Opinion

Grocery Competition Online

Recent world market research indicates that online grocery sales grew at an annual rate of 14 percent over the last five years and they are expected to grow at a rate of 10 percent between 2014 and 2018.  These robust growth numbers are masked by the reality that on-line grocery sales are estimated to only be about 2% of the total market.

On-line grocery delivery models are costly to maintain with such a low market penetration rate.  Being in the business of delivering fresh requires inventory turns (which is created by customer frequent and predictable demand).  In other words, having lots of customers order regularly in some consistent pattern.

It is not surprising that many grocery retailers are now offering models where customers order on-line and pick up at the store.  These models avoid the expensive costs of distribution and allow an entry point for retailers to understand their customer shopping behaviour in the digital realm.

“Do nothing, start somewhere or ask what happened” will be the 3 likely scenarios that explain the success or failure of grocery retailers.  If the growth and market size of on-line consumer purchasing behaviour in other categories is not a compelling reason to immediately cross out “do nothing”, then sooner or later, the closed signs will undoubtedly hang on the door.

All businesses including grocery retailing need to quickly adapt to changing customer behaviour.