Amazon to deliver groceries? It'll have to catch up with established local companies - Omaha.com
Published Friday, June 7, 2013 at 1:00 am / Updated at 12:07 pm
Amazon to deliver groceries? It'll have to catch up with established local companies

Large retailers reportedly are dipping their toes into the grocery delivery business, but the option already exists for area residents who need help or want to save some time.

Milk2you and Natural Home Foods, both owned by Bryce Johnson, have been delivering groceries in bulk and on a weekly basis since 1995. Omaha Fast Foods, owned and run by Eric Barrett, opened a little more than a year ago. Hy-Vee also offers online shopping options for its customers, with the options varying by store.

Amazon has been testing its grocery delivery service, AmazonFresh, in Seattle for at least five years, Reuters reported this week. It plans to expand the service to Los Angeles and the San Francisco Bay Area this year, and target other cities if it goes well. Walmart is also testing a same-day or next-day grocery delivery service in the San Francisco Bay Area and is already operating a grocery delivery business in Britain.

The businesses models differ, but local businesses say the key to separating themselves from larger stores venturing into grocery delivery is efficient routing, fresh food and exceptional customer service.

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Barrett's business operates via a website that is an automated system, with next-day delivery costing $4.99 and same-day delivery at $9.99. Barrett does the shopping himself at Walmart and Sam's Club, adding a small markup to the items, and delivers them directly to customers' kitchen counters.

“We have ... a lot of third-floor apartment dwellers who don't like carrying groceries up the stairs,” Barrett said.

Johnson's businesses each focus on a different market: Natural Home Foods offers about 1,000 products and delivers items in bulk, such as freezable meats, dry goods and cleaning supplies for free. Milk2You offers about 160 products and specializes in weekly delivery of staples such as milk, eggs, bread, frozen goods and some produce for a fee of $3.20.

Both businesses operate out of a warehouse at 6998 S. 108th St. in La Vista and source products from local suppliers, including Hiland Dairy and meat processing plants in Omaha, Harlan, Iowa, and Sioux City, Iowa.

Milk2you delivers to the Omaha and Council Bluffs area and Blair, Neb. Natural Home Foods delivers west as far as Kearney, Neb., and east between Omaha and Des Moines.

West Des Moines-based Hy-Vee also offers online shopping and delivery service for a fee, although delivery options depend on the store. Customers have the option to have their groceries gathered for pickup at the store or for delivery Monday through Thursday. Online shopping with pickup is $10 at Hy-Vee and an additional $15 for delivery.

The operations manager at the 51st and Center Streets Hy-Vee, Eric Boeding, said his store gets six to 10 orders per week for pickup or delivery.

Boeding's store also offers personalized shopping for elderly customers whom the store learns about through referrals and word of mouth. The service is not publicly advertised, but Boeding said a Hy-Vee employee at his store calls those customers weekly to check if they need anything and delivers their groceries for a fee.

Elsie Downs, 96, of Omaha has been using Milk2you for about five years. Chris Meier delivers her groceries on Thursdays every week or every other week, depending on what Downs needs, and puts them away for her.

“It's very convenient,” Downs said, noting that she stopped driving at 90 and finds it difficult to get groceries by herself. “That's really a big godsend when you have someone coming to the house because it's hard to get your groceries when you live alone.”

Amazon's quiet development of an online grocery business would target one of the largest retail sectors not yet affected by e-commerce. While food is a low-margin business, Amazon expects to make it profitable by delivering orders for higher-priced items at the same time, Reuters reported.

A former grocery executive told Reuters, however, that Amazon will struggle with the kinds of issues that long have made grocery delivery a tough business: Fresh produce can get outdated in warehouses and damaged in delivery, shrinking profits.

Calls to local delivery services that showed up in a Google search found two with disconnected phones or inactive websites, apparently out of business.

Milk2you emphasizes local and fresh. Johnson said orders from Hiland Dairy come in daily, ensuring that customers' milk and dairy products are not sitting in the warehouse long before they're delivered.

Personalized customer service is important when it comes to grocery delivery, Barrett and Johnson said.

Johnson said his delivery drivers have personal relationships with customers developed over time, to the point that some drivers have garage-door codes and keys to customers' homes so they can deliver items directly to the kitchen when customers aren't home. Otherwise, drivers leave items on the front porch in a special cooler left out by the customer.

“It's very relationship-driven,” Johnson said, noting that his seven delivery drivers for both businesses often receive gifts from customers around the holidays.

Johnson also concentrates routes, making an effort to recruit as many customers as possible on existing routes. That's something bigger companies won't be able to do as easily, Johnson said.

“If you can build routes ... that are compact, that's how we can keep the cost as low as we are,” Johnson said. “That's the secret to having home delivery.”

Bigger retailers won't have that advantage, he said, because they have to deliver to anyone who places an order.

Barrett said he's not worried about the competition.

“No big corporations are going to be such a threat to our well-established rapport with all our customers,” he said. Barrett said about 75 percent of his customers use his service out of necessity because of a disability or ailment, while the remaining 25 percent are just busy.

Johnson said most of his customers are just looking to save time.

“I've been asking people for 20 years: 'What is your time worth?' ”

Contact the writer:

402-444-1414, paige.yowell@owh.com

Contact the writer: Paige Yowell

paige.yowell@owh.com    |   402-444-1414    |  

Paige covers commercial development news primarily for the Money section's news blog, Money Talks.

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