Are online groceries a viable business? Lessons from the past show us it’s all about timing

Jess Kaur
Are online groceries a viable business? Lessons from the past show us it’s all about timing

Let’s bust some myths, shall we?

The year was 1996 when Louis Borders came up with the idea to launch an online grocery store, and he decided to name it Webvan. It finally became operational in 1998, but within three years, the company went bankrupt.

Webvan had an ambitious vision – to be an end-to-end solution for the grocery supply chain by building its own fulfillment warehouses and provide customers an unparalleled online grocery shopping experience. But unfortunately, it was the time of the dot-com bubble, and the business world was trying to explore and harness the scope of the internet. In effect, investors wanted Webvan to grow quickly, and that push for rapid growth eventually became the prime reason that brought the company down.

What happened after that? Did entrepreneurs stop launching online grocery businesses? Or did consumers stop shopping grocery online?

No. In fact, grocers have been continuously going online ever since, and succeeding as well.

So, what exactly went wrong with Webvan?

If we look at the big picture, the answer is as simple as it gets: It just wasn’t the right time for such a business. It’s not always about the right product or the right plan, how you time it is also crucial. Let us elaborate that for you.

Also read: Grocery shopping is back-breaking for old people, this Singapore startup aims to tackle that

How Time Makes the Difference

Amazon came into existence in 1994, and ever since, it has timed everything right (or fixed its mistakes in time to minimize the damage).

Amazon launched Amazon Fresh in 2007 (more than a decade after its inception) and then Amazon Pantry in 2014 for online grocery shopping & delivery.

Amazon had enough resources to launch a grocery shopping wing any time it wanted. But Amazon didn’t hurry up, it took its time, it analyzed the market, prepared a roadmap, and timed everything well. Over these years, it has experimented frequently with the pricing & supply of the goods to identify the ideal way to deliver satisfaction to customers, and to stay profitable at the same time.

Besides, if online grocery were a dicey business, many of today’s successful online grocery businesses had known it and would have never started. But they did, and they are doing pretty well and running online grocery selling business profitably.

Before moving ahead, let’s look at some stats that further dispel the belief that online grocery stores can’t be profitable.

Online Grocery Sector: Growth Prospect (Stats)

  • By 2025, 20% online grocery sales will happen online and the estimated online grocery shopping spend will be $100 billion (CNBC)
  • According to FMI, by 2022 consumers should be spending $100 billion dollars a year on online grocery.
  • In the US alone, online grocery shopping spend will double in next four years from $14.2 B in 2017 to $29.7 in 2021 (Statista)

Now that we have pretty much busted the myth around the potential of online grocery selling, let’s cover some growth-oriented practices that can ensure businesses success in this tough sector by enhancing customer experience.

Online Grocery Sector – Growth Tactics

1. Efficient Delivery

You must have a clear path of how your delivery model will be. Remember, it’s not only about being unique, but also about being efficient to keep the promise you make to your customers.

Bricks and clicks retailers like Shop & Shop have a distinct advantage over pure plays as they have a retail footprint to use as a collection point/pickup and keep shipping costs and prices competitive. Collection points remove the hassles of providing last-mile delivery, and are becoming a trending delivery model with time, especially in the online grocery sector.

Also read: Taking your offline grocery business online? Here are 5 critical factors to consider

2. Shopping Lists

Shopping lists are even more important online, as consumers often shop from archived lists, especially because they can be easily saved & retrieved in the virtual environment. So, why make customers to start the same order from the scratch every time, when you can allow them to proceed with just a couple of clicks.

3. Meal-kits

Online grocery sellers can easily tap into a new vertical of meal-kits (sets of ingredients for particular type of meals). Blue Apron, Hello-Chef, there are plenty of successful businesses operating in the sector that proves its future potential. Besides, offering something additional such as meal-kits will also entice consumers to shop more from you.

4. Supermarket Experience

The concept of supermarkets for grocery shopping has been a hit since the beginning. Online grocers should try to provide a similar shopping experience to customers. For instance, putting fresh products in one category and frozen in another; cross-selling products on the Cart & Checkout page, etc.

Conclusion

From above discussion, it is clear that online grocery shopping is not only going to stay, but also promises a great future for entrepreneurs. But to seize these future opportunities in online grocery sector, entrepreneurs must build their business with latest tech & findings.

For instance, millennials are going to dictate the path of consumer behavior; therefore, should be a prime focus of a business. Also, future potential lies in the area of last mile delivery; plus, big data & analytics will play a big role in providing customers a personalized experience.

Only through these considerations & their implantations can entrepreneurs ensure that online grocery selling business not only succeeds but also grow leaps & bounds in this potentially viable sector.

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