Food and beverage ecommerce has changed drastically since Amazon bought Whole Foods in 2017 — but what’s next? In the first of a multipart video series, L.E.K.’s Rob Wilson, Managing Director, explains changes in ecommerce, four key ecommerce channels to consider and why having a strategy is essential in planning for a post-pandemic world.
More on ecommerce:
Covid-19 Impact on the Foodservice Industry Part 1 – The Great Channel Divergence
Digital Grocery Lessons from Amazon’s Acquisition of Whole Foods
Consumer Health Claims 3.0: The Next Generation of Mindful Food Consumption
Read a transcript of the video below:
Prior to the COVID-19 humanitarian crisis, ecommerce penetration was about 3 to 4 percent of total food and bev sales. Post COVID-19, it's now become a very meaningful part of food and bev for most manufacturers and is an increasingly important channel to invest resources in in order to succeed.
The first watershed moment was Amazon purchasing Whole Foods back in 2016. And that resulted in step change focus on ecommerce. And now this terrible humanitarian crisis has really provided us a second step change growth in penetration for buying groceries online and we expect a lot of this strong growth to continue in the years ahead.
There's four primary channels in ecommerce for brands to consider. The first one is Amazon. You need to develop an Amazon strategy and figure out how it's going to be a successful partnership on both sides. The second one is concierge service. The leader there being Instacart where a third party essentially takes your order and delivers the groceries direct to the consumer's doorstep. The third channel is click-and-collect curbside, where consumers go and take care of the last mile delivery costs on their own. And the fourth channel is direct-to-consumer. And the direct-to-consumer is a bolder choice by manufacturers to bypass retail channel and sell the consumers directly in their homes.
It requires a completely different set of capability and often in most direct-to-consumer companies I've worked with just have a different type of DNA, a different way of running than your traditional food and beverage manufacturers. The pace at which decisions are made within a direct-to-consumer business are much different than in a traditional food and bev, brick-and-mortar retail focused business. You have to be much nimbler and faster and quick in making decisions on a daily basis.
COVID-19 is a humanitarian crisis and our hearts go out to all of those impacted by it. It has changed everyday life as we know it. One of those changes has been where we buy groceries. And as we've seen, the amount of consumers buying groceries online has tripled in one year's time. It's gone from 13 million households to over 40 million households in under a year. Our habits have changed and food and bev manufacturers need to recognize this change and the time is now.
It's urgent, the speed at which this space is moving is very fast and it's time to develop a strategy to capture this growth within the fast growing ecommerce channel.