As the markets and the news spin around contemplating the effects of Amazon.com’s purchase of Whole Foods, the Blue Apron IPO debacle, and Amazon’s intent on entering the meal kit market, the question that must be asked is, does anyone actually want their food delivered?
According a report in the WSJ by Heather Haddon and Julie Jargon, the answer for most is, no.
Concentrated in cities and surrounding suburbs, grocery delivery is still a small business, accounting for less than 2% of last year’s $715 billion in food-retail sales, according to food-services research and consulting firm Technomic Inc. Amazon already makes up more than half of online food orders through its Fresh, Prime and Prime Now services.
Seventy percent of respondents to a survey by supply-chain consulting company AlixPartners LLP last year said they had no intention of having groceries delivered. Grace Herrera, a 59-year-old caregiver in California, said she would rather spend time shopping than pay extra for delivery. “I have time to go to the store,” she said.
Margins also remain an issue. Razor-thin to begin with, they have dropped in recent years as falling food costs sparked a price war. And in the online world, the learning curve for how to sell fresh foods has created an added drain.
Ocado Group PLC, the biggest online grocer in the U.K. and one of the few public ones, posted its first full-year profit in its fiscal year ended in November 2014 and averages transaction sizes of $140 per order, compared with $32 for the typical brick-and-mortar supermarket, according to Barclays Capital Inc. But about 30% of Ocado’s fresh produce is wasted daily, a drag on margins and far worse than a traditional grocer’s average of 3%, the firm found. An Ocado spokeswoman dismissed the Barclays estimate, saying spoilage amounts to 0.7% of annual sales and that the company is an industry leader in reducing food waste.
Read more here.
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