Demand for Online Food Retailing: What’s the Future for Digital Food Procurement?
As technology has improved, the failed attempts to launch online grocery in the late 1990s appear to be a distant memory. Certainly, CPG suppliers are looking for any kind of incremental growth, especially growth that eliminates wholesaling costs by going direct to the consumer. And struggling, midmarket grocers are looking to retain share of wallet (and share of mind) any way possible while being attacked relentlessly on all sides.
Most commentary on the phenomenon of digital food procurement has focused on the potential of online grocery shopping. The severe wounds wreaked by Amazon on Walmart, Best Buy, Circuit City and others are clearly the inspiration behind many worried executive imaginings: will the grocery store as we know it…die?
The Hartman Group's special issue of Hartbeat EXEC, “The Future of E-Commerce in Modern Food Culture,” explores where digital food procurement is headed and how it is disrupting the way people shop and eat.
We’ve found that early adopters tend to simply be those more willing to let go of traditional notions of how to obtain food, just as these consumers are letting go of traditional notions of how to eat, when to eat and what to eat. Yet, they are still a minority of food shoppers.
The question on most minds is: Will the behavior really grow both in adoption and in share of wallet? And why or why not?
Drivers to Adoption
Our recent syndicated study on the topic reveals that online grocery today is tapping into pure convenience drivers, not the higher-order ones that are driving early adopters’ increased spending in the brick-and-mortar side of grocery. This is not necessarily bad for long-term growth, since it suggests a broader, midmarket hook relevant to many households. But it does suggest that, unlike the iPhone, the current providers aren’t really innovating much in terms of the grocery shopping experience itself.
- Target Households: young urbanites, suburban families, older singles
- Underserved Need: eliminating the drudgery and inconvenience of constant shopping
- Cultural Hooks: unleashes the ability to order in the home kitchen, as the need arises, b) order on demand out of the home when the consumer has time or simply remembers and c) distribute grocery shopping across household members to ensure “agreement” and total household satisfaction
Source: The Online Grocery Shopper 2012 report, The Hartman Group
Online ordering potentially reduces the inconvenience of grocery selection by eliminating all the walking around the store we are habitually used to performing. It theoretically enables you to shop much more quickly by occasion or for targeted fill-in trips, precisely when the grocery store is a time-wasting pain in the rear. For consumers whose shopping behavior is full of dull, fill-in and pantry-stocking trips, online has interesting potential to remove the drudgery or condense its invasion of their personal time. For others who are not so tired of shopping, online grocery will most likely not seduce them until super-fast delivery becomes reliable and feasible (e.g., Instacart).
Online grocery shoppers today do not appear to enter the experience looking for a radical new way to shop … even if they eventually start shopping differently due to online grocery use.
To read the full report, use this link to download your free copy of: The Future of E-Commerce
This issue of Hartbeat EXEC explores where digital food is headed and how it could further disrupt the way people shop and eat. The report covers:
Hartbeat EXEC is a quarterly report written and published by The Hartman Group for executives within major U.S. food and beverage companies.