With the purchase of Whole Foods by Amazon, the world of online food sales has been changing rapidly. There have been a number of entities trying to determine what will work best to meet consumer needs, including grocery stores, restaurants, delivery companies, and meal kit companies. Food manufacturers must understand the needs of these channels be able to adapt to the channel requirements.
Online food sales have come in a number of different forms including restaurants and delivery services (ie Grubhub) delivering restaurant foods, new food companies making and shipping meal kits, and traditional supermarkets providing online ordering with either delivery or quick pickup.
This week, Amazon
announced that they were introducing food delivery into 10 new cities to have a total of 38 cities where delivery is being offered.
But Amazon is a small player in overall grocery market, with its Whole Foods accounting for only about 2.5% of the sales. Despite all the news involving Amazon, Walmart has the largest market share in the grocery arena, increasing it's total of the US market to a massive
25% share. And Walmart has been pushing its on-line ordering with store pickup.
Currently, Walmart is testing kiosks that are essentially vending machines for customer pickup that allows the customer to pickup food ordered online without having to interact with any store employee. Other chains selling grocery such as Target and Kroger are also moving further into developing systems for online ordering / delivery systems.
While full-time meal delivery companies, such as Blue Apron and Plated, have had a
tough go at it on their own, some have come to find that being married to a grocery store may provide salvation. Even Walmart has partnered with the
meal kit company Gobble to sell meal kits online. Peapod, an online grocery delivery service and subsidiary of Ahold Delhaize is slated to roll out 40 new meal kits over the coming months.
Fully prepared meals have been more of a challenge for grocery store online sales, and while that segment has done well for in-store sales, delivering prepared meals is a bit more of a challenge with regards to packaging and temperature control.
For those selling food within this online environment, it is hard to know what is going to stick with the consumer and what isn't, so there will continue to be a lot of experimentation. But is important for companies who do not want to get lost in the shuffle, so they must continually evolve through testing concepts and adapting to customer needs.
And customer needs will continue to change as well in term of how they want to purchase food. Certainly, guessing what the Millennials will do as they reach the point where they become primary purchasers has been difficult. For this segment, growing up in the digital age means that they are more reliant on technology for doing what they want to do. And while many older consumers will still want to pick out their own broccoli or cut of meat,
others may begin to opt for convenience that comes with online ordering.
For the food manufacturer, ongoing change requires that they are willing to adapt to fit what delivery channel stores choose to use. This may be in terms of packaging that will fit into a store delivery system or meal kit. Product quality may become a bigger factor in that the consumer will not be choosing the product at the store, but rather, will be paying a premium for delivered items. Because of this, they may have higher expectations for what shows up at their door.
Customer-direct food sales from processors or online distributors is another online component that has found its mark in certain areas. "Direct product sales by the manufacturer in the online marketplace has become an important channel for some companies. Those companies selling products like wine, balsamic vinegar or high-end olive oil can take advantage of additional volume sold through making their products available to a much broader audience. These types of products, especially ones with brand recognition, are likely to provide the larger price markup needed to support the costs associated with protective packaging and ground shipment. Since these products are shelf-stable, there is normally minimal risk with the exception of product damage or breakage."
"Direct sales are not limited to shelf-stable products as there are a number of companies who have
carved out a niche in the sale of perishable goods, including those selling high-end cuts of meat or specialty meat products."
Online direct sales is not without its challenges. Package integrity, temperature control, and product recovery due to lost product or complaints can be a challenge.
Online food sales and delivery will continue to evolve. It is not a matter of whether it will gain in terms of sales, but how much. And who will be best positioned to take advantage.
CNN tech
https://money.cnn.com/2018/08/28/technology/business/amazon-whole-foods-365-walmart-kroger-costco-grocery/index.html
Amazon-Whole Foods one year later: The grocery business will never be the same
by Nathaniel Meyersohn @CNNMoney
August 28, 2018: 3:33 PM ET