On Board with Online?
Momentum steadily building for digital deli shopping and delivery.
By Kathleen Furore
As the buzz around digital grocery and food service retailing continues to grow louder, it might seem that everyone who stands to benefit has already jumped on the online ordering and delivery bandwagon. Be assured, however, that
momentum is just beginning to build.
“Retailers and manufacturers shouldn’t be lulled into complacency about the opportunity this innovation holds,” concludes the new report, Online Food Shopping and Grocery Delivery in the U.S.: Future of Food Retailing, produced by Packaged Facts. Though online food shopping represents just 4 percent of food and beverage sales, the report projects double-digit annual growth rates for online grocery shopping over the next five years.
Similar predictions about the future of online grocery, deli and prepared foods shopping have recently been made by other industry specific research companies.
“Sales from the online grocery business are expected to jump more than 16.6 percent to $13.1 billion this year,” reports IBISWorld in their September 2015 Online Grocery Sales in the US market research. “Looking ahead, the next five years promise strong growth for the online grocery sales industry. Revenue is forecast to grow at an annualized rate of 13.2 percent to $24.4 billion in 2020,” the research concludes.
Whatever the exact number turns out to be, food businesses seeking a share of those billions must at least explore the opportunities online offers.
“The online grocery landscape is rapidly evolving, and now, more than ever, it is critical to understand the distinct business models that are emerging and expanding in the U.S. today,” says information from Digital Merchandising for Deli and Bakery, a special research report prepared for the International Dairy-Deli-Bakery Association (IDDBA) by Brick Meets Click, a company that helps retailers, suppliers, and technology service providers identify growth opportunities at the intersection of in-store and online grocery retailing.
“In the last five years we’ve seen an uptick in the number of chains offering online ordering with in-store pickup or delivery,” explains Alan Hiebert, senior education coordinator at IDDBA. “Since Amazon arrived on the scene, shoppers have increasingly demanded to interact with retailers in the easiest way possible. To the chagrin of some in the grocery industry, that often means keeping face-to-face contact to a minimum—though not eliminating it.”
Understanding the nuances of this online trend and exploring ways to balance face-to-face customer contact with the convenience online shopping offers can help deli retailers and vendors best position their businesses to tap the growing demand for online ordering, pickup and delivery services.
“The online grocery landscape is rapidly evolving, and now more than ever it is critical to understand the distinct business models that are emerging and expanding in the U.S. today."
—Digital Merchandising for Deli and Bakery, IDDBA
The Evolution of Online
How times have changed!
“Massive influx has driven the number of industry enterprises up at an average annual rate of 14.2 percent over the past five years to 3,121 in 2015,” IBISWorld notes. That influx includes national and local players—each employing different models of online ordering and delivery. Delivery-specific companies, which get a lot of press, include rapidly expanding AmazonFresh (which offers same-day and early morning delivery of Amazon items including fresh grocery products); Instacart (a same-day grocery delivery service that pairs customers with personal shoppers who shop various stores then deliver customers’ orders); and PrestoFresh Grocery Delivery (which partners with local grocery retailers to take online orders and deliver products to customers in the Cleveland metropolitan area).
Big box retailers and grocery retailers are playing the online game, too. In September, Target announced the company is partnering with Instacart to test online grocery delivery in the Minneapolis area, promising to have products delivered to customers’ homes in as little as an hour.
September also found Wal-Mart expanding its free curbside pickup for online grocery orders in eight new markets. Wooster, Ohio-based grocer Buehler’s Fresh Foods offers the Click, Load & Go program, which lets customers place online orders that are filled by a personal shopper and picked up in-store.
And Publix offers Deli Online Easy Ordering as a convenience to its shoppers, spokesperson Maria Brous says. “We recognize that our deli and bakery departments are popular destinations within our stores and the level of service provided may also create a slight wait time,” Brous explains. “Our customers are using mobile platforms more and more, and this service offering is an extension of our service philosophy.”
Publix customers have embraced Deli Online Easy Ordering.
“Custom subs and luncheon meats and cheeses are very popular. We make our online orders as they come in and prioritize the orders based on pick-up time,” Brouse notes. “We have assigned associates to fill the online orders. We place the orders in a designated, refrigerated holding case for easy customer pick-up.”
In 1989, when Andrew and Thomas Parkinson founded Peapod (which now operates as a separate entity and is part of Stop & Shop, a chain owned by Ahold USA), online grocery ordering and delivery was in its infancy.
“Peapod, which was the first company synonymous with online ordering, was launched in 1989, before online ordering existed for anyone,” Hiebert says.
Those companies could be just the tip of the online iceberg. While online sales have not yet disrupted the grocery industry in the same way that e-commerce has unsettled many traditional industries (online orders currently account for about 2 percent of total U.S. grocery sales), that is likely to change, IBISWorld predicts.
“As tech companies begin to scale up their grocery delivery services, brick-and-mortar stores are expected to react by developing their own services,” IBISWorld research says. “Overall, the number of industry operators is expected to increase over the next five years at an average annual rate of 8.4 percent to 4,677 enterprises.”
“Custom subs and luncheon meats and cheeses are very popular…We have assigned associates to fill the online orders. We place the orders in a designated, refrigerated holding case for easy customer pick-up.” —Maria Brous, Publix
There's a constant shopping process, which amplifies the performance of emerging channels for food,” says David Emerson Feit, vice president of strategic insights at The Hartman Group, a Bellevue, Wash.-based firm that worked with the Food Marketing Institute (FMI) for the organization’s 2015 US Grocery Shopper Trends survey. “Very often, they start the day with little idea what they're going to eat for lunch or for dinner, and therefore have a need for same-day food sourcing. To meet this need, foodservice is just as likely to be on the table as the supermarket.”
Feit adds that the growth in same-day meal planning—which “extends beyond the home cook's skill-set and pantry”—comes at a time when companies like Instacart can step in to provide same-day delivery.
And that, he believes, is where the real opportunities and challenges for the deli lie.
“So yes, it makes sense to use deli prepared food and other fresh categories to draw shoppers into the store—but it also makes sense to use deli and fresh-prepared offerings as anchors to same-day delivery,” Feit advises.
That approach, however, doesn’t come without challenges.
“Supermarket perishable foods departments face several challenges as they look to begin some sort of digital merchandising,” IDDBA’s Hiebert cautions. “ IDDBA research indicates that 37 percent of deli shoppers will move away from their primary stores to buy deli products. To be the preferred store both for general shopping and for perishable foods shopping, a store must have great products, great merchandising, and great digital engagement.
”Fresh foods departments may also see a sales decline in their online orders, he notes.But that doesn’t mean online should be off-limits.“For food-focused grocery retailers, online-based home delivery will succeed best in the near term for those who are already very well-regarded for their in-store curation in fresh categories” Feit says.
The what and when people eat are just a couple of the behavior changes driving the popularity of online food retailing today, and creating opportunities for the deli category.
“A good online experience in these departments will depend on good in-store experiences in these departments. And many of the online ‘trips’ for same-day delivery will be prompted by deli and prepared foods and adjacent categories that together enable expanded variety in eating.”
IDDBA’s Heibert believes, overall, that omnichannel retailing is the future. It’s just the approach that will differ from company to company.
“Shoppers demand to engage with retailers in every possible way. But each supermarket chain has to take a look at its operation and decide where its niche is,” Hiebert concludes.
For a free copy of the IDDBA’s Digital Merchandising for Deli and Bakery— a primer on digital engagement for supermarkets—visit
Deli’s Role: The Opportunities and the Challenges
“People are eating all the time and often shopping for their needs as they go, wherever they happen to be.
Online Ordering Opportunities for Deli Retailers
The International Dairy-Deli-Bakery Association (IDDBA) has identified several ways delis can approach online ordering and delivery. Options include:
*Click & Collect. Shoppers place online orders, which are filled by store personnel and are ready when the customer arrives to pick up the products.
*Drive. Online orders are picked by store personnel, then picked up by customers at a non store fulfillment location. The order is often delivered into a car trunk without the need for the customer to get out of the car.
*Delivery. Online orders are delivered to a residence.
*Delivery partnerships. Adding a delivery option via Instacart, Uber, Postmates.com or one of many local delivery services can expand the reach of deli and bakery departments to a larger number of shoppers.
An Interview with Steve deMoulpied, Founder, PrestoFresh Grocery Delivery
Steve deMoulpied, founder of online delivery firm Cleveland, Ohio-based Presto Fresh, shares details of his experience with launching an online grocery delivery business and explains the important role deli products play in the overall product inventory.
MDMobile: Briefly explain what prompted the company to get into the business of grocery delivery.
Steve deMoulpied: We feel there is an opportunity to help local/independent food retailers compete by partnering to offer their products to a broader market: we offer same day delivery to a 30-mile radius around a single store. For this reason, we have focused on developing a model that does not cannibalize our partners’ existing customers – we have data to show that approximately 95 percent of our sales are incremental new business for our partner. I don’t mean to make it sound easy; we’ve spent a lot of time refining our processes to eliminate as much waste as possible. We feel that we have a good model that is repeatable.
MDMobile: Are you finding that more and more customers are ordering online?
deMoulpied: We have been experiencing rapid growth, but it’s not easy growth. There is a fairly long ‘adoption period’, the time between when a customer hears about us and when they first place an order. There is a lot for them to consider: quality (will they pick products that I would pick for myself?), trust (will I feel safe with someone handling my food and entering my home?), website experience (do they carry everything I am accustomed to purchasing where I usually shop and can I find those items?), etc., etc. We have learned a lot since we started – and spent a significant amount of time and expense doing so! But we feel we have a good idea of how to operate now.
MDMobile: How important are deli meats and cheeses to your overall inventory?
deMoulpied: Extremely important. A substantial amount of our sales comes from the deli category/department. We offer everything that you would find in a full-line grocery store, so the majority of our products are packaged on a ‘per-ticket’ basis. However, a significant percentage of our sales is fresh-sliced.
MDMobile: What are the challenges of offering deli meats and cheeses for delivery?
deMoulpied: In a physical store, the customer can specify exact weights and cut type at the time of purchase. So there needs to be a process that allows for this – you can’t just sell ‘Boar’s Head Mesquite Turkey’, for example. We partner with retailers, so when it comes to pre-packaged deli items, we have found deli to be one of the more difficult departments to keep on top of product turnover, particularly in the area of specialty cheeses. There are many product variants here, and the department changes what they carry quite frequently to see what will sell well in the store. It’s challenging for us to manage what to add and what to remove from our site so that we aren’t selling what we can’t fulfill, and so that we do sell the latest/greatest products that are available.
MDMobile: How do you choose which deli meats and cheeses to carry?
deMoulpied: We partner with grocers and choose from their inventory when we decide which items to carry.
MDMobile: Do you ever, or would you consider, working directly with a meat or cheese manufacturer?
deMoulpied: We don’t today, but would consider partnering with wholesalers/manufacturers to distribute their products.