PLEASE NOTE: This post was heavily updated a couple of days after I first published it. With everything I’ve added, I’d like to think that it deserves re-reading.
After keeping his cards very close to his chest for the last few months Tommy P finally spilt a handful of beans on the new venture he’s going to be involved with in 2008 - www.graze.com.
The site currently consists of little more than a mailing list, some nice sweeping images of greenery and healthy goodness and the promise of ‘nature delivered’. Nice to see that it’s already showing some class - the data capture is carefully graded, allowing you to leave as much or as little useful info as you want, accompanied by the promise that ‘we hate spam’.
I haven’t been able to prise out of Tommy exactly how Graze will work, but it’s looking like some sort of online grocers. The venture is the brainchild of a former colleague of his from Lovefilm, which offers some clues as to the business model behind it. As with Lovefilm and the home entertainment industry, the internet undoubtedly has the potential to revolutionise the mechanics of grocery shopping, through the creation of more efficient mechanisms for ordering and fulfilment. Unlike Lovefilm (in its current incarnation at least) fruit and veg aren’t about to be rendered redundant by people downloading their nutrients on demand.
Several of the established supermarket chains are already well underway with the process of adapting their business models to begin realise this opportunity. As of 2007 the online grocery sector was still dominated by major supermarket chains including Tesco, Sainsbury’s, ASDA and Waitrose, of which Tesco is a comfortable front-runner. The closest thing to a successful internet-only brand is Ocado, a warehouse-based retailer partly owned by The John Lewis Partnership, which is steadily expanding its area of geographical coverage and has become another leading player in this sector.
Whatever headway has been made in fulfilling demand for online grocery shopping, the extent of the demand will always dictate the pace at which the opportunity can be brought to fruition. Consumer behaviour can be influenced by advertising, marketing and public relations, but any internet business forgets at its peril that the foremost casualties of the dotcom bubble were businesses failing to account for the extent to which we consumers are irrational, creatures of habit, not about to change our habits overnight for the sake of raw fiscal or logistical incentives.
A recent report found that 15.9% of respondents purchased groceries via the Internet at least once in a year, with 3.2% making online purchases at least once a week and 2.7% making them two or three times a month. The largest proportion, 4.5%, purchased groceries online one or two times a year. The UK Internet grocery market, considered to be one of the most developed in the world, is expected to increase its current value by 80% within the next 5 years. When one considers how uniquitous a requirement groceries represent, these must be regardeded as nascent levels of demand, leaving plenty of grocery shoppers whose allegiances to their local supermarket chain are there to be tested when they make the transition to ordering online.
Indeed one wonders how much of a hurry established chains are in to see their customers drifting online. An internet shopper is less likely to make impulse purchases outside the scope of a shopping list; less likely to buy weekly magazines, and certainly daily newspapers, as part of a fortnightly or monthly order; less likely to buy music and DVDs from an outlet who can’t compete with Amazon on price; less likely to buy clothes without being able to try them on; less likely to be seduced by point-of-sale leaflets advertising loans and other financial services; and far less likely to buy fuel for their car when they no longer need to make the trip. No, the chains will always prefer their customers in-store rather than online, for as long as their core business isn’t being threatened by upstart start-ups offering an improved, exclusively online alternative.
There’s no inherent reason why the chains shouldn’t be challenged in this way. Amazon itself has succeeded in establishing itself as an online retailer leading multiple markets ahead of existing businesses who’ve attempted to make the transition from high street to information super-highway. Seth Godin examines Amazon’s success in his latest book, Meatball Sundae, ascribing it to the very fact that Amazon was built from the ground up, conceived for the medium of the web and free from the baggage of an established bricks-and-mortar business.
Certainly anybody wanting to compete in this space faces some substantial barriers to entry. These include high start-up costs, efficient stock-picking and replenishment systems, comprehensive delivery networks and user-friendly website design, assuming the start-up adopts the same basic business model. Of course, every now and then some bright spark affects a paradigm shift, re-envisaging the way a service is offered and a need fulfilled, and managing to clean up off the back of it. I’d love to think that Graze is about to do just that, but until I hear otherwise I’m assuming that they’ll be competing with the big boys on roughly the same terms. If so, the key to their success will be the little differences, and how they communicate them to make one big one.
Indeed, I think there is an important opportunity here, growing from a grassroots disillusionment with the chains. There is a strengthening consensus that a steady decline in UK food standards - and the corresponding woes of British agriculture - can be ascribed to disproportionate influence exerted by supermarkets over customers and suppliers. I can’t help feeling that they’re well overdue a comeuppance in this respect - the kind of sudden, sweeping retribution that only this new industrial revolution can inflict - and I think that Graze will quickly engender some precious goodwill if it’s seen to be reasserting the primacy of the relationship between consumer and producer.
The tyranny of Tesco was one factor in Emma’s and my decision to start having a box of organic veg delivered by The Organic Delivery Company. This comes once a week, and contains a selection of stuff selected by the delivery company based on what’s in season. Putting our current raw beetroot surplus to one side, this is a great way to get your veg. It reminds of a comment Rory Sutherland of Ogilvy made in his presentation at The Media Summit a few weeks ago, to the effect that people have been found to be shopping for organic food because there’s a smaller selection to choose from, and in this context choice is sometimes perceived as burdensome. I think Graze would do well to consider how they can enable time-starved grocery shoppers to relinquish this burden, putting it in the hands of a responsible supplier using technology to better understand our needs and act on our behalves.
It will be interesting to see how Graze unfolds, but it certainly looks like a project Tommy will be proud to be a part of. We’ve worked together building websites and interactive applicati
ons since 1998, most notably developing Ploggle together from the ground up, and collaborating on all manner of ground-breaking projects for PPC. As developers go he’s a natural, and as hard-working as anybody I know, which is a potent combination. I hope this venture allows him to finally turn these talents into wealth beyond his wildest dreams, but, more importantly, that everyone involved has a blast making it happen. For my part, I’ll keep tapping him up for titbits, and I’ll keep you posted.
