More in suburbs going online to have groceries delivered

Whether it's the lousy weather, recent grocery store shake-ups, or a changing consumer mindset, more suburban shoppers are getting their food from online grocery delivery services.

Business is growing in the suburbs, business owners say. Skokie-based Peapod added suburban “Peapod Pick Up” locations last fall, contributing to the company's half-billion dollars in sales nationwide in 2013, said Chief Operating Officer Mike Brennan.

Artizone, a Chicago-based online grocer offering foods from more than 50 local artisan shops, saw sales jump 50 percent per month in the past four months, co-owner Lior Lavy said.

A slew of startups have jumped into the suburban market recently, including Instacart, a same-day or one-hour delivery service of items from Costco, Whole Foods, Mariano's and Jewel-Osco. Since launching in Chicago in September, it's already expanded to the North Shore and is now eyeing the Northwest and West suburbs.

“People are just more comfortable with buying everything on the Internet now. If you were to flashback five years ago, you'd say, 'Who would buy their shoes on the Internet?' And now they do. I think food is entering that territory,” Brennan said.

Should this make suburban bricks-and-mortar grocery stores nervous? It remains to be seen, but probably not, said Harry Balzer, a North Barrington resident who's studied the food industry for 36 years and is chief industry analyst with NPD Group, a consumer market research firm.

“(The online grocery business) seems to have momentum, but I've seen it before,” Balzer said. “The questions are, 'Will it save me time and money?' We know it saves you time. Will it save you money?”

In a check on Friday, prices were competitive on some basic staples like milk, bananas and bread. But online grocers still have to charge for delivery. While some consumers might be willing to pay for the convenience of home delivery or mobile shopping, many will not, Balzer said. Spending habits changed during the recession and have been slow to shift back, and people try to save a few bucks wherever they can.

Plus, Balzer said, people still like to shop. Some might be OK ordering packaged products online, like cereal and peanut butter, but they don't necessarily trust someone else to select their fresh produce and meats.

To build customer trust, Peapod — the pioneer in the field, having starting in 1989 — now has “produce selection experts” and other checks in place to insure customers receive top quality products. To save customers time and money, the company recently opened new “Peapod Pick-Up” locations in Lincolnshire, Palatine, Prospect Heights, Schaumburg and Deerfield.

There is no order minimum, and picking up the order themselves lets customers avoid the usual $7-$10 home delivery fee.

When customers place their orders online, they choose a pickup time range. Then they drive up and pop the trunk, and someone comes out with their order. They don't even have to get out of the car.

“Once people get over the hump and give it a try, they love it,” Brennan said, adding that the bulk of Peapod's business remains home delivery.

Artizone customers place a premium on food quality and supporting Chicago area mom-and-pop businesses, Lavy said. While he acknowledges that online ordering doesn't compete with shopping at a farmers market or artisan shop, not everyone has time to do that each week.

“Yes, it's nice to meet the butcher, and talk to him and learn about the fish or meat. But three times out of four, you just need to get the fish and go,” said Lavy, a Highland Park resident. “Price is an issue for people. You can't be Walmart, but you can be reasonably priced.”

Lake Zurich mom and small business owner Donna Koranek tried Artizone through a daily deal website offer. Now she places orders of between $70-$100 every few weeks — things like organic eggs and produce, or specialty jams — using it to supplement her regular trips to Caputo's or Trader Joe's.

“It certainly is convenient,” she said. “The prices are a little higher. But I get what I'm paying for. Very nice-quality items ... from 20 or 30 different vendors. Coming from the perspective of someone who does handiwork and sells it, you realize the time that's gone into making these foods, and you realize it's worth it.”

Old concept refined

Online grocery shopping and delivery is not a new business but one that's evolved in recent years. Technology helped improve business logistics, making it easier to shop online. You can type in “chocolate chip cookies” and sort by price, brand or type. Delivery and communication is better, too. For example, a text will notify you when your delivery driver's in your driveway.

Online grocers say buying food online minimizes impulse buying and eliminates that “How did this add up to $160?” feeling people get at grocery store checkout lines.

“We don't have a lot of the real estate costs grocery stores have. We know we're gonna slice 46 pounds of turkey, and the person does it at one time, so that keeps costs lower than a grocery store. But we have higher costs on delivery and the website,” Brennan said.

Delivery rates vary by company and order size. The costs range from $4 to $15 per order, and most have minimum order requirements. Instacart has a $99 yearly membership.

What could be the game-changer, Balzer says, is if big-name retailers, like Amazon.com's AmazonFresh and Walmart To Go, move into the Chicago market. They're testing markets on the U.S. coasts.

Mariano's doesn't see these companies as a threat. The grocery store chain — in the process of opening five new suburban stores and converting 11 Dominick's stores — has no plans to add online ordering or delivery services, Mariano's spokesman James Hyland said.

“We're all about the experience,” he said. “We want you to come into the store and experience the store.”

Whether it's in stores or online, people love to shop for ways to make mealtime easier, Balzer says. “Shopping is part of our lives, and we require novelty. Is (grocery delivery) a novelty?” Balzer said. “If they can make our lives easier and save us money, we'll take it.”

Grocery prices: in-store vs. delivery

The prices of common groceries in different grocery stores vs. those delivered by different services:

<b>2% milk, 1 gallon </b>

Walmart: $2.78

Mariano's: $2.22

Peapod: $2.99

Artizone: $3.99*

<b>1 dozen large eggs </b>

Walmart: $1.96

Mariano's: $1.89

Peapod: $1.79

Artizone: $3.09

<b>Cheapest loaf of bread </b>

Walmart: $1.28

Mariano's: $0.89

Peapod: $1.67

Artizone: $4.40

<b>Can of chicken noodle soup</b>

Walmart: $1.58

Mariano's: $1.59

Peapod: $1.99

Artizone: $1.89

<b>Ranch dressing, 16 oz </b>

Walmart: $2.98

Mariano's: $3.19

Peapod: $3.99

Artizone: $3.39

<b>Bananas </b>

Walmart: 47¢/lb

Mariano's: 39¢/lb

Peapod: 39¢ each

Artizone: $1.39/lb**

<b>1 lb. ground sirloin </b>

Walmart: $4.68

Mariano's: $3.75

Peapod: $4.99

Artizone: $4.16***

* Largest and least expensive is a half-gallon of Horizon Organic milk

** Organic

*** 80 percent lean. Did not sell ground sirloin's 95% lean