to provide “nutritious” lunches and keep costs under $1.
Distributing to businesses is a terrific market segment for Peapod.
Larger orders. Regular replenishment. Growth as he companies they serve grow. It’s my bottle water guy on steroids.
To “cook up” some demand I would bundle kitchen items and small appliances into a welcome bundle for new customers who need these items. Some businesses may have intended to offer these amenities in break rooms and kitchenettes but, in the course of building businesses, never taken the time.
Regular delivery of select grocery items and self-preparation options is a welcome benefit for hard-working employees and a fertile segment for Peapod to develop.
I agree with Nikki. The density of office buildings, institutions, etc may actually make the business market more attractive than delivering to individual homes. Of course, the obvious question is will they increase, or at the very least emphasize, the foodservice offerings?
Everyone loves Peapod, in theory. It has been around now over a decade and has not come close to getting traction. It easily gets publicity. People want it to work. It is rational. It is practical. It would save time and it sounds convenient. Unfortunately, it only works in theory.
This new channel will suffer the same fate. initial enthusiasm from all sides, then it won’t work quite like expected…it won’t be quite so easy, it will involve a little more work and time than expected and mistakes will happen. But worry not. Though it won’t work, everyone will still love Peapod (in theory).
The new Peapod business model is an attractive one and opens the door to new expansion if they are successful.
I do wonder if limiting the hours of delivery from 7 a.m. to 4 p.m. cuts into potential business catering that could take place between the hours of 5 and 7 p.m. Offering more choices of healthy breakfast, lunch, snack and dinner items could be a differentiator and be well received.
There’s value here, I think, in widening Peapod’s target market beyond individual private homes in the suburbs. Condo and apartment buildings offer more efficient delivery logistics, and delivering several personal orders to shoppers at their workplaces does as well.
Early on, Albertsons.com did some grocery delivery to time-pressed office workers in the Dallas Ft. Worth market, as I recall. The idea seems to have face validity.
I’ve also long advocated that online grocery order and delivery firms target high-end resort communities, time shares and condos where the very wealthy may come for extended stays in luxury surroundings. Contract with the building management as the exclusive provider, and see to it that arriving guests find their pantries and refrigerators fully stocked with their preferred delicacies and beverages. This is a global market, with potentially very high margins. Why not start in Boston and New York, Andrew?
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It makes all the sense in the world for a “self distributing” organization to find other customers for their distribution network. Using schools and small businesses as consumers of their services can only reduce the portion of costs that must be covered by the retail outlets. The trick here is to not overly homogenize the operation so that you introduce inefficiencies in either serving the stores or the businesses. While a totally separate operation would allow complete independence it also requires its own overhead. Combining the purchasing, negotiating and storage operations makes sense. The outbound order selection and transportation operations must be specialized.
Minimum order for Peapod/Stop & Shop Boston delivery is $75, and service charges are $12 or $18, depending on the size of the order. The website is careful to note that prices online aren’t necessarily the same as prices in the stores. So they’re trying to make some kind of margin on a very costly method. Labor to pick and pack combined with the trucking cost will probably exceed the service charges.
Note that Peapod is running similar business delivery services in the Washington D.C. area (with Giant) and in Chicago/Milwaukee. Generally, when a retailer’s strategy is profitable, you can tell easily, because it’s rolled out very quickly. Online grocery delivery in general, and Peapod in particular, doesn’t fit that description.
This is an interesting target market. I think it hits all the major requirements for a successful online grocery business today–the concentrated population in particular. The question, though, is how far in advance people have to place their orders. If it’s not next day, it may be tough for workers to know whether they’re going to need that service or not.
If the logistics work out, I like this idea because it could be taken to any metropolitan area, where home delivery has been limited to pretty densely populated urban areas. Here in Denver, the University of Colorado Health Sciences Center is relocating from very near downtown to a brand new campus way out in Aurora. The area is very under-developed. I think by spring, there will be 30,000+ employees on the campus–and all of about a dozen lunch places within walking distance. I think that would be a huge opportunity for an online order/next day delivery service, especially of prepared meals.
It of course makes sense to take the business in a new direction. But there are a lot of foodservice distributors out there who do the same thing. Plus, you’re never going to make money on school foodservice. These are the people whose mandate is to provide “nutritious” lunches and keep costs under $1.
Distributing to businesses is a terrific market segment for Peapod.
Larger orders. Regular replenishment. Growth as he companies they serve grow. It’s my bottle water guy on steroids.
To “cook up” some demand I would bundle kitchen items and small appliances into a welcome bundle for new customers who need these items. Some businesses may have intended to offer these amenities in break rooms and kitchenettes but, in the course of building businesses, never taken the time.
Regular delivery of select grocery items and self-preparation options is a welcome benefit for hard-working employees and a fertile segment for Peapod to develop.
I agree with Nikki. The density of office buildings, institutions, etc may actually make the business market more attractive than delivering to individual homes. Of course, the obvious question is will they increase, or at the very least emphasize, the foodservice offerings?
Everyone loves Peapod, in theory. It has been around now over a decade and has not come close to getting traction. It easily gets publicity. People want it to work. It is rational. It is practical. It would save time and it sounds convenient. Unfortunately, it only works in theory.
This new channel will suffer the same fate. initial enthusiasm from all sides, then it won’t work quite like expected…it won’t be quite so easy, it will involve a little more work and time than expected and mistakes will happen. But worry not. Though it won’t work, everyone will still love Peapod (in theory).
The new Peapod business model is an attractive one and opens the door to new expansion if they are successful.
I do wonder if limiting the hours of delivery from 7 a.m. to 4 p.m. cuts into potential business catering that could take place between the hours of 5 and 7 p.m. Offering more choices of healthy breakfast, lunch, snack and dinner items could be a differentiator and be well received.
There’s value here, I think, in widening Peapod’s target market beyond individual private homes in the suburbs. Condo and apartment buildings offer more efficient delivery logistics, and delivering several personal orders to shoppers at their workplaces does as well.
Early on, Albertsons.com did some grocery delivery to time-pressed office workers in the Dallas Ft. Worth market, as I recall. The idea seems to have face validity.
I’ve also long advocated that online grocery order and delivery firms target high-end resort communities, time shares and condos where the very wealthy may come for extended stays in luxury surroundings. Contract with the building management as the exclusive provider, and see to it that arriving guests find their pantries and refrigerators fully stocked with their preferred delicacies and beverages. This is a global market, with potentially very high margins. Why not start in Boston and New York, Andrew?