A different food experiment

Recently, I decided to try something different for grocery shopping: A subscription for delivery. It looked like it would work out costing me less than if I just used the conventional pay-as-you-go delivery. Did it?

Many business are adopting a subscription model to get a regular income stream. They know that a large number of customers won’t get the maximum benefit from their subscription—in fact, some (many?) don’t use it all, and don’t cancel (gyms have long used this to their advantage). In my opinion, subscription services make great sense if they’re used to the maximum allowed, and if not, there have to be other compelling reasons.

Supermarket online ordering and delivery is still labour-intensive: Despite efforts at automation, at least part of every order must be picked by a human. Here in Hamilton, orders are entirely picked by humans (for now, anyway). So, a delivery fee of $14 (around US$9) for orders under $200 (US$129) seems reasonable to me.

The supermarket chain’s delivery subscription service is currently $23 a month (around US$15) for “unlimited” deliveries of orders of at least $80 (around US$52). There are “fair use” restrictions, but for most customers a single delivery a week is all they’d need.

A word about costs before evaluating them further: Food prices in New Zealand jumped 11.3% last year, which is the biggest jump since 1990. This means that due to soaring costs, $200 doesn’t buy nearly as much food as it used to, so it’s easy to hit $200. At $200, the delivery fee drops to $9. It’s important to note that NZ food prices aren’t directly comparable to other developed countries, most of which have always had lower prices overall.

A customer getting groceries delivered once a week would pay $14 or $9, depending on how much they order, every week. With a monthly subscription, those weekly deliveries would cost $5.75 each, as long as the order was for at least $80.

Looked at another way, it would cost between and $36 and $56 for ordinary delivery (depending on how much is ordered) every month, and that means a subscription brings a savings of $13 to $33 a month, respectively. Someone ordering only twice during a month would save $5 for the month with the subscription service compared with the $28 it would cost using pay-as-you-go for orders less than $200. Someone ordering more than $200 2 times in a month would spend $5 more (if they order three times, they'd save $4).

The company also offers 6 months for a discounted $118, which works out to $19.67 per month. Order four times in a month, and the delivery fees work out to $4.92 a week.

There are many factors to consider, starting with, how often does a person buy groceries? I read somewhere that the average Kiwi goes to a supermarket twice a week (not always for a big shop). I shop once a week, on average, though I’ve also often gone two weeks without shopping.

There are also costs specifically related to going to the supermarket, including petrol, wear and tear on the car, and the time it takes to drive to the supermarket and back home again (to avoid making this even more complicated, we’ll assume the time spent shopping in a supermarket and online is the same). For me, it comes down to working out whether those costs are (or could be) $5.75 per week. I think it’s unlikely they could cost me that much (or even $4.92).

Next, does shopping online save money compared with shopping in store? Maybe.

Everyone knows that supermarkets go out of their way to entice customers to spend more, with all the new products and specials presented enticingly. I grew to really dislike going to the supermarket with Nigel for precisely that reason: He had to look at everything, and wanted to try all sorts of new things. It took twice as long and cost much more than if I went shopping by myself, as I ordinarily did.

At home, there are no alluring displays, obviously, but specials are still offered, including “online only” specials. In my experience, it’s easy to add unnecessary things to an online order, though maybe not AS easy as in person: At home, it seems to be easier to resist temptation. Even so, “extras” frequently somehow get added to my order.

The main disadvantages of ordering online are, first, I can’t choose fresh items, like fruits and veggies—I depend on the order picker to choose good stuff. Also, things may be out of stock when the order is picked, which means I may get a substitute (if I permitted substitutions), or I get nothing (I’m not charged for what I don’t get, of course, but if they substitute, they honour the special price, even if the substitute has a higher price).

One recurring problem for me is that it’s easy to not grasp the size of a package I’m ordering online. For example, I bought a 1kg bag of salt and a 5kg bag of frozen chicken drumsticks because I didn’t stop to think how big they were. If I’d shopped in person, I’d have seen it and made different choices.

However, there are also advantages ordering online, chief among them the fact I can shop whenever I want to, like in the wee small hours when all the shops have been closed for hours (I’ve often placed orders either side of midnight). I can also compare nutrition and ingredient labels MUCH more easily—the print on actual labels is so damn small! It’s also easier to compare the prices—and unit prices—of competing products online, rather than having to try to read the stickers on the shelf in the shop. And, finally, I can also call up previous orders to make it easier to get the same things again (current prices are always shown). I could even save lists to make my ordering even faster than it could ever be in person. Finally, I can pause my online ordering to go check if I’m running low on something (especially useful when the product is on special).

After I began the 30-day free trial, I placed five orders. At the regular delivery prices, I would’ve spent $70 for the deliveries. With the delivery subscription, the same five deliveries would cost me the flat $23 fee, or $4.60 each (compared to $14 each without the subscription). All up, in this scenario, the subscription would save $47 in delivery fees—or, would it?

The truth is, I don’t normally order groceries to be delivered every single week, which is kind of necessary for it to make sense. If I ordered twice a month as I used to, I’d save $5 (plus a tiny bit more from not driving to the supermarket and back). On the other hand, if it saves me hassles and frees up my time to work on projects at home, could it be worth it?

The bottom line for me is this: The overall benefits of ordering online (that I mentioned above) outweigh the disadvantages most of the time. However, the savings from the delivery subscription isn’t enough of a savings for someone like me. That’s mainly because it could encourage someone to order more frequently to get maximum value, and that could mean spending more. Moreover, it provides an incentive for me to shop at only the one supermarket. This is bad for me because the other chain has different specials in a given week, and each chain has products that aren’t carried by the other chain.

I think pay-as-you-go delivery option is better for customers like me because it would better suit anyone who doesn’t need to order more than a time or two a month. It also doesn’t have the effect of locking customers into shopping at only one supermarket. Obviously, all of that is precisely why the supermarket chain wants people to use delivery subscriptions.

I also think that the delivery subscription, as currently offered, would probably suit a large and busy household that buys a lot of groceries every week, but doesn’t have anyone with the time to shop in person. That’s not my household, nor am I that busy. The delivery subscription service, then, is a good option for some customers, and maybe I’m just not one of them.

However: I also think that, properly managed, the subscription service could help me cut my grocery budget. That’s mainly because of the inherent advantages of ordering online I mentioned above, and especially that it’s definitely easier to edit an order online than in the shop because at home, the site or App keeps simply a running tally of how much I’m spending, and removing an item from the order is easy. In the supermarket, I’d need to keep a running tally of how much I was spending and then put some things back. The subscription fee itself becomes a fixed budgeted amount, and because it’s fixed, I think it could take off some of the pressure to maximise how much I order to make it “worth it”. If I’m right, I could place three or four smaller orders rather than two big ones. Maybe?

I decided, then, to extend the trial for another month to see if the opportunity for better budget management is real. If I then decide to cancel, I’ll only have spent $23 for two months worth of orders, however many that is, so it’s not like it’s a financial risk. I’ve wanted to find ways to better control the expense of grocery shopping, and this might be a good way to do it. I expect t know for sure by the end of next month.