Despite the origins in the late 1990s by Tesco, despite Ocado, despite Peapod, despite Amazon’s acquisition of Whole Foods, despite Walmart’s investments, despite the French drives pioneered by Chronodrive (Auchan) online grocery has still not been solved. So where is online grocery going?
Grocery stores are more and more seeing a transformation towards becoming hybrids for pick up/delivery and shopping and often foodservice too. Especially players such as Freshippo or JD.com' stores in Asia have been at the forefront of this development, but this is not really groundbreakingly new for the West either. In the US all the major grocers are rolling out click & collect (Whole Foods, Walmart, Target, Kroger etc). In the EU - with the major exception of France - this is not a huge story though, with most dedicated drive stations having shut down again.
There is much activity such as selling via social media (especially in Asia, China, perhaps health & beauty lends itself best to this in conjunction with influencers), subscription models, and D2C models with many FMCGs buying digital businesses (Unilever, Dollar shave club, Graze, Mars and Foodspring, Nestle and tails.com). However, most of this remains quite a small scale in the greater scheme of things.
What seems more promising is a new breed of tech players trying to crack online grocery. On the one hand, there are new warehousing services providers such as Takeoff or Alert/Alphabot with their micro fulfilment centres. Looking ahead, we see a battle looming between micro fulfilment centres and the Ocado solution, with the new breed of startups going for the weak spots of the Ocado robot operated sheds model, which are set up costs, set up time, high space requirements and inability to serve rapid/ rushed deliveries. In a way, this battle follows on from the one raging between home delivery and click and collect, with equilibrium coming only after a couple of years and the market finding a mixed solution. For now, grocers have Instacart and the various clones as a bridging solution.
In the publisher's view, a better solution than Ocado’s Hive are Amazon’s robotics solutions. They think Ocado stores too much air in their pods (due to standardised sizes of the bins), and that the sheds are too big and too expensive. Moreover should market demand change it is not easy to see how these sheds could be used for something different.
The other challenge in online grocery comes from online grocery startups such as Picnic, focussing on new customer journeys (app only) and new logistics models and the new model they pioneer - by radically reducing delivery time/window choice and operating a milk round principle based on AI and machine learning. While reducing delivery options these new startups offer free deliveries and great reliability of actually delivering at the time when they promised.
The concept of reducing choice is also explored by new startups in the D2C space, which tries to reduce range choice by focusing on health & beauty, CBD products, sustainability and other niches. Again, this approach currently employed by Move and Hungryroot is very difficult to execute and scale and - as the historic record suggests - often doomed to failure (see Brandless).
Another reading of the evolution of online grocery suggests that we have entered a new phase. As the major players have moved from in-store picking to dark stores and robot operated warehouses, there has been a separation between well-capitalised grocers able to afford a multi and omnichannel transformation and those who were not. (The latter group have had the recourse to Instacart like operators or include the discounters which - though extremely well capitalised are still on the sidelines). This means two things: the big beasts have defended their turf reasonably well (with Amazon not nearly as dominant in food as in other categories and let’s see where Amazon is going to go in grocery).
Secondly, in many cases the days of the first generation pure plays look numbered with Leshop in Switzerland treading water, Peapod being shut down, FreshDirect struggling, some of the smaller scale German online players disappearing (Gourmondo, allyouneedfresh) and Ocado focusing on becoming a service provider - despite what M&S do.
What would fit into this thesis is that the online grocery space seems to be fragmenting into even smaller product category niches. Examples for a fragmenting in online grocery would be niche specialists only offering one product category such as coffee/tea (blue bottle) or the ancient MyMuesli and other D2C models for proteins/meal replacement such as Huel/Soylent.
Sizes & Growth
- Online grocery - Asian penetration highest
- South Korea with the highest market share in 2019, forecast
- Asia - overview, South Korea, China, Japan
- South Korea’s online grocery market, the macro perspective
- Focus shifts towards early morning delivery in South Korea’s online grocery market
- Lotte using AI robots, Market Kurley and Homeplus store fulfilment centre
- South Korea, Emart, Shinsegae PE investment, integrating platforms
- South Korea, Homeplus converts 140 stores to online DCs
- Homeplus - joining EMD, introducing European private label products to differentiate
- Homeplus online strategy, average basket size
New startups - Picnic, Miacar, Farmy
- New breed of tech startups tackling the sector
- Introduction - a new wave of tech players muscling in
- Netherlands/Germany - Picnic
- Picnic - the business model, milk round, mobile only
- Picnic, 2018 sales and outlook
- Picnic - intelligent targeting, attacking niches
- The Edeka relationship - bringing in Bringmeister
- Picnic’s new robot warehouse in Utrecht, tenth German catchment opened
- Miacar - the Swiss copycat, Migros link up
- Farmy - pivoting from local organic online coop to a Picnic style model
- Farmy - the stats
Micro fulfilment centres
- Micro fulfilment - the second wave of new tech companies muscling in
- Integrating robotics and AI, avoiding the drawbacks of the Ocado solution
- Takeoff - announcing Version 2.0
- Takeoff - being hyperlocal
- The partnership with Knapp
- Ahold and Takeoff partnership, turning away from the Peapod model
- Ahold - closing down Peapod Midwest
- The end of Peapod pureplay
- Loblaw and Sobeys going head to head with Takeoff and Ocado respectively
- Alert Innovation - the exclusive Walmart solution
- How the tech fits into the Walmart business
- Walmart’s online state of play, end of 2019 - stats
- Fabric - New York City micro fulfilment centres
- Fabric - infrastructure could be shared
Robot picking and warehousing
- Inbound logistics/order picking
- Automation in DCs - general benefits and Amazon stats
- Robots - the AI transformation of backend and logistics
- Amazon - online grocery on the backend, Fresh operation bottlenecks
- Amazon - a solution to high wastage?
The Ocado solution
- Ocado - the MHE solution
- Ocado - productivity and fulfilment benefits, highly modular and flexible design
- Ocado - embracing automation from the beginning
- Ocado - the Monoprix deal
- Ocado - list of benefits of the hive solution
- Ocado - AI, the Hive, hub and spoke logistics
- The Ocado smart platform, autonomous warehouse management
- Ocado - one-hour delivery service
- Ocado - mini customer fulfilment centre, switch from Waitrose to M&S
- Ocado's 2019 earnings fall on fire impact
- Ocado Andover - all the drawbacks
- Has Kroger made the right bet? - the drawbacks of Ocado
New niche players - Move, Brandless, Hungryroot
- Move - US niche operator to launch in 2020
- Move - member-only stores
- Brandless - abandoning single price point and food
- Brandless - going into stores, betting on CBD
- Launching a marketplace, trying to lead on CBD…and going bust
- Hungryroot - NY based personalised subscription, adding brands
- Hungryroot - vegan, health & wellness, launching into stores
France - le drive
- France - drives stats, drive baskets higher than home delivery
- E.Leclerc - the French champion
- E.Leclerc with half the market, stats
- Drive stats, sales, market shares, outlets
- Drive stats, openings, SKUs
- Outlook - quo vadis online grocery?
Graphs and tables
- Online grocery growth rates per country, online vs offline
- Online penetration levels per country, market shares and forecast
- Picnic, 2018 sales and outlook
- Farmy - the stats, sales growth, SKU range
- France, sales via drives and home delivery, household penetration, average basket sizes
- France - number of outlets, structural overview
- France - Drive sector sales, sales per operator, market shares, number of outlets
- France - new openings, SKU ranges per drive operator
- The design of the electronic scooters used by Picnic
- blue bottle
- Chronodrive (Auchan)
- Dollar shave club
- Marks & Spencer
- Whole Foods
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