Convenience Stores
Orange groves were plentiful, grocery stores distant and home delivery common in the North Hollywood of Pamela Miller’s childhood.
“The Helms bakery delivered bread, a dairy company delivered milk, and deliverymen brought us seltzer water, meat, fish and vegetables,” said Miller, recalling the 1940s and ‘50s.
Once again Miller is picking up the phone to order groceries. For a service charge of $1.99, Pink Dot, a rapidly expanding grocery delivery company, guarantees it will be knocking on the door of her Santa Monica home in 30 minutes or less.
“This brings back warm feelings of friendly convenience,” said Miller, who is among the Los Angeles company’s 45,000 home delivery customers, most of them on the Westside.
Pink Dot fills orders from five warehouses, three of which opened in the last two months. The company plans to open six more distribution centers by March, including one in Orange County.
The company has been around nine years, filling delivery orders from its West Hollywood store on Sunset Boulevard. But with financing from a group of Beverly Hills investors, it’s betting that home delivery will carve out a bigger niche with the convenience-conscious.
“This is a society where time is becoming more and more valuable,” said Bill Toro, founder and president of Pink Dot. “Home delivery will be a big part of the changing face of retail.”
“These services will be springing up more and more because consumers have less disposable time and they’re demanding convenience,” said Barry Libert, managing director of Transformation Group, a Boston-based consultant on industry change and a division of accounting giant Arthur Andersen.
Libert said consumers spend a third as much time shopping as they did 10 years ago. There are more dual-income households now, and more busy shoppers are making purchases by telephone, computer or through a catalog.
Restaurants have long used independent contractors to make deliveries. One of the largest such contractors--Virginia-based Takeout Taxi--has franchises in Los Angeles and other cities. L.A.’s Takeout Taxi serves 78 restaurants and charges $5 for deliveries.
One of the biggest grocery delivery companies, Evanston, Ill.-based Peapod, delivers for supermarket chains. Orders are placed via the Internet. Customers pay Peapod $6.95 plus 5% of the grocery bill per delivery. On most orders, Peapod delivers as quickly as three hours after the order is made.
Peapod strikes exclusive deals in each retail market. Consumers in the company’s service areas--Chicago, Boston and Columbus, Ohio--can order from just one supermarket chain in their area.
The company began serving San Jose earlier this month and is considering Southern California as an expansion site.
Shoppers Express, which serves 19 cities nationwide, is already delivering groceries in Southern California. The Maryland-based company takes orders by telephone, fax and computer for the 31 Pavilions stores in Orange and Los Angeles counties and charges $11.95 per delivery.
The Shoppers Express service--including the computer-based ShoppingLink operation introduced in June--is available Monday through Friday, and deliveries are made 90 minutes to two hours after orders are placed, said Doug Hendrix, a spokesman for Vons, the parent company of Pavilions.
By 2000, home delivery sales of restaurant meals and groceries will account for 5% to 8% of the $800 billion in annual food service sales, up from less than 1% now, said Michael Gorshe, executive director of Smart Store, a food services consulting division of Arthur Andersen in Chicago.
Pink Dot, for one, has been growing rapidly. The privately held company doesn’t make its earnings public, but Toro projects 1996 sales at $12 million, compared with $6 million in 1995 and $4 million in ’94.
Company representatives say the $1.99 fee and 30-minute delivery guarantee are possible because Pink Dot serves communities with high concentrations of time-strapped breadwinners and because it usually delivers only to those within a three-mile radius of a warehouse.
“We have an efficient, computerized delivery system, and we generate enough volume to make the delivery charge more affordable,” Toro said. “The prices of our products are comparable to those in upscale supermarkets. We’re competitive on price.”
At $1.69 per half-gallon, the price of milk at Pink Dot is 40 cents lower than prices posted this week by the Southland’s three largest chains: Ralphs, Vons and Lucky. However, prices of a dozen randomly selected items were generally higher.
At $1.59, for example, Pink Dot lettuce was 60 to 70 cents more expensive. A can of Campbell’s tomato soup was 28 to 40 cents pricier. Most sundries--items such as detergent--were more expensive.
Tomatoes were priced at 79 cents each at Pink Dot, whereas one major chain offered them individually at 10 cents each. Pink Dot’s vegetable prices were generally higher, but it is difficult to make comparisons because the delivery company sells many of these items individually and the major chains offer them in 1- to 5-pound bags.
Like supermarkets, Pink Dot also offers specials. For example, the company was offering a 6-ounce tube of Crest toothpaste for $1.39, a six-pack of Budweiser for $1.99 and a pint of Ben & Jerry’s ice cream for $1.89--all lower prices than those found in supermarkets.
The company’s selection of fresh produce is not as extensive as that of supermarkets, and its choice of brand-name products is smaller as well.
Pink Dot doesn’t sell fresh packaged meat or fresh seafood, but it does deliver prepared food such as pasta, salads, baked goods and deli-style sandwiches. And customers can rent a video to go with their meal for $1.99. Prepared food accounts for 40% of the company’s sales, and video rentals and groceries generate the rest.
The value of the average Pink Dot grocery order is about $15, and many customers order more than once a week, Toro said. Repeat business in the company’s new service areas will be the key factor in Pink Dot’s expansion prospects, industry analysts say.
Among the shoppers who keep calling the company’s well-established West Hollywood operation--the only Pink Dot open to the public--are Sheila King and her adult daughter. In addition to conventional grocery items, the two often order treats such as ice cream sandwiches for King’s granddaughter, Veronica.
King said Veronica’s experience with grocery shopping is virtually limited to home delivery.
When a friend invited Veronica to “play like we’re shopping at the supermarket,” King recalled, “Veronica gave her a puzzled look and said: ‘Supermarket? Why don’t we just make a call?’ ”
