Online marketplace Jet.com is testing sales of fresh food, the product category U.S. consumers buy least on the web.
Jet quietly began testing fresh grocery delivery in 875 ZIP codes along the East Coast last week including Connecticut, New York City, New Jersey, Pennsylvania and Washington, D.C. On the fresh grocery section of its site, which a consumer can only shop if she lives within one of the designated ZIP codes, Jet sells such fresh produce as kale and avocados along with dairy products, meat and seafood. Those 875 ZIP codes represent about 2% of the 43,000 ZIP codes in the United States.
Jet offers free shipping on grocery orders over $35, and charges $5.99 to deliver orders under $35. The company says orders placed before noon will be delivered by the following day, Monday through Friday. Jet does not deliver on weekends.
Grocery and household items comprise about 12% of Jet’s gross merchandise value, and the value of goods sold on the online marketplace is on track to hit $1 billion by the end of May, Jet’s chief revenue officer said in April at the ChannelAdvisor Catalyst conference in Las Vegas.
Grocery delivery gives consumers a chance to try Jet and for the marketplace to build loyalty in a high-frequency category, a spokesman says.
The spokesman declined to specify where the company sources its groceries. On the frequently asked questions section of its website, Jet writes that all items are shipped in insulated boxes designed to keep items fresh for up to 48 hours, and shoppers don’t have to be home to receive deliveries.
Of the 15 major retail product categories tracked by the Internet Retailer Top 500 Guide, food and drug ranks last in terms of e-commerce penetration, with Top 500 retailers accounting for only 0.7% of retail sales. As the Top 500 represents 84% of U.S. online retail sales, that’s an indication that most consumers still buy groceries in physical stores.
That means there is ample opportunity for Jet.com and other online retailers to win over shoppers, says Guru Hariharan, CEO of retail and e-commerce pricing analytics firm Boomerang Commerce.
“Groceries are an untapped market right now,” he says. “From an e-commerce penetration standpoint, it’s the lowest. It’s yet to be seen who emerges as a winner, but it’s very clear that everybody wants a piece of it. We’ve got Amazon trying it, now Jet is trying it, Target announced curbside pickup. There’s different retailers coming at it from different perspectives.”
Prominent among the companies seeking to sell groceries online is Amazon.com Inc., No. 1 in the Internet Retailer 2016 Top 500 Guide, which has offered AmazonFresh, its next-day fresh grocery delivery service, since 2006. That service costs $299 annually and is available in a limited number of markets. Amazon promises free next-morning delivery on orders over $50 and allows shoppers to pick the date and time they want their groceries delivered. Shoppers can choose the Attended Delivery option, in which Amazon will deliver groceries within a one-hour window when shoppers are home, or Doorstep Delivery, a three-hour window in which customers don’t have to be home. With the doorstep option, Amazon’s drivers will deliver purchases in tote bags with frozen water bottles to keep perishable items at appropriate temperatures.
Earlier this year, search giant Google Inc. started delivering fresh grocery items through its Google Express overnight delivery service. Google charges an annual fee of $95 or a monthly fee of $10 to subscribe to the service. Late last year, Target Corp. (No. 22) expanded its same-day partnership with mobile grocery shopping app Instacart to a third market and now delivers groceries to shoppers in Minneapolis, Chicago and San Francisco.