Virtual growth
With the Internet helping to fuel growth, retailers who don’t already have an online presence are busy undertaking trials and those who do are updating existing systems
Print12 August 2010
A survey by Eumom, an Irish pregnancy and parenting company that runs www.eumom.ie, revealed that 72% of new mothers now shop online. Furthermore in the UK, retail analysts are predicting that 40% of the population will be shopping online in five years time. With this in mind it is no wonder Musgrave and Dunnes Stores are finally trying to get some online action. While Superquinn and Tesco have had an online presence for the past decade, Ireland’s other main food retailers had never tested the waters.
A spokesperson for Musgrave explained to ShelfLife that they are currently conducting trials in two of its stores and that it will more than likely be early next year before the online store is officially up and running. “Online shopping trials are currently taking place in Ryan’s SuperValu, Grange, Co Cork and Quish’s SuperValu, Ballincollig, Co Cork. Our trials are being conducted with our own employees only to gauge their shopping experiences and feedback. If the trials are successful then the model will be rolled out to all stores in the future.”
Although this is the first foray into Internet shopping for the group, Twomey’s SuperValu in Deansgrange, South Dublin had an online service for its store called Off Your Trolley for ten years, which has only recently been disbanded. ShelfLife spoke to the manager of the store, John Mahon, just days before the service was wound up. “Offyourtrolley.ie is in existence over 10 years. We only have about half a dozen customers that use it each week. It’s hard to compete with the likes of Tesco and Superquinn. You need to promote an online business and spend money on it. It makes sense for a larger company to do it but for a one man show it’s difficult. That’s why we’d need the support of Musgrave to develop it.”
Buy4Now
Because Supervalu stores are individually owned and run there is a real challenge there for Musgrave to roll it out successfully. Rumours in the trade are that Musgrave will employ the services of Buy4Now, an obvious choice considering Superquinn successfully uses this medium in its online business.
Mahon believed that certain shops would probably undertake the online business for a particular geographical area, as there wouldn’t be sufficient business available for every shop to employ it just yet. “With Superquinn’s online business, Ballinteer covers Knocklyon, Bray, Blackrock and that area and then Walkinstown would cover Sundrive and the surrounding area. Buy4Now operates the vans and delivery. The shops would provide people to do the shopping and to get the paperwork done. They would charge five euro for every delivery and then a certain percentage of the overall total. They might get 5-10%”.
From September, Superquinn is due to increase the number of delivery vans to meet increased demand. According to the Sunday Tribune, Kantar Worldpanel have released figures to show that the average Superquinn online customer spends €338 over a three-month period. Figures like these are surely enticing others to get on board.
Website development is also said to be underway in Dunnes Stores with its non-food to pre-empt its food presence. Dunnes Stores has refused to confirm the move but the company has been looking to recruit a manager to run an e-commerce website in recent times.
Compare.com
The most significant element of these two major retailers going online is that it will finally be possible to compare prices from all four major retailers with the touch of a button, which should see prices come into line across the board but could also spark a price war which would be bad news for already struggling farmers and suppliers.
The reason SuperValu and Dunnes may not have previously gone online could be due to the considerable cost of setting up an online business and the rate of return. Tesco’s online model didn’t make a profit from its British venture until six years after it was launched. Ocado, the company that delivers Waitrose goods in the UK has yet to make a profit after ten years in existence showing that online doesn’t always increase profitability. However it seems like you need to give your customers the option of shopping online in order to be taken seriously.
Last month news filtered through that Amazon was to take on Tesco, Sainsbury’s and Asda in the UK with the launch of an online grocery site. Amazon.co.uk is now offering a range of 22,000 grocery lines. Although it came as a surprise, Amazon has some experience selling food in the US with its Amazon Fresh concept that delivers food in its home town of Seattle. The group has also started selling food and drinks online through its German site in the past month.
And not to be left out Asda, the British division of Wal-Mart, is said to be running trials of online food retailing in Ireland, through its British site.
Organic growth
Yet the bigger retailers are not the only ones looking online for more business. At the other end of the market, some smaller retailers are seeing the need to go online too. Darren Grant, owner of the Organic Supermarket in Blackrock, Dublin, has taken the brave step of launching an online site for his store and will deliver nationwide.
His two-year-old business went from servicing four thousand people to four million people when he went online.
Prior to setting up his own business Grant was a global programme manager for Dell so has applied the skills he learned there into his online business. “Dell cuts out the manufacturer and I cut out the middle man and go straight to farms instead of going to fruit and vegetable wholesalers. We buy directly from central European hubs so our price difference is marginal when compared to non-organic food.
“If a customer orders before 2pm on any day, they will get next day delivery. If you want one potato, we’ll send it to you. There is a €6.50 delivery charge but if you spend over €100 it’s free. We offer all 3,000 products bar frozen and chilled at the moment.”
Due to the recession, Grant had to rapidly change his initial business strategy. “I needed to keep my overheads the same but expand my market. Physically expanding a shop costs a hell of a lot of money. When you are starting off the bank is not going to give you money to launch another shop so I needed to come up with a strategy or lose the business. I needed to come up with something unique, fun, funky and nationwide. With that in mind I went to my website developer, Ray Doyle and said exactly that.”
Time and effort
After a huge amount of work on the website www.organicsupermarket.ie is the first return on Google after Wikipedia when you type in organic. “We have put all our information online. We already have thousands of customers. We’ve 600 fans on Facebook and 400 on Twitter so that’s 1,000 people you can reach directly and for free with any special offer”.
For a small store to deliver specialised products nationwide involves quite complicated logistics. “I signed agreements with national hubs around the country. I couldn’t charge €15 to deliver to Cork so I had to take a hit on that and have a standard price of €6.50.”
The work has paid off and when the site was only six months live it was nominated for the Golden Spider Award for Best E-commerce website in Ireland. They also won the Most Beautiful Website in Ireland at the Irish Web Awards and were nominated for Internet Entrepreneur and Best Web Site for the Irish Internet Awards.
Competition isn’t something Grant has to worry about just yet. “We don’t have an online competitor. There’s no store that offers organic food online except for box schemes.”
Whether big or small it looks like everyone is jumping on the online bandwagon. Consumers will soon begin to disregard any business that can’t deliver to the door with a click of a mouse. We’ll have to wait until early next year to see the effect Musgrave and Dunnes online businesses will have on the Irish market but it is certainly expected to shake things up.
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