Not a week passes by without another player entering grocery delivery service in major US markets. Major players, like Amazon, Google and Safeway, and upstarts like Instacart and Envoy, experiment with disruption of the grocery value chain. The previous fiasco by Webvan does not deter the new wave of attacks on status quo. There is no guarantee of their success this time, yet, early studies show much broader acceptance of this model by younger, urban demographics.
The traditional grocery store model has not changed significantly for millennia despite numerous implementations of modern technologies. With the advent of on-line shopping, Stores that do not provide a superior customer experience are likely to find online retailers "eating their lunch"
Home delivery of groceries is not new, but the market has changed dramatically since it was last popular. Local corner shops, that carried limited number of SKU's, have been replaced by supermarkets with a multitude of choices for any one product. The shopkeepers, who knew their customers and their preferences personally, were replaced by merchandisers who are more focused on vendor's allowances than demographics they suppose to serve.
Refrigeration and distribution network improvements gave grocery brands wider reach geographically, and allowed emerging grocery brands to challenge the established titans on store shelves. Since new brands cannot compete with the advertising budgets of Kraft and General Foods, they successfully flank major brand products with superior engagement, taste and delivery via demos/tastings on store floors. Surely, the in store product demonstration does not have the reach of TV ad coverage, but the experience of "in your mouth" taste over an advertising image, and dramatically lower cost of customer acquisition, counterbalance the disparity in marketing budget. These factors led to an explosion in a number of new and emerging brands, particularly in the specialty foods category.
In the likely event that the latest incarnation of grocery home delivery takes hold, store traffic will drop as former B&M shoppers will "outsource" their shopping lists for fulfillment. This will drastically reduce opportunities for emerging brands to acquire new customers on store floors. Many small brands have ventured into selling their products online, but very few see a measurable sales increase from these efforts. It is not difficult to roll out your own e-commerce site, or to partner with established online retailers, but it is not so easy to engage consumers who will adore and keep buying your products without tasting them first. The big brands, that sell basic staples, have a strong advantage because many consumers, regardless of their demographics, have already experienced their products and therefore are comfortable ordering them online. These brands sell in volume through big name online retailers who have earned the trust of their customers by delivering better customer experience at similar prices compared to traditional grocers.
Smaller and emerging grocery brands need to rethink their marketing strategy if they want to survive this change.