We know about some of the failures of e-grocery stores. However, there are success stories out there too, and much of the success lies in the habits of younger generations living in areas that are tight in retail space. Most inefficiency occurs at the retail level, and the cost of retail increases based on the lack of availability of space. Of course NYC comes to mind as having the lowest availability of retail space in the U.S. Fresh Direct operates out of Queens, NY and has seen success in the past year. I myself have used FreshDirect a few times while living in NYC, and although the prices were a little high, they are high everywhere in the city, and I saved the trouble of shopping in crowded, cramped spaces and lugging the groceries home. FreshDirect also brands itself as "Fresh from the Farms," by selling organic, local products, a concept that is becoming increasingly popular. You can see how they brand themselves on their website:
After starting six years ago, the company became profitable for the first time last year estimating sales at $240 million in 2009, up from $215 million the year before. Some important factors in their success include decreasing delivery errors, which is obviously terrible for business, and also increasing average spend through up-selling techniques. I am also guessing that grocery shopping online is like any other kind of e-commerce; it takes a little while to gain momentum because of the time it takes to change consumer habits. People used to be afraid to shop online, but we now see the enormous success of Amazon. I think that the same is possible for groceries. The new generation is used to shopping online, and if online grocers can provide quality food for a decent price, I'm sure it will catch on. FreshDirect is now planning on testing new markets in Boston and Philadelphia, so we will see how they fare.
Looking outside of the U.S., it's also possible that online grocery shopping will popularize in China. Younger people are used to buying everything online, and are often dissatisfied with take-out but want a convenient, healthier option. Check out this article about a recent 6-month online groceries test by two major e-commerce companies. http://enovatechina.com/blog/online-groceries-a-recipe-for-success/
