When it comes to investing in solid business ideas, it’s usually a good idea to pick safe things people will always need. Think funeral homes, laundry services, convenience stores, or trash collection. Most people would also include grocery stores on that list. And, even moreso when combined with the convenience of the internet, right? Well, not exactly. According to Statista, food and beverage ranked number 11 out of 13 e-commerce retail categories in 2017.
This begs the question; what’s the issue?
People need groceries. People like internet shopping.
So what obstacles does grocery ecommerce need to overcome?
Slow-to-Adopt Customer Base
The biggest reason online grocery hasn’t taken off yet, even with the likes of several giants offering online marketplaces, is because people like picking their own groceries. That, and they’re used to doing it. According to Morgan Stanley Research, which asked people’s top reasons for not ordering groceries online, 84 percent of people said they prefer to physically see and choose groceries. The next highest reason people gave was that they “tried it and didn’t like it” (27 percent).
The preference to touch and inspect the foodwe purchase represents a steep challenge for e-commerce grocers. How do we know the person grouping their order will choose avocados that aren’t too ripe, but aren’t rock hard,either? How can we trust that our pears won’t be bruised by the time they arrive to us? Nutrition is personal and the prospect of a business selecting and shipping the food we eat can feel questionable.
Moreover, for many people, grocery shopping provides a source of relaxation, a way to spend time with a loved one during a hectic week, or precious free moments to catch up with a friend over the phone. How can e-stores rewrite this experience?
It starts with personalized, convenient experiences. People need to be compelled to make an online grocery store their grocery store. The experience needs to be memorable and easy. Opting for the right e-commerce theme on a hosted store is a good start. But the overall shopping experience needs to be compelling, unique, seamless and most of all—trustworthy.
Most e-commerce products don’t carry spoilage concerns, but the average grocery order is full of them. Additionally, it can be hard to deliver a full grocery shipment without products being damaged. Think about the last time you had your groceries bagged at the store—chances are the bagger instructed you to be careful with a certain delicate bag. E-grocers can ensure their shipments are well-packed, but they can’t guarantee what happens in transit, and nobody wants to see their cereal box dented or a chip bag arrive full of crumbs.
Amazon has shifted consumer preferences across the board toward free and timely shipping, but grocery deliveries are held up to an even finer standard. After all,how many of us know which groceries we’ll need five days from now?
Then there’s the challenge to keep shipping margins low. This means stores have to do the heavy lifting to develop their own logistics network or partner with local organizations in the markets they operate. It’s only a matter of time before drones start delivering produce, but for most companies, a solid logistics network will remain vital for the foreseeable future.
Backend Inventory Misalignment
Stocking a physical grocery store offers a relatively predictable experience. There are busy days and times of the week, and adequate shelf space is required to manage surges. But going online can quickly complicate a brick-and-mortar’s operation. How are online items stocked—in the backroom or on store shelves? How are out of stocks avoided when trying to fill both in-store and online orders? How is inventory pulled for shipments?
Without a proper inventory tracking system in place that incorporates historical sales and predicts future outcomes, e-grocers will have their hands full trying to keep items in stock and reliably pulI them for delivery. Software can also produce further insights for grocers, such as how to properly group items for delivery based on their expiration date to hopefully reduce wasted inventory. Though to make all these processes hum, it’s likely we’ll need to see a huge increase in dark storesor grocery warehouses in which humans and robots fulfill online orders.
While these obstacles certainly need to be addressed for grocery e-commerce to thrive outside the likes of Amazon, Instacart, and Walmart, the overall outlook isn’t so gray. With 36 percent of U.S. consumers planning to shop online in 2018, and e-commerce predicted to comprise 20 percent of the $500 billion grocery market by 2025, big opportunities exist. The grocers that are able to offer personalized and easy experiences while meeting consumer demand for shipping and product selection will be very busy indeed.
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