The new e-grocer on the block

Internet entrepreneur Johnny Stern is not alone in seeing the potential of his online grocery price-comparison website mySupermarket.co.uk. Greylock, the venture-capital firm that backed Facebook, now holds a stake in the business. Launched just over a year ago by Mr Stern, 35, mySupermarket compares the cost of products among the big four online supermarkets — Tesco, Asda, Sainsbury’s and Ocado (Waitrose) — and lets users cost their baskets as they shop. It has secured around £3 million in funding from Greylock and from Israeli venture-capital fund Pitango. The site has close to 200,000 monthly users, with numbers growing rapidly. But why a website that acts as a storefront for other websites? Simple, Mr Stern tells JC Business. “People spend around 20 to 25 per cent of their weekly budget on food, and consumers are looking for a way to save money on this. MySupermarket is a very easy way of doing that.” He claims the service can help users save up to 20 per cent on their weekly shop. “Most people are spending between £90 and £100 a week on their grocery shop, which means savings of around £ 1,000 a year.” The site’s technology, developed in Israel, gives the consumer details of special offers and other money-saving possibilities. Company revenue is generated principally by advertising and sponsored promotions — clients include Heineken, Procter & Gamble and Unilever — and by selling data from the site to other brands and retailers. Asda, for instance, is currently running a campaign stating that it is cheaper than Tesco on identical brands. It is sourcing the data from the site, which it is paying for. Turnover for mySupermarket’s maiden year was close to £1 million. “It is still early days, but the most successful start-ups enable the user to do something which they couldn’t do offline,” says Mr Stern, who splits his time between London and Tel Aviv. “If you look at eBay, being able to sell something to the ‘entire world’ customer base through an auction is something you would never be able to do offline — that’s why it works. Online poker or gaming sites also work for that reason.” Graduating from Cambridge with a degree in economics and management, Mr Stern spent 12 years working for venture-capital firms. “I had always liked the idea of doing something entrepreneurial, and being involved in VCs was like being an entrepreneur but without taking any risks.” In 2004, he was working in the management team for a software start-up but decided to take a chance on mySupermarket — an idea he had come up with a group of colleagues. Initial funding was secured from Manchester-based communal figures Joshua Rowe and David Hammelburger. “Online businesses had been growing for several years in consumer electronics, book and CDs. But we noticed that online grocery-shopping was a latecomer to the market — under two per cent of the entire grocery market was being purchased online, compared to 30 to 40 per cent of the CDs and books market.” Nonetheless, he believed in the demand for such a service. “Many people find grocery-shopping a chore. Ordering from the convenience of your own home is always going to be attractive, but what had held people back in the past was that they weren’t sure what they were getting. Consumers feel more confident now about the products being delivered.” He adds: “People like talking about their grocery-shopping and are interested to know whether they are being ripped off at Ocado or if there are any special offers on Tivall schnitzel at Tesco this month.” It was hard differentiating the company from other start-ups. “We had to think about a way of getting the word out there about us, without having to invest in huge amounts of marketing.” In September, he added a health-checker service to the site, in response to public concern over healthy eating. “Using very similar technology, we were able to make the same product suggestions based on health [saving calories] instead of price.” The company is currently in negotiations with Morrisons and Mr Stern has been in touch with the London Beth Din about introducing a kosher comparison service. Running a business heavily reliant on advertising revenues is particularly challenging in the current climate, he admits. “We are losing out to less generous advertising budgets. Our advertising business has to become more personalised, targeted and relevant to cope with the recessionary environment. Raising money from investors is also more difficult, and we need to be more aggressive about it.” Yet, as he puts it, people need to eat. Asked to identify other online opportunities, he says: “Any area of life where there is information overload. Online businesses are very good at consolidating information, providing it in a personal way and all in one place.” He cites real-estate service property finder.co.uk as an example. “What really determines whether an internet site will grow or stagnate is the viral effect. It’s whether or not a site is interesting enough to make people tell their friends about it. We have a long way to go, but the early signs are there.”

    Last updated: 11:41am, August 19 2008