Did you know that only 3% of Americans by groceries online? This is despite the US being the global leader in practically all sectors of E-commerce – but this is expected to change in the coming years as online grocery sales continue to rise. Just this past year, IRI reported that e-commerce sales for groceries totaled $58 billion for the whole year of 2018; and this was an increase of 35.5% from 2017.
Consumers are showing generally positive attitude toward e-commerce in general, and this may be influencing some of the growth in non-packaged foods. Increasing awareness in health issues certainly means more people are looking to purchase natural food, and online stores are taking full advantage of this new trend.
Fresh foods are among the lowest-ranked items in e-commerce sales, but with thanks to the introduction of options such as click-and-collect, companies are expecting a surge in growth.
Why isn’t grocery delivery more popular?
Anything from high shipping costs and a lack of trust in the sellers can lead consumers to avoid buying fresh foods online. For many people, it takes a leap of faith to allow a stranger to pick out veggies or other food item. To these people, it makes more sense to walk into a brick-and-mortar store, or visit an open market to buy fresh food – but this old habit is expected to change.
Delivery costs consumers the retailer about $10, but in many cases it’s the consumer who covers 80% of this cost; and this has raised problems with consumers for a long time. A click-and-collect service (currently offered by Wal-Mart, Kroger, including others) is one of the ways large stores are trying to attract online shoppers. A click-and-collect service wipes out delivery fees and this works out fine for consumers.
Other ways companies are evolving include investing in automation, reducing prices – and in the near future, driverless delivery will be the norm. Competitors such as Whole Foods offer consumers free shipping for a couple of hours for Amazon Prime members, and this is just one of the ways companies are trying to stay ahead of the curve. Another example is Instacart, which recently cut its fees.
Millions have been invested in grocery shopping
This industry has been growing slowly in the past few years following significant investments in the online food market. Much of what we see today from the likes of Target and Amazon setting up comprehensive systems for handling fresh foods, to large acquisitions like Amazon purchasing Whole Foods in 2017. This has led to dozens of companies like Albertsons and Bain & Co. grappling on how to get more people to use their services to buy fresh food, and the fact that the largest merchants are offering free services to promote sales, it means smaller companies will have to bring something to the table.
Market analysts project high growth in online food sales over the next decade, and retailers won’t hold back in enhancing their services to grab a section of the market. The problem is, many people want to touch and smell fresh food before purchasing, and someone needs to explain to consumers that the benefits of e-commerce outweigh some of the inconveniences, such as not being able to pick their own food.
What are the benefits of online grocery shopping?
The most obvious benefit is the convenience, and of course the time-saving aspect of online shopping, which was a big selling point for retailers initially. The main challenge is in fact the pricing model, and consumer issues concerning overpricing. Two pricing models are used by retailers today:
- The first one: A retailer will price their items the same way they would be in physical stores, and they would then be clear about any extra charges for shipping and what not.
- The second one: A retailer will hike prices to cover any extra charges on their part, and because some of the prices will be significantly overpriced, consumers will likely minimize the amount of groceries they purchase.
The entire grocery industry is expanding as more people shop online, and companies such as Target that didn’t invest much in grocery delivery are now taking steps to reach a broader segment of consumers. Some of the smaller food chains are finding it a challenge to provide competitive services. Trader’s Joe is one of the companies that have pulled their grocery delivery service altogether, following huge market changes; however, this is likely a short-term decisions because of the high projections for sales in the coming years.
