For years, online grocers didn't catch on with consumers. Webvan was the original disaster, losing about $1.2 billion in six years. But a year into the current recession, many online grocers are reaping the fruits of diligent brand-building as their customers stay home for shopping and dining.
"In the face of recession, our business has more than doubled," says William Orkin, president of Gopher Grocery in Minnesota. The company serves 3,000 registered users, and according to Orkin, sales grew 203 percent in 2008 and 127 percent in January 2009, compared with January the year before. That's all on a fee of $2 per delivery, with free delivery for orders over $100.
Gopher's growth is impressive—but the company is a young start-up compared with more mature grocery delivery companies like Minnesota-based Schwan's and New York-based Fresh Direct.
Fresh Direct is a much bigger fish. Since 2002, they've filled six million orders, and they currently have a quarter million customers. The company, which serves much of New York City and parts of New Jersey and Long Island, expects sales to grow by double digits in 2009, according to Fresh Direct Chief Marketing Officer Steve Druckman.
"We had a bang-up fall," Druckman says, "and we're doing better than we've ever done in our history for a lot of different reasons beside the economy. But the economy helps."
The company introduced loyalty programs in 2008. For most customers, that means unlimited deliveries for orders over $30 at a cost of $59 for six months or $99 a year. Druckman says about half of all sales now come through the loyalty programs.
In addition to an enormous food processing facility and kitchen in Long Island City, Fresh Direct has an integrated web infrastructure that includes daily updates of freshness for produce. Like Amazon.com, the Fresh Direct site stores information on customer habits and recommends products to them accordingly.
Both Druckman and Orkin credit quality and convenience for their growing business—and both also report a recession boost. For Fresh Direct, Druckman says, it's customers "going out to dinner less, traveling less, staying home more, and doing a lot more cooking."