KANSAS CITY — Considerable capital and resources are being invested in developing infrastructures and business models that will shift some aspects of grocery shopping from brick and mortar stores to digital ordering and delivery. So far, much of the investment has been on the technology side. Eventually, greater investment is going to have to be made in changing consumer behavior.
The investment is being put forth in an effort to capitalize on what is seen as inevitable — In the years ahead many consumers, if not most, will rely on digital technology to shop for foodstuffs. Ken Powell, chairman and chief executive officer of General Mills, Inc., noted during the company’s annual investors day in New York on July 8 that the company’s on-line business doubled in the last year and it expects it to do so in each of the next couple of years.
“We have been increasing our presence with on-line food outlets,” he said. “This channel also skews towards millennials so we are focusing on brands that appeal to that consumer demographic. Our success with Larabar on Amazon.com is a great example of this. As we leverage promotional tools and expanded our distribution, we doubled our sales on Amazon for Larabar in 2014. This channel now accounts for 7% of our total Larabar sales. We will continue to expand our on-line business across all of our product offerings as we strengthen our presence of virtual shelf sets and experiment with new digital promotional events.”
Earlier this month, The Kroger Co. invested $280 million to acquire Vitacost.com, Inc., an on-line retailer of healthy living products that include natural and organic foods. The retailer views the Vitacost business model as complementary to its Express Lane model, which is available at its Harris Teeter banner and is an on-line ordering and pick-up service.
In June, Wal-Mart Stores, Inc. described its “Drive” retailing concept that would allow consumers to order products on-line and then allow them to schedule a pick-up time at a Wal-Mart location.
“ … Basically what we are looking at testing is a customer will be able to go on-line and build their basket,” said Jeff Davis, executive vice-president and chief financial officer for Wal-Mart U.S. “In doing so, they can also select then the time that they will want to pick up their item. They would then drive to our Drive depot and upon arrival be able to receive their merchandise without getting out of their car. So once again, we look at this as an opportunity to allow customers to shop how they want to, when they want to.
“Within this depot, it will have access to about 10,000 items. Many of those items are driving the majority of the volume in a Neighborhood Market, so, as you can imagine, these are high-volume items and it is not only in grocery and fresh and dry, but it also would include anything in our over-the-counter market also.”
The consumer marketplace is littered with failed business models that relied too much on new technologies or unique ways of using those technologies, and not enough on resonating with consumers. When it comes to buying food, shoppers are exercising a form of control in the items they select. This is most apparent in the selection of fresh products that are the core of a grocery store’s perimeter.Food manufacturers and retailers must find a way to maintain that perception of control in the products that are ordered on-line and picked up or delivered. Otherwise, consumers may resist the conveniences the digital marketplace offers.