( Photo courtesy Craig Carlson )

As we look back on the one-year anniversary of the Amazon-Whole Foods merger, we reflect upon how the grocery industry was changed forever. 

Following the announcement of the merger, grocery chains’ stocks plunged and overnight the grocery industry was awakened to the online threat of Amazon! 

A stunned grocery industry immediately went about subcontracting home delivery to Instacart and other third-party vendors, as well as developing click-and-collect shopping options.

I believe history will show that this was one of the most significant events to affect the grocery industry in this decade.

Dialing forward to today, companies like Walmart have posted Q2 sales indicating the strongest growth in more that 10 years and Target reported its best sales in 13 years. 

The strong economy and the successful ability to manage the online marketplace are cited as the primary factors for this growth.

According to forecasts by Nielsen and the Food Marketing Institute, “by 2022 consumers could be spending $100 billion dollars per year on online grocery.” These reports also cite the fact that many retailers and manufacturers are not ready for the demands of online grocery.

What does the online marketplace ultimately mean for the produce industry? There are numerous challenges to selling produce online. 

One of the main challenges is that the impulse nature of an in-store experience is lost. It’s also difficult to communicate the quality of the product, as well as to meet customer quality expectations since the actual product might not match the picture online. Additionally, it’s difficult to package products for delivery that require different temperature specifications to prevent chill damage. 

What does the online marketplace ultimately mean for the produce industry? There are numerous challenges to selling produce online. 

For these reasons, I predict that fresh produce will lag in growth within this online marketplace. 

The best-in-class retailers and grower/shippers will use this as an opportunity to innovate and capitalize on this opportunity. According to Nielsen and FMI, the road map for digital success will be through people, processes and technology advancements. 

The first area will require the industry to develop people that understand this channel well. Strong processes must be developed in order to operate in the digital space. “Big data” technology must also be available so that these people can work effectively.

As part of this process, the produce industry will need to develop ways to overcome the challenges of selling produce online. If you look at what best-in-class online retailers have already done, it is possible. For example, retailers are already rating the quality of their online products daily, offering days of freshness guarantees, and telling the grower stories around locally grown, organic, sustainability and social responsibility.

There are online retailers where produce represents almost half of their sales — these retailers are ahead of the curve. It can be done, but it will take a different mindset and approach to overcome key obstacles and deliver a superior online produce program.

Craig Carlson is president and CEO of Carlson Produce Consulting LLC.

 
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