The Internet of things is showing the ambition to connect everything, while we have learnt to take it for granted. One of the latest trends is delivering foods, ranging from snacks to fresh vegetables to all imaginable groceries. By pressing the button on a mobile App, consumers can just wait for the fresh iced vegetables or hot cuisines arriving outside the door.
Giant companies have successively entered this promising market. Amazon burst out its fresh business from 2013 onwards, and reached to New York, Seattle and other cities in recent 2 years. Traditional supermarkets, such as Safeway in western and central United States, also launched online delivery service. Much surprisingly, even Google has tested its express service in two US cities recently, and expanding next-day delivery in midwest.
Industry trend and consumer behaviour
The online grocery shopping is of great potential and demand. According to the Telegraph, it is already a $10.9 billion (£7 billion) industry in the US, expected to grow 9.6 percent annually through 2019, according to a December report by IbisWorld. In the UK, statistics of IDG say online is the fastest growing parts of grocery market in next five years, more than doubled in value to £17 billion by 2019.
Looking into geographic factors, millennials (aged 15-20) and generation Z (21-34) are the most avid online grocery shoppers, due to Nielsen global e-commerce and the new retail survey. Also from the graph, ordering online for delivery to home is the most prevailing, while online automatic subscription is followed behind, indicating a much segmented market of potential.
How is the competition of current market?
Generally, there haven’t been a global red ocean in online grocery market, the reason mainly lies in three aspects. First and obviously, fresh food or instant food delivery calls for high standard of logistic and transportation, while many of the delivery service hasn’t reached such capacity. Secondly, online grocery is perceived as disruptive service to traditional stores, which may inevitably undergo constraints and barriers, and consequently has a relatively high entry level for new business. And thirdly, it’s not easy to find reliable or stable suppliers. Also because of increasing awareness of healthy diet, the food made by online retailers, even Amazon, is less decent to trust.
To further analyse present competition, the key players can roughly categorised into three parts-
- Traditional online retailer (e.g. Amazon)
- Traditional supermarkets providing delivery service online (Safeway)
- Other new entrance and start-ups (e.g. Instacart)
The price of food is one of the most essential factors. As compared by Todd Bishop (writer of GeekWire) a year ago, Amazon Fresh provides the lowest price among its competitors, while Instacart, which offers organic foods, are far more costly than others. Safeway is a bit expensive than Amazon, but still cheaper than Instacart.
In terms of key considerations of an online grocery retailer, delivery time is best equally performed, while factors like supporting areas/ regions, brand awareness, variety and quality differ from one retailer to another.
Suggestions for future
For the hopeful industry prospective, there must be more and more new players stepping into the market. As mentioned earlier, god of the Internet, say Google has prepared to expand fresh delivery and online grocery business. Regarding to its powerful ecology, it’s easy for Google to gather resources and converge them into its pre-existing strengths, also getting the higher chance to disrupt the current market.
On the other hand, smaller business and start-ups have consider more about its positioning strategy, and trying to differentiate their value proposition as much as possible. In addition to Instacart, Uber Eats is another case in point. What Uber delivers is neither fresh food nor snacks, but the hot meals just cooked in restaurants. By simplifying the ordering process, users can just choose set meals from the most favourite local restaurants for that day. As shown in the following graph, Uber Eats also differs from traditional take-out websites offering rich choices of restaurants or meals.
To sum up, online grocery is seemed as a bright industry, having attracted a number of key players from Amazon, Google, to Uber and many others. For new entries, they may either take advantage of self ecology, or find blue ocean to perform different functions. For all, stable suppliers and excellent delivery ability is pretty critical.