WE Communications Blog: PLUS
The news is littered with headlines lauding the “death of retail” and the sheer speed of the disruption and dislocation of companies we now keep at the center of our households. The grocery retail market has been ripe for disruption. With razor-thin margins, consolidation toward large multinationals, and the technology’s ability to drive choice up and prices down, supermarkets are feeling the pain.
Automation and swings in fragile agricultural sectors have traditionally been the main concern for grocery retail. Meanwhile global players like Amazon and Walmart grow in scale and sophistication, using data to figure out the best algorithm to sell you an avocado. But a new disruption is playing out that’s changing the business model in real time. It's happening in the space between the phone and the retail experience. There is a new player in the fight over what's in your pantry.
Think of the last time you went to the grocery store. What was it like? Did you even want to be there? What did you buy? The average store has 40,000+ SKUs that you probably had to schlep through on your way home from work. More than likely you bought the same things you always buy. There are solutions but all with downsides. Amazon’s online inventory is inconsistent. Meal kits leave a mountain of packaging. Kroger and Walmart have started their own delivery apps, but they aren't exactly brands worth the lock-in. Grocery shopping isn’t fun in real life and your digital life is now just as fragmented. In comes Instacart.
Instacart’s early value was convenience and novelty — deliver groceries to my door. It’s a smart service built on the back of the infrastructures of the major grocery players. Store-specific apps aren’t exactly the perfect options either. Healthy customer skepticism has revealed the artificial bias built into search and branded algorithms. Instacart allows you to pick the brands you love while shopping at the stores you want to support. Bonus: You don’t have to search for the bafflingly unintuitive location of cocktail olives.
Instacart is reshaping in real time the grocery retail segment, even in midst of Amazon’s dominance. Chains lik e Aldi and Kroger have inked deals with the delivery service in an effort to defend themselves from Amazon. What it’s created is a real-time shift, putting the power of choice into the customer’s hands. It’ll require grocery stores to straddle the line between warehouses while reinventing the customer experience.
YouGov reports that in 2016 online revenue accounted for $12 billion of the $630 billion food retail market. As the competition grows larger and the players consolidate into even larger players, the digital disruption in the grocery market could become a leading indicator for the potential fate of the rest of the retail sector. What happens when a defensive Amazon strategy like Instacart changes the segment while already in the midst of disruption? Is it prolonging the inevitable death of retail or forging a new path for success? Does anyone else find irony in a DiGiorno pizza delivered via Instacart?
Interested in learning more?
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