Eatfresh

www.eatfresh.com.au

Executive Summary

Jacqueline Steedman established Eatfresh in 1998 as an Internet based grocery and fresh produce retailer. The company provides high quality fresh fruit and vegetables to consumers in Melbourne and Sydney.  Eatfresh is based in Melbourne, Victoria and currently employs five full-time and four part-time staff.

Jackie established Eatfresh to fill the demand from busy workers with little time to go to the market for fresh fruit and vegetables. The Internet was viewed as the ideal medium to provide a convenient ordering mechanism for customers whilst maintaining low overhead and establishment costs.

The business to consumer (B2C) selling of retail goods over the Internet is known as e-retailing. By using an online interface rather than a physical shopfront, significant barriers to entry are minimised.  In particular, an Internet operation allows Eatfresh to avoid large start-up expenses associated with land, building and inventory costs whilst  still exposing the business to a wide customer base.

Eatfresh believes that a traditional grocery and fresh produce retailing company could boost their annual revenue by $200,000-$300,000 by adding an online storefront to their existing operations. Eatfresh itself was able to generate significant cost savings through the utilisation of e-commerce in their venture, and achieved an overall operating benefit of $138,675 in 2001. Total establishment costs amounted to $59,300.

The Business

Jacqueline Steedman established Eatfresh in 1998 as an Internet based grocery and fresh produce retailer. The company provides high quality fresh fruit and vegetables to consumers in Melbourne and Sydney with a focus on freshness and quality.

Eatfresh is based in Melbourne and currently employs five full-time and four part-time staff.

Getting Started

Eatfresh was established as a result of Jackie's desire to cater to the needs of busy working Australians who had very little time to go to the market themselves for fresh fruit and vegetables. The Internet was viewed as the ideal medium to provide a convenient ordering mechanism for customers whilst maintaining low establishment and overhead costs.

Initially Jackie spoke to several web developers about available technologies before settling for a complete solution provided by Telstra.  The company initially serviced the Melbourne Metro area and has since expanded to cover a 50km radius of the Central Business District (CBD). Recently, Eatfresh has extended operations and established a base in Sydney.

Online Sales

The business to consumer (B2C) selling of retail goods over the Internet to consumers is known as e-retailing. Eatfresh established itself as an e-retailer to take advantage of the significant cost savings that could be achieved through using an online interface rather than a physical storefront.

This removed barriers to entry such as expensive start-up expenses associated with land, building and inventory. The company estimates a saving of $300,000 from avoiding the more traditional shopfront.

As an e-retailer, the main challenge is the logistics involved in fulfilling and delivering orders received over the Internet. Eatfresh has a team of employees situated at the market and warehouse to complete orders before they are ready for dispatch.

Current e-commerce strategy

Eatfresh maintain an online catalogue of every item available for sale including a description, quality of produce available, price and quantity.  The traditional shopping experience is simulated as customers can browse through the catalogue and add selected items to their shopping cart. Upon completion of product selection, customers proceed to the online checkout where they enter their billing and delivery details. These are then electronically submitted to Eatfresh using a secure connection.

At midnight of each day, a batch process collates the orders from the Internet and imports the details into the purchase order and sales analysis software.  This software then produces a report detailing the orders, which is then sent to the team at the market and the warehouse to fulfil the orders.

The software also produces a packing and delivery slip for each order, a summary sheet for the entire batch and account reports for wholesalers.

A customer relationship management (CRM) software package is used to track the history and details of customers including a log of correspondence providing Eatfresh with the ability to analyse customer demand and purchasing trends.

Revenue and Costs

* Note: Capital Expenditure was amortised over a four year period

Financial Analysis

Eatfresh believes that a traditional grocery and fresh produce retailing company could boost their annual revenue by $200,000-$300,00 by adding an online storefront to their existing operations. Additionally Eatfresh estimates significant cost savings through e-commerce with their venture resulting in an overall net operating benefit of $138,675 for 2001.

Cost savings totalled $204,100 in 2001. As Eatfresh buy produce on an as-needed basis, as opposed to stockpiling in a warehouse, the company now enjoy decreased levels of obsolete stock ($40,000), warehousing expenditure ($15,600) and inventory financing costs ($1,500).  In addition, enhanced staff productivity in general administration has saved Eatfresh $40,000.

Automated processes have streamlined fulfilment operations resulting in reduced after sales service costs ($30,000), travel requirements ($7,000) and incidences of administrative error ($6,000).  Expense reductions from other web-enabled functions included banking ($1,600), payroll ($10,400), marketing ($10,000), communications ($30,000) and hardware ($5000).

Eatfresh invested $59,300 in the e-retailing system. The majority of this figure was incurred in website development ($22,500), and database integration ($20,000). Registration of domain names incurred $800.  Before implementation $5,000 was spent on researching into suitable web technologies.  A further $5,000 was invested in offline advertising to assist in launching the business and $1,000 was spent on staff training to ensure maximum utility of the new system.

Ongoing costs totalled $65,425 in 2001.   Most costs were associated with maintaining the online infrastructure including ISP (Internet Service Provider) fees ($3,000), website hosting fees ($2,400), system maintenance ($15,000) and telephony ($8,000).  Staff requirements for system administration and training amounted to $5,000 and $2,000 respectively.  Bank transaction fees of $10,000 and electronic payment system fees of $1,000 were incurred.  In addition, capital expenditure was amortised over a four year period ($14,825).

Non-financial Benefits

The Eatfresh philosophy centres on customer satisfaction. The online storefront has provided the company with a means of meeting customer demand through streamlined fulfilment processes and efficient communication with customers and suppliers.  Additionally, delivery times are ultimately shortened which further contributes to the mandate of delivering the freshest produce to customers.

Use of CRM technology provides Eatfresh with a valuable business development tool. By providing a means of analysing customer demand and purchasing patterns, marketing campaigns can be directed to ensure the highest chance of success.

Challenges

Eatfresh initially found it difficult to locate a web developer that could appreciate the significant impact on the success of the business that the Information Technology (IT) strategy could have.  Following a significant amount of preliminary research, Eatfresh eventually enlisted the help of Telstra to locate a suitable developer and has since developed partnerships with experienced IT consultants.

Future

Eatfresh intends to increase the user friendliness of the current purchasing interface and increase the security of online transactions. Other plans include an online marketing strategy using banner advertising on other websites.

The company's advice to other businesses embarking on an e-commerce venture is to search carefully for a web developer, test trial systems before an investment is made and assess whether online functions will appeal to the customer base.