Do Online Grocers Beat Supermarkets?

Do Online Grocers Beat Supermarkets?

A Six-City Buyer’s Test Involving 14 Basic Items

GEOFFREY A. FOWLER

Jan. 7, 2014 7:23 p.m. ET

The idea of buying groceries online has been around as long as the Internet, but who would ever do it? Limited selection, high cost and inconvenient delivery timing has kept it a niche business in mostly urban areas.But now online groceries are starting to make sense for the rest of us and, thanks to growing competition, they can even save you money.

How do I know? Because I recruited a six-city team to conduct a U.S. supermarket sweep, buying the same 14 basic grocery items in online stores and at midpriced supermarkets. Eighteen jugs of milk, bags of grapes and boxes of cereal later, the experience taught me that many online grocers now offer a shopping experience that approaches the selection and convenience we’ve come to expect from the Internet, though with some tradeoffs. I won’t buy groceries the same way again.

Though there aren’t any nation-wide online grocery stores, supermarket chains likeSafeway SWY -0.09% and long-time online players like Peapod and FreshDirect now offer service in more than a dozen cities.Amazon AMZN +0.70% began expanding its grocery service, called AmazonFresh, in the second half of last year to California, while Walmart WMT -0.71% is running tests of its Walmart To Go service in San Francisco and Denver. And upstart grocery messenger services like Instacart are looking to shake up the market.

The biggest surprise from our experiment is that, in a few cities, online groceries, even with their delivery charges, were actually cheaper than or roughly equivalent to going to the supermarket. For a Walmart delivery in San Francisco, my test basket of groceries cost about 10% less than at the Safeway supermarket where I usually shop.

Many online groceries, though, have minimum-order quotas, membership fees, or delivery charges that can range as high as $14.99 for same-day orders. I felt the most let down by Safeway.com, which was significantly more expensive in our tests in San Francisco, Seattle and Los Angeles. A company spokesman said Safeway’s online store is “very competitive” in terms of value, quality and convenience, but I don’t plan to shop there again until its prices drop.

Online grocers have become more convenient, thanks to filters for food allergies, recipe suggestions based on your order and even the ability to re-up packaged goods via your phone’s barcode scanner. My favorite innovation is AmazonFresh morning delivery: Order eggs, sausage and OJ by 10 p.m. and it’ll be on your doorstep before 7:00 a.m. the next morning.

So what’s it like having strangers pick your produce? Mostly just fine. Our bananas were bruised in only two deliveries, via FreshDirect in New York and Safeway.com in Los Angeles. (The bananas were still edible and both companies say they offer a no-questions-asked refund.) All of the online chicken was fresh, though some of the expiration dates came up pretty quickly.

I love browsing supermarket aisles, where I find inspiration for cooking adventures. Online grocery shopping brings less unplanned discovery (it’s kumquat season!) and requires you to shift mental gears. In a supermarket, I know exactly where to go for frozen lasagna. On AmazonFresh, I had to tease it out of a page of listings that included dried pasta and a book about Garfield. (Yes, AmazonFresh delivers books, too.)

Nonetheless, online groceries gave me a new superpower: price comparison across stores. At my local supermarket, I am used to comparing the price of canned tomatoes across brands on the shelf. Online, I can quickly see Safeway.com charges $6.59 for a can of Cento San Marzanos, while Walmart.com stocks it for $3.48.

I enlisted a cousin of my editor who is a mother of five in Indianapolis and goes through a lot of groceries. Carroll Hannon found Peapod’s selection covered about 90% of the groceries she buys for her family. “It was pretty awesome,” she says, adding it might be worth the site’s $7 to $10 delivery fee to have somebody else get her big grocery runs to the house.

Her biggest concern: What to do with all the delivery boxes? Her kids wanted to draw on them, but she called the company to come pick them up. A Peapod spokeswoman said usually boxes are recovered at attended deliveries.

My grocery runs are smaller, so my biggest annoyance is that all the sites have minimum order thresholds. The lowest, $10, was at Instacart; the highest, $60, was at Peapod. The companies all told me they need thresholds to make home delivery of refrigerated goods economical. Another annoyance is substitutions when stores run out of the thing you ordered, which doesn’t happen when you order non-grocery goods online.

AmazonFresh in San Francisco and Los Angeles carries a $299 annual fee in exchange for free delivery on grocery orders over $35. Yeah, my jaw dropped, too. It’s unfortunate that Amazon’s otherwise excellent grocery store has taken this approach, modeled after its $79 Amazon Prime delivery club (which comes with the Fresh membership).

But if you average the fee over a year’s worth of grocery runs—say, 50—it comes to about $6 per order, which is one of the lowest delivery fees of any service.

If you need groceries in a hurry, the best choice is Instacart, a network of freelance personal shoppers who grab foods from local shops. The service, available in San Francisco, Chicago and Boston, charges $14.99 for one-hour service and $3.99 for non-rush orders above $35. I’m sure these people are lovely, but they’re not delivery professionals: one accidentally ripped my pack of Sprite, leading her (and me) to juggle a dozen cans; another just opened the door and walked into my house with my order. I can recommend Instacart for emergency situations.

The good news is that these services are likely to become better and more affordable as more online retailers tame the grocery frontier. If one of these services is available where you live, I recommend making your own test. Most offer free delivery on your first order and Amazon Prime members can try Fresh free for a month.

I plan on shopping online at least for the staples, and my guess is many of you will soon be doing it, too. The days are numbered where people who feel comfortable doing their Christmas shopping on a phone app still buy their groceries at a supermarket.