Online grocery is growing 15% annually and is expected to top an estimated $12 billion in sales this year, but is this merely a drop in the bucket when compared to the $800 billion consumer packaged goods industry? Some argue that it's not and point to the growth of companies like Amazon, Safeway and Whole Foods, who are offering online grocery delivery. Proponents further point to meal kit delivery companies like Blue Apron, who is selling over 8 million meals a month to subscribers.
TABS Analytics' CEO Dr. Kurt Jetta begs to differ.
In a recent interview with CBS Sunday Morning, Dr. Jetta spoke with CBS News correspondent Anna Werner and provided his thoughts on online grocery and the issues it faces in gaining wider consumer acceptance.
Online grocery: Is it the right thing to do?
Dr. Jetta points out that many retailers are offering online grocery because their competitors are, creating a follow-the-herd mentality. The question then becomes: Should they be doing online grocery at all since brick-and-mortar grocery stores are far from dead?
The 3 key problems Dr. Jetta points out for online grocery are:
- Limited frame of reference: Consumers can only see a few products on computer screen at a time when ordering online and therefore have a harder time doing product selection and price comparisons. Consumers can make these same comparisons faster and easier when standing in front of a shelf.
- It's more expensive: Online shopping is 25% more expensive, on average. So, the time savings that many consumers feel they get from shopping for groceries online can be negated by the higher costs of shopping online in the first place.
- It's not a "personal" experience: Building on the first point, many consumers state that they need to see the prices and deals for products within a category, and among categories. In fact, 90% of consumers prefer to shop in a brick-and-mortar store compared to online.
Will the online grocery recipe last?
As Dr. Jetta points out, retailers are making less money by offering online grocery services, which are more expensive to operate. Further, online grocery doesn't really solve a problem that consumers have since brick-and-mortar grocery stores get the job done for the vast majority of consumers.
