Groceries are just an online order and delivery away for many consumers nationwide, thanks to Internet retailer Peapod.



For years, Americans have enjoyed the delivery services of their local pizza places and Chinese takeouts, as well as UPS, Fed Ex and the U.S. Postal Service, not to mention the occasional flower shop delivery on, say, Valentine’s Day. Today, shoppers can even get groceries brought to their front doors - and into their homes - by one of the nation’s leading e-retailers: Peapod.

Annually, the Skokie, Ill.-based company serves some 375,000 customers, all of whom place their grocery orders online rather than set foot in a store. To date, it has made more than 15 million deliveries.

Like all distribution channels, from club stores to traditional grocers, Peapod has a target customer. Since 1989, the retailer has offered “smart shopping” for “busy people” - the vision of brothers Andrew and Thomas Parkinson, who first established the company in Evanston, Ill. After successfully test-marketing the concept in 400 households, Peapod began expanding to the surrounding suburbs and Chicago. In 1995, it branched out to service the Columbus, Ohio, area, eventually taking on parts of Boston, New York, Washington D.C. and beyond.

The rest is, as they say, history.

Although Peapod’s core customer is made up mostly of busy families, “we do have a lot of single people who rely on our services as well,” says Marketing/PR Manager Elana Margolis.And first-time shoppers often become long-term ones.

“They get addicted to the ease of use, convenient delivery and great quality product,” Margolis asserts.

Peapod’s product offering is substantial, ranging from produce, meat and seafood to snacks, cookies and candy, and everything in between. It sources these products from wholesale and specialty distributors in Chicago such as Centrella (Central Grocers, Inc.) and KeHE Distributors, respectively, notes Tony Stallone, vice president of merchandising.“

On the East Coast, everything flows through Stop & Shop logistics,” he adds. (See “From the Pea to the Pod.”)

Snacks, Cookies & Candy
Among the many product categories Peapod offers shoppers is, of course, snacks, cookies and candy.

Peapod carries 202 stock-keeping units (SKUs) of candy and chocolate, specifically, including an assortment of brands such as Hershey, Mars and Nestlé, among others.

“Majority of products are sourced through our distributors,” from which it receives new item notifications and seasonal candy selections, Stallone says, adding that his company meets with vendor and broker representatives who show them said offerings. In addition, formal category reviews take place twice a year, he notes.

Candy sales make up 3% of total sales for Peapod and were up 11% in 2009 versus total year 2008, according to Stallone. He adds that the biggest times of year for this category are Halloween, when candy sales are 140% above average, or almost 2.5 times normal sales, followed by Christmas (40% above average), Easter (35% above average) and Valentine’s Day (24% above average; see “V-Day Dot Com” for further details.)

Nationwide, top-selling candies include Snickers Fun Size, Dove Dark Chocolate Miniatures and Hershey’s Assorted Miniatures.

Meanwhile, snack and cookie sales were up 7.3% in 2009 versus total year 2008.

Top-selling snacks include Frito-Lay Classic Mix, El Ranchero Tortilla Chips and Rold Gold Pretzel Rods. Top-selling cookies include Oreo, Oreo Double Stuff and Nilla Vanilla Wafers. (See “Peapod’s Top 10s” for complete listings.)

Top-selling products vary by region, “but not by a lot,” Stallone says. In fact, they’re very similar.

That said, some product offerings do vary by region. For example, “Featured Brands” listed on the main page for Snacks, Cookies & Candy in the Chicago area include Kettle Brand, Back to Nature, Nature’s Promise, Clif Bar, Endangered Species Chocolate, ZonePerfect and Entenmann’s as well as local favorites such as Fannie May and Garrett Popcorn.

Shop & Save
No two consumers shop alike. There are those who arrive at the store, list in hand. Others enter with an open mind … and pocketbook. Then there are the impulse buyers, who try to stick to the necessities, but are attracted to seasonal displays and new product package alerts. Peapod allows shoppers of all types and preferences to point, click and purchase.Although first-time users may take longer to peruse the site, regulars can zip through with ease, thanks to special functions such as Browse Aisles, New Items icons and Nutrifilter, which helps the end consumer make smart food choices by sifting through all products and highlighting the ones that meet his or her nutritional goals - “an awesome feature and helps consumers to shop smarter for their families,” Margolis says.

In addition, “we save all of your grocery lists so that you can just go in and select from items you have ordered in the past,” she notes.

Coupon clippers - who are on the rise in today’s economy - can continue to cash in on discounts via Peapod, which also provides customers with Weekly Specials and Ways to Save. The latter includes hundreds of on-sale items each week as well as red-tagged specials. The site accepts all valid manufacturer’s coupons, in addition to exclusive online coupons. Shoppers can even save for their kids’ college education through the Upromise program. And before checking out, customers can click on “See Total Savings” in their carts to see just how much they’ve saved.

“We offer similar promotions to the typical brick and mortar store,” Stallone says. “In addition, we have the ability to offer electronic coupons, targeted e-mail specials, targeted samples and, in Chicago, we produce a monthly ‘What’s New & Cool at Peapod’ flyer announcing new items with photos and descriptions.”

Peapod also reaches customers through social media outlets such as Facebook and Twitter, where it launches new products and makes customers special offers.

Delivery
Speaking of special offers, Peapod currently is advertising “Free Delivery for 60 Days” for first-time customers.

Normally, delivery costs range from $6.95 to $9.95, depending on the size of the order, Margolis says, adding that tipping is optional.

And unlike local cable and utility services, Peapod lets shoppers select their own two-hour window of time in which to have their groceries delivered, “based on what is convenient for you,” she notes.

Customers can even provide specific directions for some of their product picks, such as yellow or green bananas, or thin or thick-sliced deli meats.

Satisfaction is 100% guaranteed, especially when it comes to product quality. Peapod owns and operates two 75,000-sq.-ft. warehouses and 13 7,000-sq.-ft. warerooms for inventory and order fulfillment. Through its Stay Fresh delivery system, Peapod maintains products at their optimum temperatures, “from the farm all the way to a customer’s front door,” according to company literature. All warehouses, trucks and delivery bins are climate-controlled.

Recession Reaction
Unlike Peapod’s warehouses, the current economic climate cannot be controlled.

However, Peapod’s business actually grew during the recession, as people tried to manage their budgets by dining out less and eating at home more, asserts Mike Brennan, senior vice president of marketing. Through the site, shoppers are able to sort by unit price and watch their cart totals to manage grocery costs - yet another benefit of shopping virtually, he notes.

Economics aside, Peapod also addresses another social concern of the day: the environment. By delivering groceries right to people’s doors, it reduces the number of vehicles on the road who normally drive to stores.

“We also use electronic means for driver directions (GPS), and customers can receive their paperwork electronically,” Brennan adds. “We will accept back plastic bags from customers for recycling, in addition to doing general recycling at our facilities.”Peapod tries to source its produce locally, whenever possible, as well.

Last year, in celebration of its 20th anniversary, the company coordinated hunger-relief efforts in the communities it serves, partnering with the Greater Food Depositor and the Northern Illinois Food Bank to provide canned goods to the hungry. Participating shoppers who made $5 donations contributed 10 cans each to the cause, which Peapod then matched with another 10 cans for a total of 20. The grocer also matched donations of canned goods made by its employees.

Earlier in 2009, Peapod sponsored CANstruction, an exhibit of architectural structures made out of food cans. The event was hosted at the Merchandise Mart in Chicago during the NeoCon contract furniture show and resulted in the Chicago Food Depository’s largest single-day donation: 90,000 pounds of canned goods.

In addition, Peapod makes weekly food pantry donations of gently dented or overstocked canned goods, another way of giving back to the growing number of communities it serves.

Expansion
Right now, Peapod is available in 10 states and about 23 different markets, Margolis notes, but “we are always expanding our zip code reach.” City selections depend on density and Internet penetration, she explains.

“We hope to eventually cover all of Ahold’s footprint,” Margolis concludes.Peapod is a wholly owned subsidiary of international food provider Royal Ahold, which is based in the Netherlands. As such, it works in partnership with Ahold USA supermarket companies, which include Stop & Shop and Giant Food. Ahold acquired Peapod in 2001, a move that resulted in higher volume and lower-priced purchases for the latter. Distribution and transportation costs also dropped due to the acquisition.

Today, Peapod is focused on gaining clientele.

“We think as customers have more and more access to the Internet on phones and Netbooks, Peapod will continue to become the way to shop for the new generation,” Brennan asserts.As noted by company president Andrew Parkinson on Peapod’s Web site, the increasing use of high-speed broadband, advances in portable technologies and the growing number of women who are doing their shopping online will “spur the (Internet grocery) industry to maturity.”Brennan furthers this sentiment.

“Peapod has been delivering groceries for over 20 years,” he says. “We are an Internet grandpa, and this experience helps us to understand consumers and what they want. It also helps us understand how to meet those needs in all markets and weather conditions.”

Just like the U.S. Postal Service, Peapod can be relied upon in rain, sleet or snow, for safe, satisfactory delivery. Groceries are just a point and a click away.

Peapod's Top 10s

(in terms of 52-week dollar sales)

Top 10 Candies
Snickers Fun Size 11 oz.
Dove Dark Chocolate Miniatures, 9.5 oz.
Hershey’s Assorted Miniatures, 12 oz.
York Peppermint Patties, 11 oz.
M&M’S Milk Chocolate with Peanuts, 12 oz.
Nestlé Butterfinger Bars Fun Size, 12 oz.
M&M’S Milk Chocolate Plain, 12 oz.
Milky Way Bars Fun Size, 11 oz.
Hershey’s Milk Chocolate Bar Snack Size, 11 oz.
Lifesavers Wint-O-Green Large Size Bag, 6 oz.

Top 5 Snacks
Frito-Lay Classic Mix 50-pack, 50 oz.
El Ranchero Tortilla Chips Salted, 14 oz.
Rold Gold Pretzel Rods, 12 oz.
Frito-Lay Sun Chips Harvest Cheddar, 10.5 oz.
El Milagro Tortilla Chips, Salted

Top 5 Cookies
Oreo, 18 oz.
Oreo Double Stuff, 18 oz.
Nilla Vanilla Wafers, 12 oz.
Famous Amos Chocolate Chip, 16.8 oz.
Nabisco Cookies Variety Pack: Chips Ahoy!, Nutter Butter, Oreo, 21.2 oz.

From the Pea to the Pod

Peapod sources its products from one of three major wholesalers and distributors, from both the Midwest and East Coast. They are:

Central Grocers, Inc.: A member’s owned grocery wholesaler that was formed in 1917. Operating as a cooperative, Central Grocers, Inc. supplies and services more than 200 independent grocery retailers in the Chicagoland and Northwest Indiana area. www.central-grocers.com

KeHE Distributors: A leading U.S. distributor of natural and specialty food products that fit the lifestyle of today’s consumer. It distributes more than 40,000 products - including natural and organic, international, specialty, perishable, Kosher and Latin American food items - to more than 15,000 retail outlets in 49 states, Mexico and the Caribbean. www.kehefood.com

Stop & Shop: Growing from a single corner grocer to a chain of more than 375 stores throughout New England, New York and New Jersey, Stop & Shop has serviced customers for more than 90 years. www.stopandshop.com

V-Day Dot Com

As at traditional grocery stores, holidays are high times for candy sales at Peapod. At press time, the retailer’s Weekly Specials included deals on Valentine’s Treat such as Brach’s Conversation Hearts, Dove Silky Smooth Chocolate Dark Chocolate Hearts, Fannie Mae Foil Hearts Chocolate, Hershey’s Kisses, Just Born Marshmallow Peeps Chocolate Mousse Bears, M&M’S Cupid’s Mix Milk Chocolate, Reese’s Peanut Butter Hearts, Snickers Miniatures, Tootsie Rolls Midgees and Trolli Gummi Bears & Hearts.