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California | The Supermarket Strike

A Pickup in Deliveries

Online grocers have seen an increase in orders, but most expect the demand to be temporary.

October 25, 2003|Elizabeth Douglass | Times Staff Writer

The supermarket and transit strikes are giving online grocers a boost.

They know it can't last, but they're not complaining. "We're seeing a huge pickup," said Dan Frahm, president of WhyRunOut.com, which delivers for Stater Bros. Markets. The simultaneous strikes are a "double whammy," he said, and for a lot of people in the Los Angeles area, "home delivery makes sense."

Frahm said WhyRunOut's business has jumped more than 30% since Oct. 11, when workers at Safeway Inc.'s Vons and Pavilions stores went on strike. Albertsons Inc. and Kroger Co.'s Ralphs swiftly locked out their union workers. Metropolitan Transportation Authority workers walked off the job Oct. 14, eliminating bus and rail service for about 400,000 people.

WhyRunOut, based in Laguna Niguel, has added about 40 drivers and other temporary employees to keep up with the higher demand for its services and those of a sister company, Pink Dot. (Frahm described Pink Dot as "kind of a 7-Eleven on wheels," selling more convenience items and not a full line of groceries.)

Another online service, Yummy.com in West Hollywood, has seen sales rise nearly 15%. And the home delivery business has doubled at Bristol Farms, an 11-store regional market that takes delivery orders by phone and fax and over the Internet.

The companies said they were serving new customers as well as filling larger-than-normal orders from regulars. At WhyRunOut, for example, the typical order has jumped to the $140 to $150 range, up from $110 to $120 a few weeks ago, Frahm said.

But experts caution that the trend could end with the strikes.

Christine Overby, a senior analyst at Forrester Research, which specializes in technology, called it a "blip." But she added, "That doesn't mean that there's not an opportunity for Bristol Farms and the others."

The online companies agree.

"I think these will be short-term gains," said Michael Nathanson, director of operations at Pink Dot, which has been paying down a heavy debt load in recent years. "But this may open up that second avenue.... Customers will have that awareness of Pink Dot, and some day when they run out of something or need a cake mix, they might pick up the phone and call us."

Some of the new business probably is coming from shoppers used to buying groceries online through Vons.com and Albertsons.com. Because of the labor dispute, both companies have suspended their delivery services indefinitely. Ralphs does not offer a home delivery service. The delivery services say they also are picking up customers who are turned off by the crowds at alternative markets such as Trader Joe's Co. and Whole Foods Market Inc., where the aisles are jammed with people who don't want to cross picket lines.

But Frahm and others said they were being cautious. "We wouldn't want to advertise right now. We have all the business we can handle," Frahm said. "We'll adjust if it turns out that this is more of a permanent affair."

The online grocery business has seen more than its share of failures, including Webvan Group Inc., Kozmo.com, Urban Fetch, HomeGrocer.com and MyCornerDeli.com. In September, Florida's giant Publix Super Markets Inc. chain pulled the plug on its online operation.

Today's crop of providers has largely steered clear of expensive fleets of trucks and big, out-of-the-way warehouses. Instead, they fill orders from store shelves, charge delivery fees and keep a lid on costs.

"This is a difficult business to operate well," said Arthur Zonneveld, grocery manager at Yummy.com., which has been hiring employees in the last few weeks to keep delivery times to about 30 minutes.

Online shopping, experts say, amounts to about 1% of the total market for groceries -- well below the levels predicted in the throes of the dot-com boom. Yet analysts warn against writing off the business altogether.

"It's a long, slow climb, but we're talking about a half-trillion-dollar sector," said James Tenser, an online retailing consultant based in Arizona. "So if 10% of customers shop online 10% of the time, that's still 1% of a half a trillion bucks."

The largest grocers, with the exception of Wal-Mart Stores Inc., have explored the business, and many are committed to it, even if it stays in the single digits as a percentage of overall sales, Tenser said. "The name of the game is, 'How do I get a larger share of the customers' wallet?' ... and in the grocery business, it's a game of inches."

Most people visit a grocery store more than twice a week, Tenser said. But they also tend to shop two or three stores regularly, and that means Southern California's labor woes could trigger some changes that stick once the grocery business is back to normal.

Today's increase in demand for home delivery "seems like it's situational," Tenser said. "But the strikes are taking habitual behavior and scrambling it up right now. The chips may be distributed a little differently when this is all over."

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