(Copyright Financial Times Ltd. 2009. All rights reserved.)In 2002, some people were ready to write off internet grocery shopping. "Digital lunacy" was one comment in the US press. "Doomed to be e-commerce disappointments" was another judgment on online supermarkets. The long list of failed US online grocers - Webvan, Streamline, HomeRuns, Kozmo - seemed to bear this out.
Online supermarket shopping has never been a disappointment to me. I signed up over a decade ago when my Tesco supermarket in London handed out leaflets explaining how you could order food, toothpaste and dishwasher powder from your computer at home.
It was just what I needed. I do not go along with Jean-Paul Sartre's view that "hell is other people". But I do think hell is other people in supermarkets.
Once I was online, Tesco did let me down occasionally. There was a period in 1999 when its computers crashed and stayed down for a while. But you have to hand it to the UK supermarket: it has shown the sceptics that internet grocery shopping can work.
Tesco's pioneering effort is the principal reason why Britain is now the world's most sophisticated online grocery market. The British spend almost twice as much per head on online supermarket orders as the Dutch, the world's second most enthusiastic internet shoppers, and almost four times as much as Americans, according to Datamonitor, the business analysis company.
Unlike the US start-ups, Tesco did not build expensive, dedicated warehouses to service its internet customers. Instead, it took orders online and sent pickers around its stores to fill customers' baskets. Not only did it cost Tesco far less to establish its online business than the US start-ups, its well-known name and huge customer base also meant it did not need to market itself from scratch.
Some of the web-only companies mocked Tesco in the early days for its relatively low-tech approach, but its online service outlasted them all. In the US, supermarket companies such as Safeway and Ahold are now more closely following the Tesco model in their online sales.
So it must be galling for Tesco to have come bottom in a recent customer survey of five online UK supermarkets. According to Which?, the consumer organisation, Tesco received a customer satisfaction score of only 58 per cent, well behind the 82 per cent achieved by the top scorer, Ocado, an online service that sells products from rival supermarket Waitrose.
Tesco hit back, saying the Which? survey did not reflect "the reality we experience with customer feedback from some of our 1m regular online shoppers". They, said the retailer, "love our unrivalled delivery area, our cheaper alternative suggestions, bagless deliveries, convenient delivery times and efficient service". Consumers in the Which? survey appear to have said: we will be the judges of that, thank you.
Online supermarket shopping has changed over the years. The biggest change has been the technology: broadband has made the process easier, faster and more reliable. The online supermarkets have improved their websites, too.
Competition has helped. It was when I could not find a convenient Tesco delivery slot that I clicked on Ocado instead and, like the respondents to the Which? survey, found its food better and delivery slots more convenient. Waitrose is generally more expensive than Tesco, but Ocado has made great efforts recently to match Tesco prices.
As online commerce of all sorts develops, it becomes possible to divide it into categories. There are sectors that are efficient and impersonal - such as Amazon, which delivers the books or other items without any fuss but without any human contact either. There are sectors that are inefficient and acrimonious, and which include many of those requiring interaction with a call centre.
The online supermarkets are in a category of their own, because they involve someone turning up on your doorstep every week. You get to know the delivery drivers better than their employers do. This was another difference I noted between Tesco and Ocado: drivers from both companies were friendly but Ocado's seemed happier. Tesco's drivers delivered the goods but also took a few minutes to complain about the long hours and how hard they were pushed.
It is not a crucial difference, but when you are a mouse-click from changing suppliers, it all counts. Internet shopping still has a long way to go. Ocado, which operates from a dedicated warehouse, has a different business model to Tesco and has yet to make an annual pre-tax profit. But, as Tesco's experience shows, being first in this market is no guarantee of customer affection.
michael.skapinker@ft.com
Credit: By Michael Skapinker
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