Online Food Sales Keep Growing Rapidly

Retailers must find their own last-mile solutions to serving customers.

November 19, 2019

CHICAGO—The rapid growth of online food sales will change the way food retailers do business in the future, according to Currently, 60% of millennial shoppers buy food online, said Sam Mayberry, president of Sam Mayberry Consulting.

Speaking at the Private Label Manufacturers Association's (PLMA) Seminar this week in Rosemont, Ill., Mayberry said that online grocery sales made up 7% of total grocery purchases in 2019 and are expected to jump to 10% next year, which means retailers need to have a “last mile” strategy in place.

Mayberry, formerly the head of product development of retail consumables for private label at Amazon, said that third-party delivery companies, new last-mile solutions and supply-chain processes are accelerating changes for retailers. The problem they face is the many different last-mile solutions out there (drones, autonomous vehicles, robots and more), as well as supply chain tactics, such as building ghost stores for online fulfillment.

To succeed in the future food retailing business, companies must consider three key areas: networking, differentiation and investment, he advised.

“Networking is who you align with,” Mayberry said, noting that retailers must build partnerships that work for their customers. Kroger, for example, has teamed with U.K. online grocer Ocado to build highly automated e-commerce fulfillment centers throughout the U.S., while Walmart has partnered with autonomous delivery vehicles, such as Udelv, Spark Delivery, Ford and others, to test self-driving delivery.

The second piece of the last-mile strategy is “differentiation” of private-label products, particularly as the share of private label continues to grow. He cited a Nielsen report that said premium products show the most growth potential over five tiers of pricing and total dollar share, adding that 53% of millennial shoppers pick a store based on that store’s product assortment and having the items they want.

The third ingredient to building out a last-mile strategy is investing in services that find the right balance of complexity and control over the overall customer experience. For Amazon, the investment is higher on the spectrum of controlling the customer experience, and the company recently purchased 20,000 Sprinter vans from Mercedes-Benz for its delivery partners. Another company may choose to partner with Instacart to manage that delivery experience.

Mayberry also noted the potential of using drones via UPS, Prime Air and Google’s Google Wing drone programs. Drones could relieve a serious crunch in package delivery, particularly in highly populated areas. In 2017, New York City alone managed the delivery of more than 400 million packages, and in 2018, 13 billion parcels shipped throughout the U.S., he said.

Autonomous cars or last-mile robots that roll along sidewalks and to a customer’s home are all options to be considered. Mayberry said 76% of shoppers want to buy from a local retailer online, with 55% of those same shoppers willing to pay more for same-day delivery. When it comes down to last-mile solution success, retailers need to find a mix of what works for their shoppers. “Customers are willing to pay,” he said.