Make Life Easier

"If everyone is good at something different, assigning chores is easy. If your partner is great at grocery shopping and you are great at the laundry, you’re set. But this isn’t always – or even usually – the case."

- Emily Oster, Economist and best-selling author

I’ve some good news to share. I’m a brand new grandfather to the young lady pictured above!

Allow me to introduce you to Miss Lily Caroline. She gave us a scare as she was born a month early on September 27th and came into the ring at 4 pounds, 5 ounces. That, dear reader, is little. Tiny as she is, she already has me wrapped around her little fingers. I'm glad I'm writing this and not talking in person because, in looking at the hundreds (I am not kidding) of pictures that my wife has already taken of her - including the fantastic shot above - I can feel my throat tightening with emotion. Being a grandfather is very, very cool.

Lily Caroline is out of the Neonatal Intensive Care Unit (NICU) and is now at home and she is already up nearly a pound. Mom and dad are in fine shape too, thank you very much. I want to give a big shout out to the medical staff at TriStar Centennial Hospital in Nashville, TN. They are a kind, generous, and talented bunch that will forever have my thanks and admiration.

My wife and I are the parents of two great kids. We love being parents and are proud to see both of them doing so well in their own lives.

As I say that however, we both know that being parents - particularly new parents - is no easy task. Not sleeping much is part of the problem, but not knowing much is worse. Time management is a killer. Do you remember how having babies around made the management of the little things difficult? And as those little ones become bigger, things don't let up. Most parents are so involved in their child’s (or children’s) school and sports activities – not to mention trying to manage their own careers and the relationship that they have with each other - that it often feels like you’re putting 2-pounds of something in a 1-pound bag.

And grocery shopping, a chore I abhor, is part of the "something" that is in that bag.

While my daughter and her husband don’t know it yet, traditional grocery shopping just became a lot more complicated with Miss Lily Caroline in the picture. Car seats, diaper bags, hungry baby = angry baby, feeding schedules, cold weather, hot weather, rainy weather, snow and ice.

The never-used-drugs person called Bruce Wing sounds like he's having flashbacks from a bad acid trip.

Like I said, I hate grocery shopping.

With the goal of making my daughter’s life a little easier - and yours too, I hope – I decided to research the grocery pickup and/or delivery services that occasionally pop-up on my radar screen. My thinking was, "If this stuff is for real, it could make life....for just about everyone....so much easier!".

And I'm happy to say I have more good news to share....

The Research

I started this project thinking that it would be a few hours work. I was wrong. I have invested a few weeks researching this subject and clarifying issues that needed clarification.

Do you have any idea how much time the average person spends grocery shopping every year? 55-hours. That's a pretty strong week at the office....not including the commute getting there and back with all the other crazies that are trying to do the same thing at the same time. And note that I said "average person." That means that some people spend MORE than 55-hours a year grocery shopping. Maybe a lot more. Heck, according to the stats, a significant percentage of Americans shop at three or more grocery stores every single week. Why do such a thing? Well, even though the average grocery store has about 40,000 items on the shelf, not every grocery store carries the same items and some grocery stores sell the same item at lower prices than others.

The grocery business is a big business.... $700 billion worth of big. While many of us, me included before researching the topic, think (or thought) the grocery business is pretty staid, we couldn't be more wrong. Online sales, combined with curbside pickup and/or home delivery are having a huge impact on that industry. While less than 5% of the grocery market is in online sales, online grocery purchases are growing fast. How fast? 19.5% a year fast.

Why?

It is the convenience factor.

When was the last time you drove to a bank, parked your car, and walked into the lobby to deposit a check or get cash....vs. you using an ATM or a bank app and a smart phone camera to deposit a check and using Venmo to transfer money to someone that needs cash? When was the last time you purchased a head of lettuce, carrots, onions, and the like to make a salad....vs. buying a bag of salad in the grocery store? Oh, that bag of salad probably costs double what it would cost of you made the salad yourself. I live in the South and we have this restaurant chain called Chick-fil-a. Every morning and every afternoon - except for Sunday, of course - the drive thru line at that place is wrapped around the building. And Chick-fil-a is very good, but it is not cheap.

Convenience is a big deal.

Before getting to the good stuff of the research, let me ground you in a few terms regarding the grocery business. "Online grocery shopping" or "online shopping" simply means that you search for the items you want to buy - using a website or app - and you buy those items online. The next issue relates to how you obtain physical possession of the groceries. "Curbside pickup" means that you drive to the grocery store, park in a designated spot, and a grocery employee will bring the groceries to your car. You never have to place a single foot on the pavement unless you want to. "Delivery" means that someone, often a third party…but not always, will delivery your groceries to your home so that you never have to leave the house.

Now, this third-party delivery issue is interesting. As you read through this, think about it both as a consumer and as a business owner. There are two, third-party players in the grocery delivery business. The 800 lbs gorilla is a privately traded company called Instacart. The other player is Shipt. Shipt was acquired by Target in 2017, so I don't see Shipt being an attractive partner to grocery chains that are competitors of Target. That is why I think, when a grocery chain doesn't want to build its owns grocery shopping and grocery delivery infrastructure, it clearly promotes its relationship with Instacart even though the grocery chain may also have a relationship with Shipt.

How does Instacart make money? Well, it: (1) definitely charges consumers a membership fee in exchange for free delivery (think Amazon Prime)....OR it charges nonmembers a fee per delivery, (2) for some grocery chains, it marks up the price of the groceries you buy online, and (3) for other grocery stores, there is no difference between the price of an item purchased in-store vs. online. How does this work? Well, one can reasonably assume that EITHER the grocery chain is sharing its profit with Instacart .... or that Instacart is "eating" the cost to gain scale thru new grocery store chain partnerships. At some future "scale" point, Instacart could theoretically leverage its distribution capabilities to demand the grocery chain either share a portion of its online profits or implement a mark up on.its groceries for online sales. Understanding this framework is important to interpreting the spreadsheet I created that really delves into the options.

The Evaluation

I've thoroughly studied the following grocery store chains:

• Kroger (which owns Ralphs, Dillons, Smith’s, King Soopers, City Market, Fry’s, QFC, and Harris Teeter)
• Publix
• Sam’s Club
• Sprouts
• Target
• Walmart
• Whole Foods/Amazon

For each grocery chain, I have identified whether it offers curbside pickup and what the pickup costs are, whether it offers home delivery and the delivery costs, minimum order sizes, whether prices for items are different when ordered online vs in-store, the ordering process using websites or apps, coupon usage, and the process for curbside pickup or receiving a home delivery order.

While the details are too much for a newsletter, I want you to know it is available to you as both a Microsoft Excel spreadsheet and an Adobe PDF file. Click the the hyperlinked text below for access..

Free Report - Online Grocery Shopping and Delivery Options

Summary:

For curbside pickup, Kroger is hitting home runs all over the ball park. Its grocery prices are low to moderate, its produce and meats are highly ranked, it manages coupons better than any of its competitors, and its service is good, too. Walmart is also doing an excellent job, particularly since it will deliver groceries to your home for free. I was disappointed with Amazon. Whole Foods/Amazon does a great job with delivery, but its curbside pickup process is not explained worth a darn. Whole Foods offers great food, but given its high prices, I'm a little irritated at the lack of clarity regarding how its process works. Target has potential in the curbside pickup space, but because it does NOT ALLOW for the pickup of perishable goods like dairy, produce, and meats thru its curbside pickup service, I don't see Target making the cut in the near term. The company is making big investments in the delivery space though, so stay tuned. Trader Joe's toyed with the online shopping business for a while, but it has formally decided to exit the online grocery shopping and delivery business. I can't decide if I think its management is brilliant for sticking to its knitting or if the company's executives are being idiots for staying with typewriters while computers are taking over the world. While Costco says that it is in the online shopping, pickup, and delivery business, its website is such a mess that I removed Costco from the analysis entirely. Publix - because its groceries are marked up when purchased online for both pickup and delivery - is expensive. This is my family’s favorite grocery chain, so I’m disappointed to report this.

If you decide to take the plunge and try online grocery shopping, I have two recommendations. First, know that the most difficult part of online grocery shopping is spending the time to create your first order. You’re searching for not just bread, but Nature’s Own Butter Bread. You’re searching for not just hamburger meat, but 80/20 hamburger meat…. because 90/10 makes for a dry burger. You’re searching for not just apples, but Gala apples. That level of detail is tedious, there is no denying it. Remember that once you’ve done it once, it is there forever. Reordering is a breeze the next time. And the time after that. And the time after that. Think of it as short-term pain for long-term gain. Second, most grocery stores will allow you to identify substitute items if the primary item you want to buy is not in stock. If you aren’t a control freak (like me), you can give the grocery store’s "shopper" the discretion to pick a replacement for you. If you are like me, you’ll want to reference a substitution for almost every item in your cart. Again, this is tedious. Again though, once you've done it, you won't have to do it again (unless you want to change your preference).

Future of the Grocery Business

The entrepreneurial side of me is fascinated by this entire discussion. I love convenience. When I was 7 years old (1975), McDonalds opened its first drive thru-window. Starbucks followed in McDonald's steps in 1994. The chain added the ability to order coffee online - for pickup/drive-thru – in 2015. The grocery business is taking that idea and writing it large….and adding delivery. Between Amazon and Walmart and their supply chain and logistical brilliance (check out Walmart Labs for an example of what I mean), they are going to make this work. Through their innovations and the creativity of others in this space, I sincerely believe that the days of physically entering a grocery store - in miserable weather, when you’re tired, maybe with unhappy children, walking up and down the aisles – are going to become much less frequent.

Kind of like the days of entering a bank lobby. Banks still have lobbies, but most bank customers avoid going into them.

Change is coming and what follows are some changes that might occur in the future.

Near Term:

In the near term, there are several things that I believe the grocery business should do to improve things. For instance, they might create videos that explain their respective processes. Video is, without a doubt, the best way to convey information. I probably need to take this advice to heart. It would probably be smart to develop different "template" grocery carts (e.g. single person, young family with kids <5, family with teenagers, retirees, etc.) that people can access and edit as they see fit. A lot of people have trouble getting started, but we tend to be better at taking something that already exists and making it unique to us. I believe the industry could also make the process easier by creating automatic and customer viewable substitutes for different items so that the consumer: (a) doesn’t have to "trust" the discretion of his/her "shopper" to pick substitutes, or (b) doesn’t have to create the substitute list himself/herself.

Intermediate Term:

In the intermediate term, I see the grocery industry becoming very creative. To explain, let me first share the first of my two of my favorite quotes: "When all is said and done, more is said than done." I usually get a laugh from that quote. We all KNOW things we should be doing, but that we don’t do. Knowledge isn’t the problem. Behavior is the problem. And that applies to grocery shopping. The fact is that most people DO NOT CREATE grocery lists. For those that do create grocery lists, very few create weekly meal plans. That tends to result in a lot of food in the house, but everyone is asking "What do you want for lunch or dinner?"

Should we plan better? Yes. Do we do this? No.

Like the quote says, more is said than done.

The grocery industry can help consumers address this problem by creating meal plans that the consumer can choose and place on a calendar. Heck, the industry can create template weekly meal plan calendars that consumers can just take. That calendar should be printable for placement on the kitchen refrigerator and/or downloadable to the consumer’s electronic calendar (along with the recipes for making each meal). When the consumer clicks on the meal plan, after identifying the number of people to feed, I envision "X" number or "X" amount of each grocery item on the meal plan automatically being added to/adjusted in the consumer’s grocery cart. That is SOOOO SIMPLE. But programming all that is going to be hard!

Success is simple. Simple is hard.

Grocery stores could "promote" specific brands thru through the meal planning feature. While the consumer should have the ability to change the brand items recommended in the meal plan to other items, my assumption is that many consumers won't do this because of the "easy" factor the meal plan provides This is a type of "promotion" or "merchandising" in marketing speak and it increases profit for the store/vendor (hopefully) while still adding value to the consumer.

I also think there are creative things that can be done in the reorder process. For instance, grocery stores or other stores might manufacture and sell kitchen garbage cans with a "scanner" attachment that the consumer can use to capture the identity of items that are thrown into the trash. When items are scanned as they are thrown away, those items are automatically added to the grocery shopping cart. Easy. It's the residential equivalent of an inventory management system. Frankly, it is simply a better version of Amazon's "Dash" button.

Longer-Term:

If grocery stores do start promoting brands thru the meal planing feature mentioned above, two related strategies come to mind: (1) low price grocery chains (e.g. Aldi’s) could advertise the same meal plans with off brand items at a lower cost ...and market their differentiation to their target market that way, and (2) mid and high price grocery chains (e.g. Publix) could selectively offer consumers a choice of two meal plans…one that is the branded meal plan that is more expensive because of its implied higher quality and the other that is the store brand, that is still very good, but that is less expensive. This tactic has two benefits. First, it allows the store to capture sales for consumers that are price sensitive, but not extremely price sensitive. Second, it allows the grocery store to sell its grocery store branded items at a higher price that it might otherwise because the consumer is "anchored" to the branded price. This is the strategy that grocery store delis use when partnering with Boar's Head. Boars Head Provisions is a very good, but premium priced provider of meats and cheeses. When Boar's Head ham is selling for $10/pound, it allows a grocery store to sell its grocery store branded ham for $4/pound....even though the grocery store would be happy to sell it for $3/pound. Selling Boar's Head ham "anchors" the consumer to the higher price, making the private label grocery store price seem inexpensive by comparison.

The logistics potential for online grocery shopping is tremendous. Today, grocery stores are designed to be inefficient for consumer shopping because it results in consumers spending more time in the store and it increases the probability that consumers will make impulse purchases. If online shopping becomes dominate, I can imagine a much more efficiently designed. warehouse-like, grocery store that makes the speed at which orders can be filled much faster. I can also imagine the packaging of items to be much more uniform in shape for easier collection, bagging, and that supports lower cost delivery. For instance, why buy two, one-gallon milk jugs for a large family…instead of one, two-gallon jug? Outside of trying to fool consumers into believing that they are receiving more than they really are, why sell boxes of cereal or bags of chips that are half empty? Yes, chips and cereal "settle" during transportation, but the food industry is way overselling that story...and everyone knows it. Make the boxes smaller to improve the efficiency of shipping, reduce waste, etc, Consider replacing the glass jars containing items like spaghetti sauce with something else. While glass is recyclable, it is heavy and results in more weight-created transportation pollution than the recycled glass is worth. Glass is also more fragile than other materials.

The innovation in this space is going to be epic.

Closing Thoughts

Online grocery shopping is going to be big. I believe online shopping and the curbside pickup of groceries is going to be huge. It provides a high level of convenience without the grocery mark up expense charged for delivery at most grocery chains.

I’m not sure how big the online shopping AND grocery delivery business is going to be…. because of the associated costs. Some companies (e.g. Walmart and Kroger) are absorbing some or all of the delivery costs. While that is great, I don’t see how they can do that forever. Many grocery stores mark up the cost of groceries for delivery (e.g. Publix, Sam's Club, Costco) and some have priced that markup at an average of 20% or more. If you’re a Publix fan and your normal grocery bill is $8,000/year for a family of 4, you might pay a 20% average mark up on your grocery bill if delivered. If you tip 5% to the person that delivers your groceries (and some tip 10% or 20%), you are now paying a total premium of 25%....$2,000 a year....for the convenience of grocery delivery. And I may be low balling the number.

Is the convenience worth it? That's up to you and your bank account to answer.

This entire topic has had me flying outside of my usual "lane" of subject matter, but I hope you find what I've done valuable. I kid you not when I say I have invested an inordinate amount of time researching the subject. The spreadsheet I've created is a very good one. Please use it.

As always, let me know if I can be of help.

Thanks,

Bruce

Author

Bruce Wing is the president of Strategic Wealth, LLC, a Registered Investment Adviser located on the north-side of Atlanta.