E-commerce has grown more than 400% in the past decade. The reasons are obvious: Shopping in your underwear and getting a great price is better than driving to the store and ducking behind aisles to avoid acquaintances But there is still much more growth possible in e-commerce, and you might be surprised by the next market it will disrupt: groceries.
Back to the basics
Why do you shop online for products? Because (a) you don’t want to leave your house or (b) because you want a better price than can be found in stores. But in exchange for that convenience, we make a tradeoff. When we go to the store, we can put our hands on the products and take them home immediately.
As e-commerce has become a bigger piece of our economy, other shopping dynamics are coming into play. Retailers have gotten burned by what has been termed “showrooming” — scoping out merchandise in stores, but purchasing online (often from a rival, and sometimes while you are in the other company’s store). I’m guilty of it, too. But it was a logical step in the mobile data revolution, and it can be difficult for brick-and-mortar retailers to combat.
Obviously, an online retailer can offer discounted prices, since it doesn’t have to cover the overhead of a physical location (employees, rent, etc.). But compared with the instant gratification of a bricks-and-mortar store purchase, relatively slow shipping speeds have forced online shoppers to wait days or even weeks to receive what they buy. A few of the companies you know and love are ready to change all of that. This Wired article gives the details on how a few companies can deliver your orders faster.
Players in the Grocery Market
Forty years after supermarkets drove many mom-and-pop grocers out of the sector, and roughly 20 years after Whole Foods shook up the business by offering organic foods, the grocery industry is once again ripe for disruption.
Kroger, Safeway and Supervalu are huge players in the grocery market, but companies like Amazon.com, Inc. (NASDAQ:AMZN) are looking to change that. Amazon.com, Inc. (NASDAQ:AMZN)’s Prime service, which offers two-day delivery for subscribers on most items, gives the retailer a proving ground to fix its logistical kinks and roll out even quicker delivery.
Reducing/eliminating spoilage is key to being successful in the grocery business. Amazon.com, Inc. (NASDAQ:AMZN) has invested heavily in automation of warehouses with its purchase of Kiva Systems. This equipment flips a typical warehouse on its head by delivering product to stationary employees who pack and ship. That gets the product to you, the customer, quicker. In essence, Amazon.com, Inc. (NASDAQ:AMZN) is creating a robotic shopper.
Contrast that with Wal-Mart Stores, Inc. (NYSE:WMT) who is also looking to get into the local grocery delivery game. They already provide groceries for millions of Americans with their Supercenters. Its nationwide network of 158 distribution centers dwarfs the other competitors we’ll discuss. In pilot testing of the local grocery delivery concept, Wal-Mart Stores, Inc. (NYSE:WMT) has been filling orders with human pickers walking down the same aisles as other shoppers.
There is a better way to fulfill online orders, and Amazon.com, Inc. (NASDAQ:AMZN) may havefound it. Wal-Mart Stores, Inc. (NYSE:WMT) needs an automated backroom warehouse for local deliveries, coupled with the retail locations it is known for. . . at least until we all start to order online.
Google Inc (NASDAQ:GOOG) is another dangerous competitor. You think about Google Inc (NASDAQ:GOOG) doing search, ads, and now mobile operating systems, but not deliveries. Google Inc (NASDAQ:GOOG) pivots into new opportunities better than virtually every other company in the world. What was Google Inc (NASDAQ:GOOG) Product Search has become Google Shopping. It has integrated Groupon-like deals (remember the deal that fell apart?), but that is only the beginning.
Google Shopping Express is in what could be termed the alpha stage (it’s only rolling out to a few select customers in the Bay area). But it lets shoppers place items in a virtual shopping bag, then selecting what time on the same day they want those goods delivered directly to their doorstep.
The question now is not if the grocery industry will be disrupted, but when and by whom? All the companies we discussed seem to have a competitive advantage in the space. Keep a close eye on new developments in the sector, Fools. The company that can figure out how to merge Wal-Mart Stores, Inc. (NYSE:WMT)’s widespread distribution network, Amazon.com, Inc. (NASDAQ:AMZN)’s order fulfillment capabilities, and Google Inc (NASDAQ:GOOG)’s search integration abilities will dominate the grocery industry.
The article Delivering the Goods: How the Grocery Industry Is About to be Disrupted originally appeared on Fool.com and is written by Robbie Laney.
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