The grocery business is one of the largest industries in the world. It’s also one that is set to undergo some major disruption…
Estimates suggest that in the United States alone, groceries are a $600 billion industry.
And unlike many other sectors, the grocery industry has managed to resist the biggest trends in retail – until recently, virtually all of those sales happened offline.
According to Business Insider, in fact, online sales currently make up less than 15% of total food and beverage sales! (Source)
That’s all poised to change, though…
Here are some of the reasons why, and what it means for food and beverage retailers nationwide:
The Rise Of The Home Chef
These days, it seems like almost everyone is an aspiring Gordon Ramsey or Rachel Ray. This is partly due to the phenomenon of the “celebrity chefs” and the popularity of cooking shows.
The widespread availability of top of the line kitchen tools also means that people are well equipped to prepare complicated meals at home. Ecommerce is making it much easier (and way more convenient) to source equipment and ingredients.
In the UK, the supermarket Sainsbury’s provides recipes that people can prepare at home with minimal expertise. With a single click of a button, customers can order all of the ingredients for a particular recipe… and have them delivered straight to their home.
Increasing Individualism
One of the key drivers of the growth of the online grocery industry is consumer demand for specialty items.
Diets with unique requirements, such as the Gluten Free or Atkins diets, have become very popular over the last several years. Coupled with the interest in cooking at home and easy access to exotic recipes through the internet, specialty foods are more popular than ever.
Unless you are living in major metropolitan area, though, sourcing specialty items can be a challenge. Online grocery shopping has no such limitations…
According to a study by Harris Interactive, 25% of consumers said that they have bought specialty food and beverages online.
Expansion Possibilities For A Saturated Market
The grocery industry is a highly saturated and competitive market. That’s why some retailers view online sales as one of the best opportunities for expansion…
Wal-Mart currently only does 3% of its business online… That means plenty of room to grow that part of the business.
Large retailers in the grocery sector also benefit from having an existing infrastructure. Wal-Mart, for example, is leveraging their ability to ship from many locations. They can source inventory from whichever store is closest to the customer in order to fulfill orders more efficiently.
Funding For Food Startups
Investors have been very eager to get a piece of the online grocery pie too…
Between the second quarter of 2013 and the first quarter of 2014, food and grocery delivery start-ups were able to raise more than $500 million.
As mentioned above, large existing retailers do have some distinct advantages – deep industry knowledge and infrastructure are key – but nimble and well-funded start-ups will also play an important role in transforming the grocery industry.
What This Means For Your Business
Your competition is no longer local… No matter what industry you are in. As the disruptive move of Amazon into the world of B2B wholesaling shows, even the most established industries are now vulnerable to larger competitors and technological change.
To survive and thrive in that marketplace, businesses need a new playbook.
In your corner,
Charlie