CREDIT: AP Photo – David Goldman, File
Consumers are increasingly buying everything online, from discounted TVs to dog food by the case. But buying groceries online, especially fresh produce, hasn’t caught on as quickly. Big retailers and tech companies such as Google and Amazon are hoping to break open that market with same-day grocery delivery for a small fee. But their efforts to expand online grocery shopping could inadvertently cripple the booming “eat local” movement.
Online grocery shopping has blossomed, raking in roughly $15 billion a year — about 3 percent of brick and mortar supermarkets’ nearly $600 billion sales, according to a Brick Meets Click report. The industry is expected to grow 13 percent a year, making up 11 percent of all grocery sales in the next decade, Bloomberg reported.
“They are trying to hook customers up to brands for their grocery shop and hope they will spend on non-food which is lower headache and higher margin, which will drive profitability,” eNova Partnership retail consultant Sophie Albizua told Reuters. “It is notoriously difficult to make money selling groceries online. The reason why people do it and need to do it have nothing to do with profit and nothing to do with groceries.”
Tech companies along with European and U.S. retailers are steadily expanding their reach into online grocery shopping. Google just invested $500 million into its own online grocery service, Google Shopping Express, which has partnered with stores such as Target, Costco, Whole Foods, L’Occitane en Provence and Toys R Us to deliver goods, Recode reported. In a blog post announcing the service’s expansion, Google says it plans to add “more national and local merchants.”
Last year, Amazon’s AmazonFresh expanded beyond the company’s hometown Seattle to California and expected to reach more cities this year. Besides some partnerships with local specialty stores that sell fresh fish or pasta, the bulk of AmazonFresh’s sales come from produce which are shipped from Amazon.com’s warehouse — not local farmers or grocers.
Amazon has played a major role in shuttering bookstores and electronic store such as Best Buy thanks to dirt cheap prices and fast service. The burgeoning online grocery store could have the same effect on the locally grown food market, in part because the two industries share the same customers.
Farmers’ markets, independent shop owners and online retailers all cater to consumers who tend to be educated, have lots of disposable income, and also have a predilection for technology. Overall, American millennials are far more likely to shop online than older consumers; 55 percent of millennials shop online daily for at least an hour, eMarketer found. Amazon customers tend to be wealthy (making more than $60,000 a year), well-educated, and childless. Young people and the wealthy are quickly turning to grocery shopping online, according to the International Business Times.
Locavores, who buy locally grown produce and locally caught or raised fish, meat, and poultry, also tend to be highly educated and make more than $50,000 annually. Low-income minorities also tend to frequent farmers’ markets, according to a 2012 study in the Journal for Community Health. Those communities have less access to the Internet and computers at home and could be negatively affected by a sharp shift to online grocery shopping.
Interest in eating local has grown exponentially in the last decade. Consumers are drawn to farmers’ markets and artisan goods because they believe it helps local economies and provides better or healthier foods. In 2008, the industry swelled to a nearly $5 billion a year business. About 6 percent of farmers participate in direct-to-consumer sales such as through farmers’ markets, according to a U.S. Department of Agriculture (USDA) report.
But even as local food producers become more popular, the convenience of online shopping could cancel out the appeal for many consumers. To survive, brick and mortar retailers of all sorts have to digitize their businesses if they want to keep customers happy. Tech companies’ dive into online groceries also aligns with shoppers’ desire to buy everything in one place rather than specialty stores. Retailers such as Walmart and Target have seen boost in grocery sales over traditional grocery destinations. According to a retail survey run in part by the University of Arizona, about 77 percent of shoppers said they bought groceries from a non-grocer, such as Walgreens, Target, Costco and dollar stores in 2013. Almost all of the respondents said they planned to get their groceries from somewhere other than a supermarket. That might spell bad news for the locavore movement.