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Online grocery shopping is at the tipping point, thanks to shifting consumer attitudes and innovations at the brick-and-mortar level. In the latest sign of change, Amazon unveiled a concept grocery store in Seattle that offers a no-checkout experience.
The store is currently in beta, but the company plans to open doors to the public in early 2017. In order to shop there, consumers need an Amazon account, as well as the Amazon Go app installed on their smartphone. The shopping process appears simple. Consumers will be able to enter a store via the Amazon Go app (most likely with a bar code in the app), pick up the things they need and then walk out of the store.
The Seattle store is just one of several grocery store formats that Amazon plans to explore. The other two concepts combine online ordering with pickup, eliminating the delivery option—one of the most costly aspects of online grocery shopping.
“The move to brick-and-mortar is necessary for Amazon to compete—and perhaps succeed—in the grocery retail arena,” said eMarketer analyst Patricia Orsini. “And they are serious about winning in this space, evidenced by the fact that Amazon [is trying out] several different shopping formats.”
Another Amazon concept is that a shopper could place an order online, drive a few miles to a store where the order is waiting and pull in to a designated parking spot where someone would load the groceries into their car. “This is where the real convenience of online grocery shopping lies,” Orsini said. “It also solves two other issues related to online grocery shopping: shoppers can receive their order within a couple of hours, and there are no delivery charges to increase the cost of doing online shopping.”
This click-and-collect model of shopping has gained a lot of traction in Europe, especially in the UK and France. It’s starting to gain steam in the US, as major supermarket chains such as Kroger and Safeway begin to offer it. Data from Adobe also explored this shift.
As of July 2016, in-store pickup was responsible for almost half of the sector’s online sales when measured by fulfillment type. That’s up from 18% for the previous year.
“Brick-and-mortar stores will lead the way in the growth of online grocery sales. The increase will be small, don’t expect to see the percentage of purchases made online increase by more than 1 or 2 percentage points,” Orsini said. “But, this will still add up to a good chunk of money—about $58 billion is spent monthly overall in the US food and beverage category.”
Amazon has some fierce competition, and not just from Kroger and Safeway, but also Wal-Mart and drugstore chain CVS.
“Wal-Mart recently acquired Jet.com, a pure-play CPG ecommerce site,” said Orsini. “Jet.com’s algorithm that discounts shoppers’ carts as they add more products, combined with the fact that 90% of the US population lives within 10 miles of a Wal-Mart store, could be a catalyst for shoppers to take get both lower prices and convenient pickup: Two things that consumers value when purchasing groceries digitally.”
As the grocery space continues to change, consumer behavior toward buying groceries online is also slowly shifting. The change is primarily led by millennials. According to February 2016 research from UPS, in association with comScore and the e-tailing group, 11% of millennial digital buyers had ordered from digital grocery delivery services such as Peapod, compared with 6% of non-millennials.
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