E-commerce takes root in food
Apps, drones, insider memberships — brokering online relationships between consumers and the food industry is about to get very interesting
E-commerce in the grocery business was barely a thought five years ago. Most grocers did not want to cannibalize sales and decrease foot traffic. The primary idea has always been to have more people in grocery stores, not less. With Amazon, Walmart and Costco looking at cyberspace as a potent place to sell food now, grocers are looking at strategies to keep their customers. At first, it was the “click and collect” era, not the greatest idea in the world, but nonetheless a strategy. Most grocers are now looking at full delivery service whether through a partnership or by developing everything in-house.
That is the case for Loblaw which recently launched “PC Insiders” which offers free delivery to its customers for a fixed fee. This program à la Prime is clearly in response to Amazon’s incursion into the grocery business. The brilliance of the Prime model is based on how it can build loyalty and allow the retailers to cover delivery costs. Paying for delivery is not something consumers are keen to do, and costs could be exorbitant for grocers. With its Prime program, Amazon has perfected the art of covering “last-kilometre” costs in delivery service, which is known to be the most expensive when selling products online to consumers. Venturing into smaller streets, looking for addresses and transporting the product to consumers’ doors takes time and energy. Loblaw with its $99 PC Insiders program is merely copying Amazon by doing the same — and why not? Loblaw has a database of 16 million non-paying PC Optimum members, so a loyalty loop can be executed by Canada’s No. 1 food retailer. Converting 100,000 PC Optimum members can generate enough capital to cover significant costs.
On the other hand, some partnerships look promising as well. Sobeys opted for a partnership with U.K.-based Ocado. This partnership has done wonders for European grocers willing to increase their business with e-commerce. Many countries in Europe are now seeing online food sales exceed 5 per cent, and in some cases up to 8 per cent. In Canada, we are not even at 2 per cent, but the market potential is real. More than a third of Canadians are thinking of going online regularly to purchase food. Everyone under the age of 39 in Canada right now considers the internet as an integral part of their lives.
The emergence of more e-commerce in food retailing signals the end of the big box stores. More retailers are looking at smaller stores which require less inventory and maintenance. A big store with nobody in it is bad for business; therefore, it makes little sense to build more of them. Sobeys acquisition of Farm Boy this year in Ontario is consistent with such a strategy. Farm Boy offers a great in-store experience while also providing Sobeys with high-quality products to be delivered to consumers’ homes.
E-commerce in food also offers more opportunities beyond retailing. This is happening in service as well. An increasing number of consumers want to “go out by staying home.” No overpriced wine, no extra tips, no standing around waiting to be seated, instead more consumers want to enjoy a meal in the comfort of their homes. Although home delivery by restaurants has been around for
The emergence of more e-commerce in food retailing signals the end of the big box stores. More retailers are looking at smaller stores which require less inventory and maintenance.
decades, there are now new options available to them.
New are apps, such as UberEats and Skip the Dishes, which allow consumers to have access to more choices. Some restaurants can’t afford a driver or to operate a fleet of cars. These apps act as brokers between restaurants and the curious consumer. As a result, some restaurants are now virtual, operating without a dining room while exclusively selling online. Brokering online relationships between consumers and the food industry could get interesting in years to come. With drones, some are predicting to see more farmers selling directly to consumers. The sky is the limit, literally.
During this holiday season, malls were packed, but don’t let that fool you for a second. Throughout the year, an increasing number of consumers will spend time in front of a screen purchasing presents instead of parking kilometres from the mall’s entrance and working their way though the cashiers. So uncivilized. That rule increasingly applies to food. Now if only we can figure out a way to have someone clean up the dishes for us, that would be such bliss. That would clearly be e-commerce’s next frontier in food.