Online Retailers Take On Groceries
Can online grocery shopping really save you money? [Source: https://www.youtube.com/watch?v=CEtreaNHrg8]
If there is a poster child for the advantage of having a robust bricks-and-mortar infrastructure in the competitive world of online commerce, it's the grocery store.
Just ask anyone at this week's annual meeting of the best and brightest in the retail world, the Big Show. That's what the National Retail Federation calls its terrific gathering of speakers, exhibitors, entrepreneurs, and, of course, the globe's leading retailers.
On its own, selling food is one of the most challenging businesses in the world. Your inventory is highly perishable and your margins are among the slimmest anywhere. Executives who succeed in other industries and businesses have been known to shrivel up when faced with the prospect of running a grocery store chain.
Now add the fact that consumers (some of them, at least) are demanding online grocery shopping and delivery. If you have ever visited New York City, home the NRF's Big Show, you know the already-clogged and congested streets are made even more so by 'e-grocery' concerns that park their giant, refrigerated trucks on busy street corners, where delivery boys rush packages of highly perishable foods into apartment buildings. The cost and complexity of delivering online grocery orders is staggering.
Not unexpectedly, one of the web's most talented and ingenious businessmen, Jeff Bezos of Amazon, is attempting to dominate the online grocery space. Why are he and other entrepreneurs so interested in groceries? In the United States alone, the food and beverage industry is the largest by sales of any other industry: $600 billion annually. To get even a small slice of that pie is quite desirable to some businesses.
But now that it's 2015, and everyone is making their New Year's predictions, I will predict that the companies that succeed in the growing market for online groceries will be those that can leverage IT successfully ... not just food. That's because information technology is what helps a company track orders and ensure that food is not damaged as it is rapidly delivered to the consumer.
A major study on the subject says that savvy, online consumers are willing to pay extra for the convenience of avoiding the supermarket and instead having items delivered to their doorsteps. If Amazon, eBay, and even Google can ensure same-day delivery of books and music, then perhaps food is a natural extension.
If the IT infrastructure is there, why not include more products? In this new study, a full quarter of millenials surveyed said they would be willing to pay extra for same-day delivery for the online orders.
Then there are the disruptors. The lean, mean, smaller companies for which online groceries aren't simply things you add onto an already sprawling online enterprise. These companies are known as concierge shops, and they offer what the big online companies cannot: a focus on one sector and the same sort of focus on their online consumers. They're not delivering books one moment and bananas the next.
Another prediction: These market disruptors will find ways of establishing shared food storage and fulfillment centers in major metropolitan areas even though they are competitors. That kind of move is market disruption at its best: working together to take on the big guys -- some of the NRF's most prestigious members -- when the big guys expect it least.