Last Updated: December 18, 2020
Online grocery shopping is catching up with consumers rapidly. According to Orian Research, the global online grocery market would grow with a CAGR of 23.7 % in the period of 2020- 2025. One more research suggests that the grocery ecommerce business will be expected to reach $250 Billion within the next five years.
The top retailers of grocery eCommerce industry are not only popular among customers but many aspiring entrepreneurs or business owners study their order to cash process or frameworks before starting their own grocery ordering and delivery business. Some of the leading grocery brands are:
Peapod, Fresh Direct, Shipt, Instacart, Fresh City Farms, Grocery Market, Loblaws,Inabuggy, Grocery, Spud, Thrice Market, Boxed, Grocery Market, Food Land, Cornershop, El Grocer, Good Eggs, Carrefour, SafeWay, Farm Drop, Talabat, The Fruit Box, Arabind, Rappi, La Ruche qui dit Oui!, Aussie Health Products, The Veggie Box by Victoria Whitelaw, Domicilious, Far, Box, Organic Delivery Company, Aussie Health Products, Mercadoni, etc.
To get successful in starting and operating an online grocery business, you need to focus on the following factors:
Out of all these factors, entrepreneurs or business owners often waste so much time and resources in choosing the right grocery business model.
To help you out with it, we explained the three major business models in the grocery industry.
Online Grocery Store Business Model:
A business owner starts his online grocery store (website/app) and delivers groceries to customers in a specific city or region. Either, he has inventory stored in a warehouse or running an offline grocery store. In this business model, there are mainly two players- 1. Business Owner (who is also the admin & seller of the store) and 2. Customers.
Hybrid Grocery Business Model:
It is a combination of inventory and marketplace grocery business model. One of the best examples of this business model is Peapod. Contact Us to know more about it.
Online Grocery Marketplace Business Model:
A business owner starts an online grocery marketplace by tieing up with local grocery producers/retailers who will sell their grocery products on the marketplace. Key players in this business model are-: 1. Business Owner, 2. Sellers, 3. Buyers, 4. Delivery Staff.
Specifically, in this post- we will be discussing the vital aspects of the marketplace business model.
Commission on Each Transaction: Admin can charge a commission on every transaction from the seller.
Vendor Subscription: A vendor has to pay a fixed amount of money to admin in order to list, access, and sell on grocery marketplace. A vendor can choose the required subscription plan from a number of available options and can also upgrade or downgrade the plan according to his/her requirements.
Commission on Delivery: On every transaction, admin can charge a fixed delivery fee from both buyer and delivery boy.
Secondary Revenue Streams:
It is essential that your grocery marketplace website is quick to load, easy to use, mobile-friendly, and has the following unique features:
These days, it is a common practice among businesses to send discount coupons to make the most out of seasonal sales. So your website must have the feature to receive & process these discount coupons.
If customers can’t find what they are looking for by browsing product categories, they should be able to search for it. To enhance customer experience, the search tool should have the auto-suggest feature & should be error-tolerant to minor spelling mistakes.
Social Commerce Features
Features such as sharing products on social media, social signup, or selling directly on Facebook, would also help your business get good exposure.
Make sure that your marketplace website has all keys features to get easily crawled by search engine bots and to rank better.
It is certain that most customers will buy from you on mobile. So make sure to enhance your store’s on-the-go purchase experience, whether you make the website responsive, build a separate mobile website, or an app.
As mentioned earlier, the unique challenges this business model presents are due to the nature of grocery products, which are either perishable or intended for immediate consumption. Let’s discuss the major ones in detail:
Regular online stores can afford to tackle instances like delays in delivery, wrong item delivery, returns, etc. But for online grocery stores, it will be a pretty much ‘do or die’ situation. Therefore, the entire supply chain – from farms/manufacturers to storehouse & then to the customers – needs to be very robust & time-efficient.
Additionally, since perishable food products need to be stored & delivered in refrigerated chambers, storage infrastructure would add up the business operations cost marginally.
There are certain steps you need to take to combat these challenges. Some of which are:
Today, people shop online not just for convenience but also because they expect to get better prices. Online grocers face the same challenge of offering competitive pricing. But with too much money spent on building & maintaining the storage infrastructure & efficient supply chain, keeping satisfactory profit margins might become difficult.
Other than that, when it comes to vegetables & fruits, most customers prefer to buy only after physically checking them for their freshness & quality. When shopping online, such an option is not possible. So, to persuade customers to buy groceries online remains a persistent challenge.
There are a bunch of steps you can take to address these problems:
Online grocery marketplaces that don’t have physical stores can launch their offline chains to benefit from the blended online-offline grocery shopping concept.
We analyzed the current state of the online grocery supermarket business across various countries and provide historical background to identify key grocery industry trends.
To gain insight into the current and future state of the online grocery business in the US, we scrutinized both incumbent companies and innovative newcomers.
According to eMarketer, a subscription-based market research company, the US grocery eCommerce is the fastest-growing product category online.
The online grocery delivery industry in the US is currently lying around $20-$25 billion. By 2021, this number will reach $38.16 billion.
To lure the young, affluent, and urban US households, you have to work on 3 major things:
Online grocery shopping in the United Kingdom is the fastest-growing purchase channel. According to Statista, the UK will become the second-largest grocery market after China in 2020. No doubt, when we talk about edible grocery sales, the online grocery supermarket business in the UK has changed a lot because of Asda, Ocado, and Tesco. But yes, there is a huge scope of new online grocery websites in the country.
Attentive service and friendly interaction play a major role throughout the entire eCommerce grocery experience. Also,
In the emerging eCommerce horizon, Canadians want their groceries to be delivered directly to their homes. Currently, they are spending around $6.4 billion per year on online grocery shopping.
By analyzing the Canadian shopper journey and working aggressively at every step of their purchase journey is the key step in winning them over.
Grocery consumption is the basic human need, and people are increasingly relying on online shopping. So, the online grocery business idea fits perfectly in the current dynamics, despite the above-mentioned challenges.
The important thing for entrepreneurs planning to enter this sector is to be aware of these challenges & know how to go about them by leveraging the right technology, trends & tactics. And that’s where this post serves as a valuable resource.
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