No one—not even the world's top three retailers—has fully mastered the art of selling groceries online
through supermarket aisles. Profits are meagre, convenience is king, discounters are rife. Even Amazon, Walmart and Alibaba, the world’s three biggest retailers, are trembling. No one has fully mastered the art of selling groceries online. The business represents just 2.3%, or $160bn, of a worldwide grocery market of $7trn. As that share rises, as it will surely continue to, it could be life or death for some in the industry.
Grocery is a sadomasochistic business. Sellers can count on stable revenues but have little margin for error on sourcing, price and waste. Shoppers suffer from a retail version of Stockholm syndrome. They are lured by grocers with the promise of savings, only to be fleeced. Shops make them do the work of picking the produce and bagging it. They set traps in the aisles—in the form of strategically placed celebrity magazines or freshly baked doughnuts—to slow shoppers down.
Earlier this year Mr Steiner persuaded Marks & Spencer, a British retailer, to pay £750m for a half of Ocado’s domestic online-grocery business. The money is helping develop his firm’s newer, more lucrative international venture, which licenses the know-how to build modular high-tech warehouses that can be scaled up as needed. The biggest deal, struck in 2018, has been with Kroger.
In 2017 Amazon sent shivers down American grocers’ spines by buying Whole Foods. On November 11th it confirmed that it was opening its first grocery store in California that is not part of that upscale chain. Last month it launched free delivery of Amazon Fresh, a grocery service, to its Prime members. So far its bark has been worse than its bite. By one estimate only 6% of its sales are perishables, compared with 65% at a traditional grocer.
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