[Guest Blog] The Rise of Online Marketplaces in Digital Grocery

Written by Adrien Nussenbaum

Grocery retailing is being profoundly transformed. It’s predicted that within a decade grocery shopping as we remember it will be unrecognizable. Amazon’s acquisition of Whole Foods in 2017 marked a milestone in the evolution of the grocery store, bringing an eCommerce first, technology-driven approach to a sector noted for its digital latency. The Food Marketing Institute and Nielson together estimate that 70 percent of consumers will buy at least some groceries online in the next five to seven years. In fact, online grocery sales are predicted to reach $100 billion by 2022 in North America alone.

And already over half of the world’s food retailers have begun to prepare to sell their goods online. From AmazonGo to Instacart, HelloFresh to Peapod, we’re seeing a surge in on-demand, digital-first services designed to make food shopping more convenient for consumers.

Like a snowball down a mountain, the shift from offline to online in the grocery sector is gaining momentum at a rapid rate. The adoption of online grocery shopping varies greatly, even across digitally mature markets such as the US, UK and France. Currently online represents only 3% of all grocery sales in the US, whereas it accounts for 9% in the UK, about 5.5% in France and is approaching 20% in South Korea.

In fact, online grocery sales comprise just 2.9% of total global grocery retail sales in 2017 – and while Forrester estimate 57% of global consumers shopped online in 2017, only 12% bought groceries online. There is a huge opportunity to capture market share. Both online and offline retailers are locked in a battle to capture the loyalty of these high frequency shoppers and establish themselves as the go-to grocery destination.

So how are some of the most innovative grocers embracing this digital-first approach? In this post Mirakl looks at some of the major strategies building the online grocery sector of the future.

Cultivating Collaborations

It’s an industry moving at pace. The success of pure play grocer Ocado in the UK did well to silence critics over whether the model could be profitable, its largest warehouse ships 2 million items a day, with more fresh and organic offerings than the largest U.K. brick-and-mortar grocers. The industry is currently experiencing a surge of collaborations following the success of the Sainsbury’s Argos merger, last week it was reported that budget grocer Iceland had struck a deal with homeware retailer The Range to stock their products in-store, recognizing a synergy in their target audience and need for an expanded range.

Likewise Walmart has made strides to reach new customers in Japan and China through their collaborations with JD.com and Rakuten. Early in the fall, there was the news that Tesco and Carrefour have struck an alliance to increase their purchasing power of own brand products and goods not for resale.

Marketplace Mindset

Collaborations are just one of the routes to success that retailers are embracing, many are enhancing their platform infrastructure and re-defining their product strategy. If we look at the Chinese market, they have highly evolved marketplace adoption. Using this model they are able to grow their online grocery business through a larger product assortment of items many grocers don’t have in-store. Resulting in increased market share.

Likewise, if we turn to South Korea, one of the most digitally mature e-grocery markets in the world, superchain E-Mart sought to eradicate customer pain points and entice new shoppers to their stores, at the same time ensuring their offering was seamlessly omnichannel. To achieve these ends E-Mart built a marketplace platform encompassing its many grocery formats.

In North America, Alberstons, who currently operate grocery stores in 35 states under 20 banners, including Safeway, Jewel-Osco, Shaw’s and Vons, have launched their own grocery marketplace to take their assortment to the next level. Their online marketplace creates an endless shopping aisle that offers customers access a wide assortment of hard-to-find products from the most experienced sellers and allows shoppers to quickly discover new items and trends that suit their tastes and lifestyles. These purchases are made directly from manufacturers and shipped to the customer.

“Our digital team is focused on removing the limits on how people shop for food. Today, people are trying to squeeze the best out of each day in their busy lives. While some customers want an extended selection or unique specialty products, there are other customers who simply prefer to have bulky items like pet food shipped straight to their front doors,” explained Jon Fahrner, Head of Marketplace for Albertsons.

Their best-in-class marketplace will deliver an easy digital onboarding experience for third-party sellers and a new platform giving fast access to the grocer’s large customer base.

Benefits it provides include:

Product visibility and national exposure on a large digital platform for invited and carefully selected marketplace vendors
Proprietary data that will help Albertsons evaluate what products to stock in stores while also giving vendors insights into what regions to consider for building distribution

It’s clear Albertsons are re-shaping their growth strategy focused on better serving their customers at a time when the grocery industry is under the spotlight.

Earlier this year, French retail giant Monoprix announced a new collaboration to enable customers to purchase Monoprix products via Amazon Now. Whilst the Monoprix website already offers a range of services including home delivery and a click and collect offering enabling shoppers to pre-order items online before picking them up at a nearby store – this latest move increases their footprint, opening up new opportunities to grow the business.

At the annual Mirakl Marketplace and Platform Summit event, Regis Schultz, President of Monoprix explained “Monoprix want to offer the same amazing experience customers expect offline, and find a way to translate this online. Currently, Monoprix stores are located in towns, but our marketplace opens up a wider audience in a scalable way. In the coming years, we expect marketplace to make up 10-20% of total revenue.”

It’s a period of flux. Grocers know they can’t afford to sit still with Amazon and other giants quite literally poised to eat their lunch. What’s clear is that whatever strategy they adopt, it must enable expanded product choice, connect across physical and digital stores, meet consumer demand for convenience and be highly scalable. Mirakl believe the future of grocery industry is intrinsically linked to the rise of the platform model – only time will tell.

To discover how a marketplace platform can help you stay ahead, get in touch with Mirakl, providers of platform software solutions, here.

Adrien Nussenbaum co-founded SAS Mirakl in 2011 and serves as its US CEO. He has over 15 years of experience in business development and entrepreneurship with a strong emphasis on technology and retail.

Prior to MIRAKL, Mr. Nussenbaum served as a Co-Head of FNAC.COM’s Marketplace Business Unit, focused on developing the seller program and content syndication deals to increase the product offering. He co-founded the marketplace SplitGames, growing the business successfully and leading to its acquisition by FNAC in 2008. Previously, Mr. Nussenbaum served as a Manager of Deloitte’s restructuring team where he advised many retailers in their turnaround process. www.mirakl.com

Filed under: Platform Innovation | Topics: online grocery market