Online grocer threatens classic retailers

Online grocer threatens classic retailers

According to consultancy company Innosight online grocers will start to take over from the classic retailer. It points to services like AmazonFresh, which will expand its activities into two new American cities in the near future.

Online grocers triple in ten years

Currently, some 3.3 % of all American grocery purchases are done online, but innovation advisors like Hannah Clark Steiman expect that by 2023 the number will grow to 11 %: that means a 13 % growth each year, in an estimated 500 billion dollar industry - as she revealed on Business Week’s management blog.

 

Classic retailers currently have a scale advantage on internet parties, but are slowly being overtaken by the online groups - who only need one storage location per city, whereas classic parties have to pay for several outlets.

 

New business model speeds up growth

A couple of newcomers, like Instacart and Google Shopping Express, have opted for a business model that allows them to grow faster with lower costs. Instead of delivering their own goods, they are selling things existing chains offer. Instacart is also collaborating with freelance delivery services, which eliminates the need of its own delivery service. Instacart started out in San Francisco and has expanded into Boston and Chicago late last year. It will expand into ten new cities this year.

 

Corporate financing has also found its way to online groceries: Relay Foods’ founder Arnie Katz said in 2009 that 9 out of 10 potential investor talks did not amount to anything. Now, 9 out of 10 are willing to carefully consider the offer. He managed to bring in more than 8 million dollars through investments last year.

 

Classic giants move slowly

Most classic chains, with Steiman making an exception for Ahold, are not aware of the power of the shift: Albertsons quit online in 2009, Kroger is testing web sales without too much worry while Wal-Mart is dipping its toe in the water, without thinking about expanding its online sales.

 

Steiman believes these chains are too focused on where the customer is today, which is a fatal error. They should instead be running on two tracks: one should be to shift towards internet sales, while expanding their product range, so that customers keep coming to the actual stores. These need to be transformed into a real experience with free offers and friendly service. Selling or buying food is becoming partly entertainment, the consultant has stated.

 

 

 

 

(Translated by Gary Peeters)

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