Many grocery e-tailers are under the gun to turn a profit before venture capital funding runs out. But some have found that the costs associated with selling grocery products over the Internet are outweighing profits initially. This is due to the exorbitant expense to build and maintain warehouses, employ labor, absorb delivery costs, and acquire and retain customers while maintaining the vast selections of products and services to offer at comparable prices. Skeptics claim that fulfillment is the biggest challenge to profitability. Delivery costs are enormous when considering the expense of owning fleets and retaining labor.
Food is also perishable, so safe transport demands speed and often requires refrigeration.
Companies such as Webvan have invested major capital to build central warehouses for fulfillment purposes. Competition Offline Competition from traditional brick and mortar retailers has not gone away. In many cases, the physical retail locations can cite as advantages their variety, size of selection and availability of fresh goods. Until online stores can address these factors, the online shopper may still have to venture to the physical store. Offline retailers also have established brand recognition and matured relationships with consumers.