Groceries delivered to my door?
Sign me up!

I’ll admit it. The thought of trading in the grocery store checkout line for an online cart to buy my weekly groceries puts a little spring in my step. I appreciate that I am heavily involved in the meat industry and have a deep love for brick and mortar stores, but the promise of groceries delivered to my front door intrigued me enough to try it out.

Online grocery is one of the great comeback stories. After the first online grocery delivery company Homegrocer.com failed during the dot-com bust of the 2000s, smart business people perfected the formula and they have returned stronger, more diverse and with better IPOs than ever before. Online grocers like AmazonFresh.com, FreshDirect.com and DoortoDoorOrganics.com are skipping brick and mortar stores for a strong online presence with regionally-based distribution warehouses and privately-owned delivery trucks. In 2014 IBIS World reported that online grocery sales had grown at a 14.1% annual rate over the past five years. In addition, profit estimates were $927 million, which is 8.5% of total revenue. For comparison, brick and mortar stores are at an average of 1.3% total revenue (FMI). Online grocery is only growing, with 54% of online grocery shoppers increasing their spending over the past year (Watson, 2015).

What does this mean for the meat industry?

For the right grocery shopper, online grocery can be a life saver. While it truly has the potential to replace or at least fill in the gaps of a regular grocery shopping trip (and that even goes for fresh meat sales), there is a price for convenience. From my estimates, an online shopper will pay more, but in the long run it’s an opportunity cost comparison. If the time saved by shopping online versus going to a brick and mortar store is greater, shoppers will increasingly make the switch. For meat suppliers, that means playing the game and working to create fruitful relationships with online grocery businesses. However, when trying to forge the sale, it will be important to have a good grasp of an online grocery’s unique buying, selling and distribution business model.

In order for brick and mortar grocery stores to compete, Meat Directors or Meat Managers need to constantly be giving consumers a reason to physically come into a store. That means emphasizing convenience, value and product freshness, along with unique advertising campaigns to peak and maintain a customer’s interest. Some retailers have been successful with a hybrid model that allows customers to order online and pick up bagged and ready to go groceries at the store’s front door. While this does require a bit of infrastructure and systems in place on behalf of the retailer to succeed, it also may require meat suppliers to produce specialty cuts or packaging for the retailer.

Who’s the customer?

I am the epitome of an online grocery consumer target. About five years ago — otherwise known as B.C. (before child) — I was a busy professional single whose clean refrigerator held nothing more than a half-gallon of skim milk and a few premium steaks in the freezer. Now I am a busy professional mom who can barely squeeze two gallons of whole milk, several frozen ground beef chubs and an entire pork loin into my over-stuffed refrigerator.

In either case, trips to the grocery store have always been a burden. Since I was often in grocery stores for professional reasons at the start of my career, I could find a thousand alternate things to do than hit the local grocer for personal items, and now it’s often comical to watch my 2-year-old’s grubby fingers pull random items off the shelves. Voila! Enter my reason for trying online grocery with front- door delivery.

Because I have a self-diagnosed obsession with online reviews, I have compared and contrasted three major online groceries in that format. Since only a few online grocers deliver to my region in Kansas City, I roped some friends into receiving packages on my behalf with the promise of free steak. Each is a potential online grocery customer as well: a busy professional single and a busy professional mom.

Let’s dig in!

The Basics
amazonfresh-logo-190915_150px

AmazonFresh.com4stars

Locations served:
New York City, New Jersey, Philadelphia, Southern California, Northern California and Seattle

Who got the delivery:
My high- powered single friend in San Diego

Fresh-Direct_150pxFreshDirect.com

3stars

Locations served:
New York City, New Jersey, Philadelphia and areas of Delaware and Connecticut

Who got the delivery:
My cousin, the busy professional and mom of two

door-to-door_150pxDoortoDoorOrganics.com

3stars

Locations served:
parts of Colorado, Kansas City, Chicago, Michigan and parts of the NE

Who got the delivery:
Me, the meat industry professional and mom

Ease in Online Ordering
5stars

I’ll be honest. I love shopping on Amazon.com! I read all the customer reviews, I religiously use the sorting capabilities and I even get excited over the “frequently bought together” suggestions. So when I had the opportunity to buy groceries in the same way, I was excited! Aside from forcing an available delivery zip code in order to browse items, AmazonFresh.com’s online ordering lived up to the hype and more!

3stars

FreshDirect’s online ordering was antiquated at best. Their online ordering mirrors that of an actual brick and mortar store with categorizations, cross merchandising and a large number of offerings, but their system does not have nearly the bells and whistles as other websites. The scheduling system was a bit confusing, and their check-out process seemed to take forever. Overall, they are due for an upgrade.

5stars

DoortoDoor organics online ordering was designed with the consumer in mind. Their website is truly beautiful, and their advance categorizations and enticing photography elevate the overall feel. They also have quick reference icons communicating various brand attributes along with a one click Shop By Recipe® function! Whoever designed their website knew how to appeal to consumers.

Pricing and Offering
2stars

AmazonFresh.com relies on suppliers to set actual product pricing, and for the offered regional and specialty brands, the pricing seemed in line with what they would normally cost at a brick and mortar store. The prohibitive costs are the incremental ones. There is a $299 annual signup fee for a PrimeFresh membership and a minimum $50 subtotal just to get the first delivery.

4stars

Pricing for FreshDirect is slightly more than what would be found in a brick and mortar store, but still not out of reach. They do not have a minimum order requirement but instead charge a flat fee of $7.99 for deliveries. There is an optional DeliveryPassSM subscription which is a maximum of $119/year with a minimum order of $30. I’m intrigued!

3stars

Because DoortoDoorOrganics is a hybrid subscription meal planner and online grocery, to get a delivery you must be subscribed to a “Produce Box,” which start at $25.99. Once you’re subscribed, you can shop the store, but be forewarned – all items are either organic or natural, and inherently pricey.

 

Delivery and Packaging
5stars

Among many things AmazonFresh does right, their delivery and packaging is on point! They make marketing magic with branded green delivery trucks, matching cooler bags and branded freezer packs. Refrigerated items even have special quick teardown Styrofoam sides that help protect deliveries from the hot sun. The beef items themselves were delivered frozen in wax paper wrapping, which made the steaks have a “local butcher” feel. This was definitely a nice selling point.

1star

On the plus side, FreshDirect delivery was perfectly timed; however, their packaging was less than desirable. The steaks were in traditional overwrap packaging, but then just thrown into a large cardboard box with no protection or way to keep the product cool, especially in the summer. The promise of convenience dissipates if a customer has to be home to receive his/her groceries.

3stars

First off, delivery was on time as promised; however, the packaging was way over done. There was literally enough padding and freezer packs to safely ship a delicate icicle to the Sahara and have it arrive safely. It is important to note that there was communication printed on the packing asking recipients to set everything out during normal delivery days so it could be returned and reused. Trouble is, not all customers will do that, which leaves their “better for the earth” vibe an empty promise.

 

What’s the final word?

In the long run I do not believe online grocery will replace the brick and mortar store completely, but it certainly has the potential to steal share from the U.S. grocery market as a whole.

What are your thoughts about online grocery? Tell us in the comments below.

 


 

IBIS World. (2014, December). Online Grocery Sales in the US: Market Research Report. Retrieved July 24, 2015, from IBIS World: http://www.ibisworld.com/industry/online-grocery-sales.html

FMI. (n.d.). Supermarket Facts. Retrieved July 23, 2015, from Research Resources: http://www.fmi.org/research-resources/supermarket-facts

Watson, E. (2015, July 7). Online grocery shippers are upping their spending online, but remain wary of buying fresh produce, says new survey. Retrieved July 23, 2015, from FoodNavigator-USA.com: http://www.foodnavigator-usa.com/Markets/Online-grocery-shoppers-are-upping-their-spending-online-survey

 

Comments

  1. Great insight. Convenience will always have strong margins of which makes fresh meats nearly out of reach to most online shoppers. This is why TFM will be combining the natural element to the formula, utilizing the Open Prairie brand for the Amazon Fresh project called “Brooklyn” in 2016. Personally, local chains like King Soopers are by far the most dominant player in home delivered groceries due to their superior systems in place (dist, warehousing, merchandising, local attention, etc…). TFM feels that there is no real position in this channel for the Star Ranch brand…yet.

  2. I agree this is a growing trend and a great opportunity for brick and mortor retailers to maintain or gain share. Even small stores such as Buehler’s in OH are gettign this right with drive up pick up of on line orders. The challenge for retailers is to set up the system that allows the customer to identify their quality parameters for perishables. This is key to building consumer trust and repeat use of the on line service.

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