Online Grocery Delivery: The Way To Consumer Hearts And Wallets
The online retail landscape is expanding across borders, with partnerships and acquisitions designed to strategically outmaneuver the competition. One of the areas that has been most active is deliveries, particularly grocery deliveries. We’ll unpack this and give our take on this fascinating unfolding story.
The Grocery Delivery Landscape and Why It’s Important
Online grocery deliveries are critical to ecommerce companies for a number of reasons. First – over and above the massive potential revenues that this segment generates – it’s a direct route into consumers’ homes, making the ecommerce platform an integral part of consumers’ lives.
This is the ultimate foundation for companies who see a world where everything is done online, and where the trust of consumers is paramount. Even more than this, it entrenches the company or brand where consumers cannot imagine life without a particular company or service.
There are many other major benefits: it’s a recurring order, meaning recurring revenues; it allows upselling and cross-selling with other products that ecommerce companies offer, and it associates the brand with convenience and assists it in becoming a household name.
Big Players, Big Moves
The big players in this space are the online retailing giants; the likes of Amazon, Walmart, Target, and the Alibaba Group. These players are involved in a battle for share of market of this exploding space, and are constantly making moves both behind the scenes and in the public eye, to conquer this arena.
Amazon recently partnered with French retailer Monoprix, to launch Prime Now grocery deliveries in Paris. Retail giant Monoprix is owned by the Casino Group, which had €38bn in consolidated net sales last year. What is doubtless more interesting for Amazon, however, is that the group operates businesses in France, Latin America and Southeast Asia, providing an excellent launching pad for deliveries in these markets.
Amazon, of course, has begun offering Whole Foods deliveries via its Prime service. The option, open to Prime Now customers, includes free 2-hour deliveries if over $35 is spent. There’s also an ultra-fast 1-hour delivery option costing $7.99 for orders of over $35.
While currently limited to certain geographic locations (Cincinnati, Dallas, Austin, and Virginia Beach) there are plans to expand the program across the US this year.
Walmart announced plans to expand its grocery delivery offering from 6 markets currently serviced, to over 100 by year-end. This would mean that the retailing giant would be servicing over 40% of US households and making deliveries from 800 stores in total.
This move has been seen as a direct response to Amazon’s Whole Foods/Prime Now move. Unlike with Prime Now, however, the Walmart model doesn’t involve a subscription, and the minimum order is $30. Curbside pickup is free, while delivery costs an additional flat fee of $9.95, and prices are the same as in Walmart stores (unlike other retailers which raise prices of online orders). These moves also show how Walmart is attempting to leverage its price advantage vis-a-vis potential rivals.
Walmart has been pursuing other delivery avenues and channels, partnering with Uber and Deliv to trial grocery deliveries in trial areas, and the company plans on expanding grocery delivery in 2018, relying on other crowdsourced delivery services.
In the race to the consumer, particularly the consumer’s kitchen, Walmart has identified home meal kits as a channel that can be further leveraged. Already the likes of Blue Apron have seen success in this market, and Walmart will be looking for a piece of the action. It also ties in with a shift in strategy from grocery pickup to grocery delivery.
Another way Walmart is fighting Amazon in the 1-2 hour deliveries space is through its membership warehouse club, Sam’s Club. Through a partnership with Instacart, consumers will be able to order groceries and other household goods for same-day delivery, and the service is expected to reach millions of consumers in the US this year.
Tom Ward, VP Digital Operations for Walmart US, stated that “90% of Americans live within 10 miles of a Walmart store, and we serve more than 150 million customers a week, which gives us a unique opportunity to make every day a little easier for busy families.” This means that Walmart is taking the race to deliver groceries to the consumer very seriously.
Target meanwhile, not wanting to be left behind, has acquired Alabama-based same-day delivery service Shipt for $550 million enabling same-day delivery from Target stores, and is expected to be available in most Target stores by year-end.
Target customers pay an annual $99 for unlimited deliveries. Orders over $35 are free as part of that subscription, while smaller orders cost $7.
At Market Beyond, we pride ourselves on being future-focused and leveraging our proprietary technology and data to provide value. That’s how we are able to give companies incredible macro- and micro insights that are actionable and real-time, enabling them to make smart moves across categories or at product-level.
We see this battle between the top retailers hotting up even further, as brands maneuver to adapt to changing technology-driven lifestyles, stay relevant, grab share of market and share of mind, and fight for space in the smart home of the future.