Buy Online-Pick-Up-In-Store, Grocery Style. Hannaford's Efficiency Experiment

The 178-store Hannaford grocery chain is trialing a grocery tweak on buy-online-pick-up-in-store, where shoppers select almost anything from the test store's 40,000 SKUs and then drive to the store, where the order is loaded into the customer's trunk. The effort, which involves three isolated temperature-controlled holding areas, pits employee efficiency against thin grocery profit margins.

The Hannaford-to-go program is also likely to cost the chain some impulse purchases, but that's the downside of any E-Commerce effort. The question is whether this program will lure in more customers and/or build more loyalty from existing shoppers.

The trial, which was launched in mid-March at one New Hampshire store and is slated to expand to a second store "in the fall," has "gotten off to a better start than we expected. We found that [customers] shopped the whole store. That surprised us a bit," said Mike Norton, a spokesman for the five-state regional chain, with stores in Maine, New Hampshire, Vermont, Massachusetts and New York.

Although the trial being expanded to a second store would presumably signal the initial test results have been favorable, Norton stressed a multi-month one-store trial may not prove that much. Whether the concept is working "is not clearly proven and it's not clearly disproven."

The marketing value of the program aside, the question remains as to whether store employees can profitably locate and assemble groceries—including splitting frozen and refrigerated items into two holding areas, with a third area for temperature-neutral products and then later reassembling the full order at pickup.

For orders worth less than $126, the store charges a $5 service fee, but that won't go very far in covering labor costs. Then again, if the store can shrewdly use every moment of employee downtime during less-busy parts of the day, it could leverage otherwise-wasted employee time. "The potential is to be very efficient with the labor," Norton said. "You've got to be very efficient in how to pick that order. We know a little bit about that. It's a matter of how quickly we can assemble it."

Two parts of this program are potentially very powerful. First, can this approach address the part of grocery shopping that is often most despised, namely searching for those few hard-to-find items. Second, will this program indeed translate into retail loyalty for traditional in-store shopping? In other words, will this only work on a small scale or can it profitably work if this approach really takes off in a community? Either way, it's nice to see some aggressive experimentation in grocery.