Going to the grocery store ranks as one of Patty Silva’s most dreaded chores. Now that Silva can shop online and pick up everything by driving through her Pinecrest neighborhood Farm Store later that day, she is in heaven.
The Miami-based Farm Stores chain is counting on the fact that there are lots more time-stressed customers like Silva, willing to pay a $4.95 fee for the convenience of online grocery shopping.
But while the interest among consumers like Silva has long been there for online grocery shopping, the graveyard is littered with more failures than successes both in South Florida and across the country. The list ranges from PublixDirect to high-profile Internet start-ups like Webvan.
Because of the high costs associated with distribution and delivery, online grocers have had a difficult time generating the volume necessary to turn a profit. The few success stories are typically concentrated in such urban markets as New York City or Chicago, or supermarkets just offering online ordering and store pickup.
Farm Stores CEO Carlos Bared is banking on a different twist. His iExpress model is the only service in the country offering online grocery shopping combined with a drive-through pickup that allows for flexibility in scheduling and a choice of locations — 17 in South Miami Dade, with future expansion to another 13 in other parts of the county.
Since 1999, the 65 traditional Farm Stores in Broward County and throughout the state were converted to licensed operator agreements, leaving the company to focus on operations of its 30 Miami-Dade stores. The operators pay a license fee and royalties on some of the Farm Stores products.
The way Bared figures, the service is a natural extension of the niche that the privately owned Farm Stores chain has filled in the South Florida community since opening its first store in 1957 on Flagler Street.
The chain’s iconic double drive-through locations were popular quick-stop destinations long before the avalanche of gas station mini-marts. Nicknamed “la vaquita” or “baby cow” because of its logo, generations of South Floridians grew up on their name-brand ice cream and milk made at the North Dade dairy that the company once owned.
“We already have incredible brand equity,” Bared said. “Our building is almost an icon like the golden arches. For many people, Farm Stores is a way of life.”
Bared sees online groceries as a way to capitalize on the existing Farm Stores brand loyalty and synergy with Gardner’s Market, a local chain of specialty markets that the company acquired in November 2006 for about $4.75 million. The Gardner’s acquisition was a key piece of the vision that Bared has had for more than a decade, because the Pinecrest store is what serves as the fulfillment center for the online grocery orders.
“Essentially, Farm Stores has always been about saving time,” Bared said. “The Internet grocery concept layers on another level of convenience to what we already do. This is another way we can save people time.”
The grocery segment is considered the last area of retail to see a major shift to the Internet. Less than 10 percent of U.S. adults who go online have purchased groceries on the Internet, according to a 2010 report from Forrester Research. But those are valuable consumers if you can nab them: Forrester’s report found that U.S. online grocery buyers tend to skew younger and more affluent.
“It’s more a logistical business than a retail business,” said Neil Stern, senior partner with McMillanDoolittle, a Chicago-based retail consulting firm. “It’s all about how efficiently you can get stuff from one place to another. It’s the last mile that’s the most costly.
“Where there’s been the most success is in highly dense urban markets. If you’re starting to serve the suburban markets it’s been difficult. People are still trying to crack the code.”
Online grocery shopping in the U.S. represents only about 1 percent of the total dollars spent on groceries. Two of the most successful companies have been Peapod, backed by Dutch supermarket chain Royal Ahold, and FreshDirect, both offering home delivery.
Safeway is the only traditional U.S. supermarket with a significant online presence, ranking among the top 100 U.S. retailers in terms of online sales. Internationally, Britain’s Tesco also operates successfully online.
O’Connor believes more companies have been afraid to venture into the space because of past failures, particularly Webvan, an internet grocery start-up that was one of the most high profile busts of the dot-com era.
“Webvan created a stigma in the industry,” O’Connor said. “The crash and burn of Webvan was so dramatic.”