July 22, 2006
As a whole, the online grocery and food business has had a
very rough past with a variety of high profile companies such
as Kozmo, Webvan and a few others failing miserably as a result
of their ambitious and impossible logistic requirements.
But since that time, companies such as FreshDirect and Peapod
have built what appears to be sustainable eCommerce businesses
and online grocery shopping is once again in the headlines, with
big names such as Amazon entering the market.
The eCommerce pioneer is currently selling just non-perishable
goods, so is not necessarily competing directly with FreshDirect and
similar outlets who also offer fresh produce. However, Amazon's
economies of scale and logistics expertise will ensure they will
have a significant impact on that market.
For all the other players that have tried it in the past,
online grocery shopping has never been one of the more popular
categories of Internet retail when compared with books or music,
for example.
New research from WSL Strategic Retail shows that just 12 percent
of US Internet users purchased groceries online last year, up from
about 8 percent three years ago.
For all of last year, Jupiter Research has forecast that
online grocery sales totaled $3.3 billion, up from $1.7 billion in 2003.
While $3 billion is nothing to be sneezed at, online grocery sales
make up a very small percentage of current retail eCommerce sales,
which eMarketer forecasts to be above $104 billion this year.
The most popular grocery item bought at Amazon currently is a
100-pack of Slim Jim beef jerky. What Amazon has to work out now
is what book, CD or household item they should recommend to a
jerky eater.
I can hazard a guess but will restrain myself on this occasion.
Source: eMarketer
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