Foodstuffs' online shopping move comes with challenges

The logistics behind New Zealand's biggest supermarket chain offering online services to tens of thousands of customers are being questioned.

One supermarket industry insider asked how it could work at Foodstuffs, the locally owned franchised business with the Pak'nSave, New World, Four Square, Liquorland and Gilmores brands.

Chris Quin, Foodstuffs North Island chief executive, this week told the Herald that North Island customers of Foodstuffs supermarkets would be able to order online later this year.

Foodstuffs chief executive Steve Anderson said South Island customers would get the service in 2017 or 2018.

But the industry sceptic was this morning questioning how the Foodstuffs' franchised owner-operator supermarket model was going to cope with the challenging practicalities of delivering millions of groceries, frozen, chilled and fresh items to customers.

The length of time it had taken Foodstuffs to go ahead with online orders was partly driven by resistance from supermarket owners, the critic claimed.

"Foodies will struggle with it," he said. "They can only really make it work as click and collect. Delivery is too difficult to manage from franchised stores."

The online supermarket model was internationally challenging because big scales of business were needed to make home deliveries of food items work to cover the extremely high costs involved, he said.

The cost of renting or owning a big fleet of delivery vehicles, maintaining that fleet, buying fuel, paying staff and the difficulties of getting deliveries to the right address at the right time were all obstacles to overcome.

Countdown has been running online deliveries for about 16 years and that arm of its business is understood to be profitable. But delivering from one main centre is not practical, so items must be delivered from individual supermarkets, the insider said.

"With the franchised model, the issue is which franchisee gets the sales - and they get saddled with the costs," he said.

Quin acknowledged this week that customers would be able to order from supermarkets which were not closest to them, if they wanted certain items not stocked in their local store.

The insider said Countdown could spread the costs of online deliveries over its entire portfolio of supermarket so individual stores popular with online customers were not hammered.

But Foodstuffs could not do that with its franchised model, the critic claimed.

Asked this week how Foodstuffs would make the new system work practically and financially, Quin said this had been carefully studied and planned.

The model was based on Foodstuffs' experiences at a trial for online ordering, carried out at two Wellington supermarkets: New World Thorndon and New World Kapiti, he said.

Those trials were highly instructive, Quin said, describing the online move as a major initiative he had driven since he left the digital world of Telecom/Spark where he had previously worked for 24 years and joined Foodstuffs in September.

But Quin also said click and collect orders would be a significant component in the online business.

He did not go further to spell out that that could keep costs down because customers would therefore pick up their orders, saving the supermarket owner/operator the costs of delivery.

But Quin did say that Foodstuffs would use trucks and staff from each store to deliver the goods, rather than contracting the services out to a big freight handler.

He was also specific that online orders would come from individual stores, rather than a central point.