Peopod

CASE III Peapod Online market2003 The online securities industry turned out to be a lot tougher than analysts thought a some eld ago. Many of the beforehand(predicate) online grocers, including Webvan, ShopLink, StreamLine, Kosmom, Homeruns, and PDQuick, went bankrupt and out of business. At hotshot prison term, Webvan had 46 portion of the online foodstuff business, barely it still wasnt profitable comely to decease. The new business model for online grocers is to be part of an existing brick-and-mortar chain. Large market place chains, like Safeway and Albertsons, are experiencing gross sales crop in their online business hardly exact yet to turn a profit.Jupiter look for estimates that online grocery store sales will be over $5 billion by 2007, about 1 portion of every grocery sales, term it asks more than 5 percent of wholly retail sales to be online by then. A few years ago, optimistic analysts estimated online grocery sales would be 10 to 20 measure tha t by 2005, but it didnt trifle out that way. One of the few online grocers to survive in 2003 is Peapod, the first online grocer, started by brothers Andrew and doubting Thomas Parkinson in 1990.However, even Peapod was failing until 2001 when Dutch grocery giant Royal Ahold purchased authoritative interest in the company for $73 million. Peapod operates in five markets, mainly by closely affiliating itself with Ahold-owned grocery chains. Peapod by fiend is in the Washington, DC, area, while Peapod by grasp and Shop runs in Boston, New York, and Connecticut. The riddance is Chicago, where Peapod operates without an affiliation with a local grocery chain. Peapod executives claim the company is growing by 25 percent annu entirelyy and has 130,000 customers, and all of its markets except Connecticut are profitable.Average fiat size is up to $143 from $106 three years earlier. The online grocery business seemed like a sure winner in the 1990s. Dual-income families strapped for ti me could simply go online to do their grocery shop. They has about the same choices of products that they would have had if they went to a brick-and-mortar grocery, about 20,000 SKUs (stockkeeping units). They could browse the aisles on their base computers and place strays via computer, fax or telephone. The orders were alter at ffiliated stores and delivered to their homes in a 90-minute window, redemptive them time and effort and simplifying their daily lives. For all this convenience, consumers were willing to pay a monthly fee and a fee per order for packaging, shipping, and delivery. Since most of the products purchased were well-known branded items, consumer set about little risk in buying their conventional foodstuffs. Even perishables like relieve oneself and meat could be counted on to be high quality, and if consumers were concerned, they could make a dissipated trip to a brick-and-mortar grocery for these selections.However, while all of this sounded good, most c onsumers didnt qualify their grocery shopping habits to take receipts of the online alternative. Currently analysts do not expect the online grocery industry to take make in the near future, if ever. Miles Cook of Bain &038 telephoner estimates that only 8 to 10 percent of U. S. consumers will find ordering groceries online appealing, but only about 1 percent will ever do so. He concludes This is going to remain a recessional offering in a few markets. Its not going to be a national mainstream offering. Jupiter Media Metrix analyst sight Cassar concludes that The moral of the story is that the ability to get along a better mousetrap must(prenominal) be measured against consumers willingness to buy it. suspicion 1. What behaviors are involved in online grocery shopping? How does online shopping compare with traditional shopping in terms of behavioural effort? 2. What types of consumers are likely to comfort online grocery shopping from Peapod? 3. Overall, what do you have in mind about the idea of online grocery shopping? How does it compare with simply eating in restaurants and avoiding grocery shopping and cooking completely?