Amazon gained notoriety when it began field-testing online grocery delivery in 2007 in downtown Seattle. Amazon freshĮven Amazon Fresh, which leads the U.S. And it seems people generally prefer to squeeze their avocados before purchasing them. The products are also bulky and hard to stack, driving up transportation and handling costs. The margins are thin, the product is highly perishable and the supply chain is expensive and complex.
There are many reasons why online grocery delivery has not taken hold and become profitable. markets, but that is before factoring in considerable marketing and IT costs. In the U.S., Instacart claims to have a positive gross margin in 10 of its 19 U.S. Some are turning a profit, of course - Ocado, a pure online UK grocer, had 2016 pretax profit of just over 1%. Estimates in the UK are that each delivery loses £3-5. Worse, it doesn’t seem like anyone is making any money. Developing markets seem to have the highest potential: a recent Nielsen survey showed that 37% of shoppers in Asia Pacific claimed to have ordered online groceries, compared to 13% in Europe. Online grocery spending accounts for about 6-7% of the UK grocery market, 5% in France and the U.S., and is less than 2% everywhere else. The service is more popular in Europe than in the U.S., but still has not taken hold.
Online grocery landscapeīut looking at the market today, it does not seem as though online delivery has disrupted the grocery retailing model very much at all. The innovation is exciting and is developing quickly. They can now order online, through mobile apps or by QR scan, and receive their goods through store pickup, drive-through, home delivery, locker drop-off or even have them placed in the trunk of a car. Retailers are experimenting with different ways to meet growing consumer expectation to interact with products in different ways. The omni-channel supply chain is in our headlines and on our lips.
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