This Industry Is About to Be Disrupted

The industry most ripe to be disrupted?
grocery. As we’ve said before 20% e-commerce penetration has been the
tipping point for sectors including books, sporting goods, toys and consumer
electronics. Bottom line: once a fifth of shoppers are online, shit gets real for the
sector. The US grocery market has been a slow mover, but is catching up fast.
More than 20% of US consumers have already purchased groceries online.
However, estimates suggest that within five to seven years, that number will
reach 70% propelling online grocery to a hundred billion dollars. Grocery stores
desperately need to get out of the 80s once you fill that first basket up.
Online, you tend to only manicure around the edges. Amazon’s share of online
grocery stands at 18 percent. We predicted Amazon would begin to overlay
their operational expertise and zero percent ROI hurdle and consumers would
see prices drop and that is exactly what has happened.
Although in-store prices at Whole Foods are 14 percent higher than Kroger, Whole
Foods is making an aggressive play for home delivered goods through Prime Now, which comes in two to seven percent less expensive than Kroger goods delivered
through Instacart. That’s right, Whole Foods for less than Kroger – that’s a
Mercedes for less than the price of a Toyota Camry. As grocers were sitting on
their hands with regard to home delivery Instacart filled the void and is the
first result in paid and organic searches. Relative search volume for Instacart is
two and a half times that of Amazon Fresh and more than half of brands with
stores in our grocery Digital IQ Index partner with Instacart. These
partnerships have been the growth engine for Instacart, now valued at 4.2 billion
dollars. However, grocers using Instacart are not playing for the long game and
are outsourcing a key core competence with respect to building shareholder
value. What do Borders, Toys ‘R’ Us, Circuit City
and Target all have in common? They outsource their e-commerce to Amazon.
Instacart allows customers to easily switch between grocers, diminishing
grocery store brand loyalty except for those grocers who have partnered with
Instacart to build dedicated sites. Who else loses as
Amazon muscles its way into the grocery landscape? Simple – food delivery kit
services. Blue Apron is a broken IPO – what is Blue Apron worth? Is it worth zero?
That’s a little harsh – it’s worth less than zero. This business model makes no
sense. I don’t grocery shop very often so my team – no joke – decided to play a game with me. Sushi or donkey droppings? I’m going to guess $4.99. Foie gras!
I would guess – all-natural, real vegan, faux gras, 8 ounces – I don’t know,
I have hash that looks like this so I’m gonna guess it’s expensive, I’m gonna put
this at $27.99. Everyone Nourish Shampoo – yeah, funny, hilarious guys. Active Once a
Day Men’s 50-plus – hey bitches, I may be 53, but naked eye look 52 and – 52 and
seven-eighths! I’m gonna guess $7.99. Health Aide
Kombucha – wait there’s a – what’s going on here? Do you know something I don’t? Am I dying? Is the ass cancer finally here? Flow 100% naturally alkaline spring water – Flow
Water. I see this and I get the sense it would probably be good for my prostate
and improve my stream so I’m gonna say again – any price whatsoever.
When I pee now it’s like a baby bottle dribbling – my seven-year-old? It’s like a
firehose – I mean he could seriously break down a wall. We’ll see you next week.

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100 thoughts on “This Industry Is About to Be Disrupted

  1. The only reason online grocery shopping will increase is because of urban demographics… i.e. more young professionals moving to increasingly dense urban areas. But in the meantime, brick-and-mortar shopping is still popular as a social outlet. In Portland we have so many choices now, Green Zebra, New Seasons, and Market of Choice, whose stores are events unto themselves. Young people like to see-and-be-seen and the outing experience of shopping still provides a nexus for casual social mixing, just like bars, brewpubs, coffee shops, food carts, etc. I doubt this will ever wane.

  2. If you want a tour @L2 of an Amazon Fresh FC let me know. I work for Amazon here in Seattle and can hook you up. Keep up the great work.

  3. I have zero interest of buying my groceries on line. I very much like my local medium size independent grocery store. Hope I’m not alone.

  4. I thought Scott was finally going to talk about the airlines. GM will mass produce a car with no steering wheel and petals in the 2020 model year. The talking heads at CNBC were gushing over Boeing, while IMHO the AirParks of Arizona are 5 years away from having mothballed aircraft as far as the eye can see.

  5. I’m a digital native, web developer. Never purchased food online. The grocery store is one of the last ways to get the hell out of the house. I like to explore food. Online will be somewhat supplemental I’m sure (baby diapers, etc, maybe) but I have more faith in the AI checkout that amazon is working on being big before online groceries.

  6. I enjoyed this video but I don't agree with the studies underpinning it. To state the obvious, there's a reason South Korea leads the pack when it comes to online grocery delivery, density. Singapore, Tokyo, NYC… sure I'll buy that. Viable markets combined do not make for sexy numbers. I also don't buy the comparison between perishable food, books & consumer electronics. To me there are 2 groups of people, those who enjoy buying & preparing food at home & those who don't… so they eat out or by premade food products. I guess this is why I never understood Blue Apron. If I can't be bothered to stop by the butcher on the way home from work, why would I want to take the time to cook it? I've never met a person who enjoyed cooking but hated shopping, or vice versa. I could be wrong. Thanks professor!

  7. Those multi-vitamins are so damned overpriced, buying them will give you a stroke! $7.99 at Wal-Mart, c'mon down Scott!

  8. Why aren't the large food chain stores (like Safeway, Albertsons, etc) exploiting Their positions in communities and marketing home delivery? They're positioned in places even Amazon isn't! They have the ability, means and motivation (is if being totally wiped out by Amazon wasn't enough!). Most of them even have websites capable of accepting online orders. What are they waiting for?

  9. Not trying to be disrespectful, but they are about to be disrupted?
    I thought they already were disrupted like 10 years ago….
    I love this channel, but I think Amazon being as big as it is right now means that retail business is dead. That's it.

  10. This is what happens when a smart business professor has a microstroke in the brain lobe responsible for shame. On camera.

  11. This is all fun and games in the 48 contiguous states but Hawaii doesn’t have online groceries. I’m guessing Alaska has the same problem.

  12. The graphics are getting better. Fonts, colours, backgrounds and transitions are better. Professor hired a new team?

  13. My all time favorite people I would follow to the ends of the earth. Elon Musk, Scott Galloway, Dr. Michael Greger.


  14. I grocery shop every week at least and I didn't get much closer on those products. Vegan duck liver? Who the hell would ever eat the real stuff much less chic peas made to taste like it.

  15. Harris Teeter charges $5 to collect items when I order online to be picked up at the store. They occasionally make mistakes. However, it saves 2 hours of my life (2.5 hours shopping in person vs. 0.5 hrs online). An extra $5/week is totally worth saving 2 hours.

  16. For two years, I used an online grocery service.* It save literally work weeks of time. It was really astounding how much time it freed up. This past year I've gone out to buy groceries every day or two. Every day or two I spend (lose) at least two hours getting groceries. (2*(365/2))/24=minimum 15 days (2*(365/2))/8= minimum 45 8 hour work days

    * The two major grocery chains in our area (northern virginia) both offer the service. It's a delivery service.

  17. Online grocery shopping and efficient consumer analysis would drastically reduce the insane amount of groceries thrown away I hope.

  18. I will never buy groceries on-line, unless the cost is the same as me driving down the street from my house, and picking it from the store. When I buy on-line, its because I can only get those things on-line. Whats the benefit of buying on-line if i can drive down the street and pick it up 20 minutes?

  19. I still prefer going to the brick-and-mortar grocery store to select and purchase my food, and I'm considered a Millennial so…

  20. When it comes to packaged goods like chocolate or milk, if I get cheaper price online, I would not bother going to the store. But for fresh produce I would rather go and get it myself cuz I don't want spoiled stuff. People would still go to grocery store to get fruits and veggies but for other things they will start ordering online more and more

  21. Do you believe amazon is against government subsidizing produce? I think that would help a lot of people

  22. "That's a Mercedes for less than a Toyota Camry."

    Friend of mine went that route and that bloody quasi-panzerwagen has nearly bankrupt him.

  23. They should change the name of this channel to “Monday morning quarterback”! We called it, the day after it happened, wow!

  24. What are your thoughts on ai usage, digital product networking, and marketing? this video sparked my interest.

  25. Target ended ecommerce partnership with amazon years ago. I expect strong opinionated news but current state of the market, not inaccurate stuff.

  26. Slide at 0.20: There is one company that is largely responsible for South Korea and UK having high penetration of online grocery, and is also responsible for part of the 2% in the US (and also involved in China, Thailand). It's not Instacart, or Ocado. It's Tesco.

    First mover into online grocery in UK in 1994, slowly disrupted the UK/Irish market, forcing the other big UK/Irish grocers (i.e. not Aldi/Lidl or CoOp) to offer online (including Asda Walmart), and recently added Click & Collect (as has Asda).

    Tesco introduced online grocery to South Korea via their Samsung Tesco Homeplus unit, and was the tech partner of the Safeway Groceryworks joint venture in US (and I believe Safeway still runs a version of the Tesco online software, although Tesco developed a later version since).

    I believe Tesco is still the largest online grocer in the world by orders and revenue (has been for some years), although will probably lose that crown to Instacart or WalMart when they really start to grow, or perhaps Amazon when they figure out how to make Fresh work properly. And has lost some of their worldwide volume in recent years due to exiting some key markets (for stores as well as online).

    The South Korea, US and China grocery eCommerce engagements were ultimately victims of the "Fresh & Easy" (Tesco US) and revenue misstatement debacles, with Tesco having to focus more on their core markets (including online), and less on tech innovation/rollout. The service is available in most of the countries that Tesco trades in today (UK, IE, CZ, SK, PL, TH, and I think HU and MY), although not as popular outside UK, IE and TH.

    The key metrics to making online grocery work profitably at scale? Picking costs (from store or dedicated warehouse), service area size/demographic, delivery miles and successful drop density (for own vehicles, or 3rd party delivery costs for gig economy delivery). Ocado's solutions (soon to power Kroger's offer) optimise the picking costs using lots of specialist hardware; existing UK offers tend to optimise the other metrics (picking closer to the customer, and clever routing software to optimise the deliveries using own fleet, while steering customers via delivery cost yield management into picking times which tend to help optimise the drop density or improve fleet utilisation for less popular delivery times)

    Scott's call of "it gets interesting at 20%" I think is too high; tipping point is 15% or less for high density populations (per metrics above), potentially less if there are 1-2 dominant players. The reason why the "takeoff" hasn't happened in the UK? 7+ well established and effective competing services, chasing the same customers who are disloyal to any one brand and play one off against the other using specialist price comparison websites.

    PS: Lidl US seems to be making some of the same mistakes as "Fresh & Easy" (Tesco US) in 2007.

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