Online Grocery Shopping is Exploding

The way consumers purchase goods and services is changing and the organic produce industry, like all others, must adapt or risk being left behind. That was the overwhelming message from three e-commerce leaders speaking to a packed educational session “E-Grocery and the Future of Organic Fresh Produce at Retail”, at the Organic Produce Summit last month in Monterey.

“I can’t over emphasize how much our industry is changing. The way our customer interacts with our industry is changing and we’ve got to get in front of it,” said Tony Stallone, vice president of merchandising for Peapod, the largest online grocery delivery store in the United States. Dan Bourgault, head of brand partnerships for same day grocery delivery service, Instacart, and Don Barnett, COO for Sun Basket, a subscription-based meal delivery service that ships organic and sustainable ingredients and recipes to its members every month, joined the panel for a lively discussion of consumer online purchasing trends.

Panelists from L to R: Kevin Coupe from Morning News Beat, Tony Stallone, vice president of merchandising for Peapod, Dan Bourgault, head of brand partnerships at Peapod, and Don Barnett, COO for Sun Basket.

All three see the consumer buying landscape changing quickly, accelerated by Amazon buying Whole Foods with plans to eventually move into the online grocery business.  Instacart has an already established relationship with Whole Foods and stands to lose a big client, but despite that Bourgault says the Amazon incursion has actually been good for their business because it pushed many other retailers into the online game.

“In the year after it happened, we initially thought we would add 70 markets which would put us just under 100. We had to change that outlook after Amazon acquired Whole Foods, “Bourgault said.  “We ended up being in 207 markets at the end of the year.”

While there is tremendous growth potential, Bourgault thinks the Amazon disruption is far from over, and he cautions those who dismiss Amazon because they are new to the grocery business. “If you are in competition with Amazon, know that they are trying hard to figure it out and they are really good at figuring things out. If you think they are not going to be able to figure it out, you are wrong. They will and they will become a big competitor," he said.

Sun Basket’s Barnett sees other factors fueling the online trend as well, and its good news for the organic sector.  Consumers, he says, want healthy options but they also want convenience.

“Our company’s mantra is to make healthy eating easy, personalized and delicious and the healthy part leads with organics,” he said.

Initially many in the industry predicted consumers would not buy fresh produce without being able to see it, touch it and smell it, but as it turns out, produce is one of the biggest drivers of online grocery sales.   Ninety-five percent of all Instacart orders include produce. “Our top two categories are fresh fruit followed by fresh vegetables,” says Bourgault. “There are huge opportunities in the produce space.”   And if the messaging is on point, consumers will understand the value of organics.

With a population that is increasingly urban and a younger generation that is comfortable and capable with technology, the online grocery business is expecting continued growth, and these three industry leaders believe growers, producers and retailers must embrace and understand the click and buy mentality.

“The top three rows on Instacart generate 89 percent of items added to basket,” Bourgault says, “you have to be in the top three rows.” Sun Basket relies on reams of data to pinpoint exactly what their customers want in a meal kit. “We are a product company and we tailor to our customers’ needs,” Barnett said.  Maintaining the supply chain is key to all online business and it represents significant challenges going forward. With meal kits changing frequently, suppliers have to able to adapt.

Kevin Coupe, Morning News beat leading the E-commerce discussion at OPS 2018.

Bourgault added “There is nothing worse than an item being out of stock online. We call it ‘opportunity costs’ - the money not made because customers couldn’t put their preferred item in their cart. 

Despite the challenges there is no denying the growth of online and where it’s going. Stallone is direct with his assessment “If you didn’t see the freight train coming, I’ve got news for you, it’s here.”