By Raymond Britt
Peapod.com, the world's largest (a reported $550 revenue) and longest operating (since mid-1980s) online grocery and delivery company is more than ready to battle upstart competitors like Amazon Fresh Grocery Delivery and Wal-Mart.
[Note: Peapod's stronger than ever, and we're (myself and WinSight, our Web Insights and Strategy Consulting firm) proud of our long-term client and business partner relationship, helping the company implement extraordinary initiatives and achieve exceptional results.]
Amazon.com announced plans to enter 40 markets, but to date expansion has been exceedingly slow.
Amazon Fresh grocery delivery in Seattle six years ago have recently opened limited service in Los Angeles and San Francisco. The service appears to operate differently in each of the three markets (from website to customer membership, products, services and fees). Seems odd to us that the Amazon Fresh shopping and search capabilities on each site are disappointingly weaker. But as they roll out to new markets, perhaps customer experience issues will improve.
Meanwhile, Peapod continues to innovate, building a huge mobile commerce revenue stream, introducing new ways to better serve its customers (e.g., no fee Order Pickup in 100+ locations, and advancing technologies to make the online shopping experience even better).
For more about Peapod, see out other articles about Peapod's Breakthrough Strategy, exploding Mobile Commerce revenue, and visit the company site at www.peapod.com.
Excerpts from the Crain's Chicago Business article are below. For the complete article, see How Peapod plans to beat Amazon and Wal-Mart.
How Peapod plans to beat Amazon and Wal-Mart
Everyone wants in on the grocery delivery game these days, it seems, from Amazon.com Inc. to Wal-Mart Stores Inc. Which is why Thomas Parkinson is all pedal to the metal.
The co-founder and chief technology officer of Peapod LLC, Mr. Parkinson is leading the sector's oldest incumbent beyond its original business. All at once, the company is branching out into office food deliveries, opening a downtown Chicago office to lure tech talent, expanding its warehouses here and on the East Coast and turning former bank branch offices and Starbucks into free pickup sites for customers who can't commit to a two-hour delivery window.
Peapod, a unit of Dutch retail conglomerate Royal Ahold NV since 2001, also is starting to deliver office supplies and other bulk orders to businesses. He says the Skokie-based service ultimately wants business-to-business deliveries to account for as much as 30 percent of overall revenue.
Office “orders are much bigger and more consistent—usually weekly—so we get a lot of revenue out of the business,” Mr. Parkinson says. “The sweet spot for us is small to midsized companies that provide food for employees, like trading companies that don't want traders to leave their desks in the middle of the day.”
Mr. Parkinson, who founded Peapod with his brother, Andrew, in 1989, has to act fast: Amazon and Wal-Mart both are dabbling in providing food deliveries and would be formidable rivals if they ramped up beyond their test markets.
Wal-Mart, the nation's biggest retailer and grocery chain, is experimenting with Walmart To Go; it uses stores and warehouse centers to fulfill food orders placed on its website. The Bentonville, Ark.-based company rolled out the service in Denver last fall after operating in San Francisco and San Jose, Calif., for a couple of years. It also owns Asda, a European subsidiary that has delivered groceries in Britain since 2006.
Amazon is a bigger threat, in part because the e-tailer has shown it is willing to take losses on new businesses to undercut more established players. It has run a grocery delivery service in its hometown of Seattle for six years. It expanded the service, called Amazon Fresh, to Los Angeles in June and to San Francisco last month. According to reports, the company may be looking to expand to as many as 40 markets nationally. An Amazon spokeswoman did not return a call for comment.
“Our biggest fear is (Amazon's) not caring about not making money,” Mr. Parkinson says. “They've proven time and time again that they're willing to spend a lot to gain customers. It's going to be a good fight. The highlight for me is how fast we're growing and the investment by Ahold. They know we have to build out now to get ahead.”
HOW WILL THIS GARDEN GROW?
Still, some analysts think there will be room for Peapod, Amazon and Wal-Mart and startups such as San Francisco-based Instacart, which employs personal shoppers to grab groceries at a brick-and-mortar store and drop them off at customers' homes. The service came to Chicago last year and the North Shore last week and plans to be in 10 cities by the end of this year.
“We'll see a lot of experimentation and growth over the next several years,” says Jim Hertel, a managing partner at grocery consultancy Willard Bishop LP in northwest suburban Barrington. “As Generation Y's consumption patterns mature, Peapod and concierge services (like Instacart) are going to become the norm.”
Peapod, which had annual revenue of about $60 million when Ahold acquired it, increased revenue to about $500 million in 2012 and about $550 million last year, according to industry estimates. Mr. Parkinson declines to talk about financials.
To fuel further growth and attract young tech talent, Peapod recently opened Peapod Propulsion Labs in the Lyric Opera building on Wacker Drive. Some 30 Web developers moved from headquarters in Skokie to the new space, 10 more have been hired, and the company plans to bring on at least another 10. (The company declines to provide an overall headcount.)
Peapod also has bulked up its physical presence, adding 120 pickup locations on the East Coast, where New York-based Fresh Direct LLC leads, and five in the Chicago area since August 2012. On the East Coast, where Peapod has alliances with fellow Ahold-owned chains, customers can pick up orders at Stop & Shop and Giant grocery stores. Here, where no such relationships exist, customers can visit locations in Palatine, Deerfield, Lincolnshire, Schaumburg and Arlington Heights in repurposed bank branches or fast-food restaurants.
Peapod is building four warehouses on the East Coast, including a 300,000-square-foot, automated facility in New Jersey, and is expanding its 100,000-square-foot warehouse in northwest suburban Lake Zurich. With the new locations, the company will have 24 warehouses and smaller “warerooms” in 12 states and Washington.