Tracking the latest developments in online grocery shopping is one of our favourite subjects. In a huge and incredibly competitive industry, technology is constantly allowing retailers and manufacturers the opportunity to change their relationships with consumers. Trends like voice shopping, product replenishment, pickup and delivery services, meal-kits, and smart appliances have the potential to upend traditional marketing and customer retention strategies. Mergers, partnerships, and acquisitions like Amazon’s purchase of Whole Foods regularly shake up the industry. Shoppers have enthusiastically embraced some innovations while turning their nose up at others. We are seeing trial, error, investment, and innovation reshape an industry that has long been resistant to change. Today we’ll be taking a long look at what’s coming in an industry that is being rapidly reshaped by technology.
The Major Players
Business Insider recently released a survey of strengths and weaknesses for industry leaders in online grocery shopping. They deemed Amazon to be in the best position on account of the strength of their eCommerce platform. In spite of the company’s inexperience, lack of physical locations and the requirement of Prime subscription, Amazon has retained its status as the Boogeyman of the industry. But Amazon’s competitors aren’t ready to go gently, and they’re all working hard to prevent the Seattle based behemoth from owning the future.
Among Amazon’s competitors, there are an array of strengths, specialties, and weaknesses. Wal-Mart has a huge footprint in terms of brick and mortar, and they don’t charge a subscription fee. However, high costs and fees for delivery tend to hamstring their efforts to carve out a larger slice of the eCommerce pie. Kroger is benefiting from its innovative partnership with Ocado, but the online sales platform leaves a lot to be desired. Target deserves praise for an excellent subscription and replenishment program, but they have fewer stores than their competitors and require their customers to maintain an account with Shipt to qualify for same-day delivery. Meanwhile, Aldi’s customer-friendly pricing has given the retailer a great deal of goodwill from consumers, but they are still struggling to build a network of stores in the US.
In Europe, Tesco and Carrefour are moving forward with a partnership that they feel will allow them to compete with Amazon. As Campaign reports: “Tesco chief executive Dave Lewis said that pooling the businesses "product expertise and sourcing capability" would improve choice, quality, and value" for consumers. His counterpart at Carrefour, Alexandre Bompard, added that it was "a great opportunity to develop our two brands." The merger will create the world’s largest grocery chain, a move that Patrick O’Brien, UK retail research director at GlobalData feels will enable them to compete effectively with Amazon and counter the increased buying power of Sainsbury’s, Lidl, and Asda.
More Mergers and Alliances
In addition to mega-mergers like the Carrefour-Tesco marriage, partnerships like Kroger’s alliance with Ocado, and game-changing acquisitions like Amazon’s purchase of Whole Foods, industry analysts expect to see more consolidation in the future. Services like same-day delivery will be required to remain competitive, and retailers will need to make massive investments in their supply chains and logistics infrastructure. Relatively small competitors such as Trader Joe’s, which recently suspended its pilot delivery program in Manhattan, will have to team up with other retailers or tech companies to offer customers the same level of service that Amazon can. Food suppliers and grocery retailers currently make up 47% of all mergers and acquisitions in any given year, and that number might increase in the near future!
Pickup and Delivery
Changing demographics are about to change the nature of shopping. Within a decade, Millennials will surpass Baby Boomers and Gen Xers as the single largest group of consumers in the US and UK. And a tech-savvy generation with a reputation for impatience and a focus on instant gratification is unlikely to accept the supermarket experience that their elders have grown accustomed to. Surveys have shown that most members of this cohort are either buying groceries online or planning to start. Gen Xers are also migrating online in massive numbers, in 2018 29% of Gen Xers reported that they bought some or all of their groceries online. In 2019 that number has jumped to 40%. As shoppers abandon the supermarket, retailers are scrambling to make click and collect and low-cost same-day delivery programs available in an ever-larger number of markets.
New Shopping Paradigms
We’ve written before about how Direct to Consumer (DTC) business models are reshaping retail. The internet has allowed manufacturers and consumers to cut the middleman out of transactions, and it’s not a stretch to predict that the future of the grocery industry could lie outside of the supermarket. In the FMCG industry, DTC models are poised to offer shoppers the chance to buy quality, specialized products such as the grain and gluten-free breakfast cereals on offer from Magic Spoon, personalized snacking bundles from Graze, or customized meal plans from companies like Blue Apron. Consumers will benefit from the convenience of home delivery and food customized to fit their flavor preferences and dietary requirements, while the producers should gain a leg up on brand loyalty and customer retention by leveraging the subscription model to remove fuss and friction from the purchase process.
Voice-based product replenishment is another trend which could upend the supermarket’s place at the center of the grocery universe. We’ve already reached the point where Siri and Alexa are able to conjure up a bulky bundle of toilet tissue or a hefty sack of dog food within hours. As consumers begin to realize how much time and trouble can be saved by voice replenishment for household staples, we’d expect them to adopt the practice en masse.
For retailers and manufacturers to thrive, ensuring that your brand is capable of delivering products to your consumers on their terms is a must. The grocery industry is intensely competitive, and some of the world’s largest companies are frantically striving to create new ways of doing business which will attract your customers. If you aren’t capable of offering similar levels of quality, convenience and value, your future is bound to be bleak.