Setting up Online Grocery

Business in 2020? Here Is What

You Need to Know
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Last Updated: March 26, 2020

What’s covered in this post?
 Online grocery industry stats and players
 Ecommerce Grocery Business in the US, UK, and Canada
 How online grocery business works?
 How an online grocery store makes money?
 What are the features of online grocery store?
 What are the challenges in online grocery business?
Online grocery shopping is catching up with consumers rapidly. According to a Nielson
study, in developed countries like US, UK, Japan, etc., about one-fourth online
shoppers are already shopping groceries on the internet and 55% are willing to do it in
the near future.
To cater to this growing customer base, online grocers are also increasing at a 3x rate year-
over-year. And the whole sector is growing at an impressive annual rate of 13%
Online Grocery Business in the US, UK,
and Canada
We analyzed the current state of the online grocery supermarket business across
various countries and provide historical background to identify key grocery industry
trends.
 Ecommerce Grocery Business in the US is Just
Getting Started
To gain insight into the current and future state of the online grocery business in the US,
we scrutinized both incumbent companies and innovative newcomers.
According to eMarketer, a subscription-based market research company, the US
grocery ecommerce is the fastest-growing product category online.
The online grocery delivery industry in the US is currently lying around $20-$25 billion.
By 2021, this number will reach $38.16 billion.

Coronavirus (COVID-19) Effects on Grocery

Business in the United States
Faced with a global pandemic unprecedented in modern times, the online grocery shopping in
the US is exploding. As Americans prepare for potential quarantine conditions, items such as
bread, salty snacks, frozen dinner have been in high demand.

Major grocery chains in the US such as Walmart, Kroger, and Stater Bros are working 24-hours
a day. According to Apptopia, grocery delivery apps have begun seeing record numbers of daily
downloads. Instacart, Walmart Grocery, and Shipt have seen their daily downloads surge by
218%, 160%, and 124%, respectively.

How the US grocery business is dealing with

COVID-19?
 WholeFoods, Waitrose, and Sainsbury’s have designated the first hour after
opening for elderly and vulnerable customers.
 Grocers in the US are providing adequate cleaning supplies and hand
sanitizer for workers to wash their hands.
 Several grocery delivery services in the US have promoted the fact they
would add a “contactless” delivery option.

How to win over the US grocery customers?

(Online Grocery Shopping Habits in the US)
To lure the young, affluent, and urban US households, you have to work on 3 major
things:
 Seamless Customer Experience on your online grocery marketplace.
 Eliminating the logistics and supply chain hurdles.
 Entice Millennials

Online Grocery Business in the United

Kingdom (UK)
Online grocery shopping in the United Kingdom is the fastest-growing purchase
channel. According to Statista, the UK will become the second-largest grocery market
after China in 2020. No doubt, when we talk about edible grocery sales, the online
grocery supermarket business in the UK has changed a lot because of Asda, Ocado,
and Tesco. But yes, there is a huge scope of new online grocery websites in the
country.

Coronavirus (COVID-19) Effects on Grocery

Business in the UK
With all the major grocers’ online delivery slots booked up weeks in advance, the online grocery
business in the UK is all set to touch the new high. As an impact of coronavirus on the
grocery business, shelves have been stripped bare and many retailers are rolling out special
hours for old or vulnerable people.

How the UK grocery business is dealing with

COVID-19?
 Because of higher demand, online shopping delivery service Ocado has
suspended its online food delivery service.
 Tesco, Sainsbury’s and Asda will not let a shopper buy more than three of
any particular items.
 Tesco is all set to appoint 8,000 new drivers to help with grocery deliveries.

How to win over the UK grocery customers?

(Online Grocery Shopping Habits in the UK)
 Attentive service and friendly interaction play a major role throughout the entire
ecommerce grocery experience. Also,
 Overall low Grocery Bills
 Easy to Navigate eCommerce grocery website
 Better Loyalty Scheme

Ecommerce Grocery Business in

Canada
In the emerging eCommerce horizon, Canadians want their groceries to be delivered
directly to their homes. Currently, they are spending around $6.4 billion per year on
online grocery shopping.

Coronavirus (COVID-19) Effects on Grocery

Business in Canada
Grocery delivery services in Canada are seeing a surge in demand due to coronavirus. For a
smooth delivery process, retailers are engaging with vendors to make sure that their supply chain
will not create any problem. Further, they are apportioning the number of each food item
customers can buy. But, of course, regardless of this, panic-buying is happening.

How the Canadian grocery business is dealing

with COVID-19?
 Toronto grocery stores can now accept the 24-hour deliveries to keep shelves
stocked.
 Many Canadian Grocers are offering seniors-only shopping hours to ensure
that they get access to all the necessary grocery items.
 Fresh City Farms reported that online grocery business has tripled or
quadrupled and the company has hired more than 12 restaurant workers to increase
the production of their home-made products.
 How to win over the Canadian grocery
customers? (Ecommerce Grocery Shopping
Habits in Canada)
By analyzing the Canadians shopper journey and working aggressively at every step of
their purchase journey is the key step in winning them over.
 Free Shipping
 Organic Grocery products
 Seamless Customer Experience
In this post, we will do a critical analysis of online grocery business and cover its
important aspects in the following order –supermarket business model & possible
revenue models, critical website features, challenges & solutions.
Also Read: A Guide For Canadian Entrepreneurs To Start An Online Grocery Business

Looking for an eCommerce grocery solution to

quickly launch your online grocery marketplace
Check Growcer

Online Grocery Business Model

Assuming you know the basics, (which are – an online marketplace/store to sell
groceries and deliver them at customers’ doorsteps) the critical aspects of an online
grocery business are:
a) Tie-ups with local grocery producers/whole sellers (given you are not one yourself),
and
b) Establishment of a robust delivery network to make sure orders reach customers in a
timely manner
As for how this business makes you money, usually, a commission is cut by marketplace owners
on each order, before transferring the payment to the grocery seller; or if you are the
seller yourself, then through service charges for delivery & convenience.
View
 Canvas Model for Online Grocery Business

How Ecommerce Grocery Platform

Makes Money? – Revenue Model of
Online Grocery Business
Commission
As just explained, the commission-based revenue model is pretty straight forward.
However, to accelerate business growth & maximize profit margins you can implement
different commission rates for different products. For that, do market research to
identify:
 Most popular products
 Growth in the demand for a product

Subscription
Typically, the subscription-based revenue models waive off some charges, provide
discounts, or better service to customers over a period of time. For example, Instacart
offers a yearly subscription for free 2-hour or scheduled deliveries. Another example,
Thrive Market offers a 25-50% discount on all orders with its yearly subscription. Note
that you can also use both the commission & subscription-based revenue models at
once.

Service Charges
For those online grocers who operate their business independently, (especially brick &
mortar grocery sellers who are planning to go online) making money from the service
charges is the most viable revenue model. They can also add the subscription-based
model as an additional revenue stream.

Secondary Revenue Streams

 On-site promotion for merchants/grocery sellers (applicable for marketplaces
only)
 Hosting banners ads
 Start blog and publish sponsored content on it
 Sell useful merchandise such as jars, reusable carry bags, etc. (it will also
help you in branding)
 Sell user data to market research firms

Which revenue model & streams will bring you

maximum benefit depends on many factors,
such as:
 Target market
 Business size
 Budget, age, and popularity of the business, etc.
So, analyze each of these options against your business goals & needs, and choose the
ones that suit you the best.
Launch an Online Grocery Website along with
Ready-made Mobile Apps
Contact us

Critical Website Features for Online

Grocery Store
Understanding business requirements & implementing the right revenue model will help
you establish your online grocery startup. But it is your website that will help you interact
with buyers, engage them, and turn them into loyal customers. So, it is essential that
your website is quick to load, easy to use, mobile-friendly, and has the following unique
features:

Repeat Orders
Many a time people take the same grocery items home. Keeping this common
consumer behavior in mind, you should provide your customers the option to save an
order to their profile, which they can re-order, instead of adding same items to the cart
time & again.

Shareable Cart

Grocery shopping is often a family activity, in which different members can have
different demands. So, it would be quite logical to offer a feature that allows users to
share shopping cart with other registered users so that they can add additional
products, and get them all delivered in one single order.

Recipes & Ingredient List

This would be like going the extra mile and will be totally worth it. Add some recipe
ideas on your website and recommend them on product pages (if the product is one of
the ingredients). This will definitely catch customers’ attention and might even engage
them to buy more items from you.
Discount Coupons

These days, it is a common practice among businesses to send discount coupons to

make the most out of seasonal sales. So it is important that your website has the
feature to receive & process these discount coupons.

Friend Referral
Offers like providing free first delivery or x% discount to customers who invite their
friends to buy from you are becoming a popular practice among online businesses. Not
only do they encourage customers to buy more from you, but they also help you keep
the customer acquisition cost down.

Shopper Module
In developed eCommerce markets, there is a trend catching up among customers to
hire shoppers. These shoppers take the list from customers and do grocery shopping
online on their behalf. If you are operating in a market where customers seem inclined
to that option, make sure to include it in your website feature list.
Other than these, make sure your online grocery store also have these basic, but critical
features & functionalities:
Product Categories: Classify your inventory in proper categories and sub-categories
and implement it on your website to make it easier for customers to find the right
product.
Search Tool: If customers can’t find what they are looking for by browsing product
categories, they should be able to search for it. To enhance customer experience,
search tool should have the auto-suggest feature & should be error-tolerant to minor
spelling mistakes.
Customer Profile: Like any other eCommerce store, your registered customers should
have an account where they keep a record of their orders, save items, save repeat
orders, etc.
Merchant Module: If you are opening an online grocery marketplace, then you also
need to work on a separate section for merchants (grocery sellers), which allows them
to manage their individual inventories, orders, payment, etc.
Social Commerce Features: Features such as sharing products on social media,
social signup, or selling directly on Facebook, would also help your business get a good
exposure.
SEO Ready: Make sure that your website has all keys features to get easily crawled by
search engine bots and to rank better.
Mobile-Friendly: It is certain that most customers will buy from you on mobile. So make
sure to enhance your store’s on-the-go purchase experience, whether you make the
website responsive, build a separate mobile website, or an app.

Housing all the above-mentioned features on your online grocery supermarket is a

challenge, which definitely will take lots of time, effort, and investment. The best
approach to go about this challenge is to build your grocery store with a technology
solution (readymade script) that offers most of these features by default and allows you
to easily add unique features.
 At FATbit Technologies, we have developed a similar product called Growcer that
enables entrepreneurs to instantly launch a feature-rich online grocery store, it offers
everything that a grocery store needs to implement unique functionalities.

Get a readymade, feature-packed grocery

marketplace
Learn More
Now, let’s discuss the challenges you will face when running an online grocery business and its
possible solutions.

Challenges Associated with Online

Grocery Business
As mentioned earlier, the unique challenges this business model presents are due to
the nature of grocery products, which are either perishable or intended for immediate
consumption. Let’s discuss the major ones in detail:

Storage & Delivery Infrastructure

Regular online stores can afford to tackle instances like delays in delivery, wrong item
delivery, returns, etc. But for online grocery stores, it will be a pretty much ‘do or die’
situation. Therefore, the entire supply chain – from farms/manufacturers to storehouse
& then to the customers – needs to be very robust & time-efficient.
Additionally, since perishable food products need to be stored & delivered in
refrigerated chambers, storage infrastructure would add up the business operations cost
marginally.
There are certain steps you need to take to combat these challenges. Some of which
are:
 Integrate a robust, Just-in-time (JIT) inventory management system API with
your grocery store that automates things to reduce storage cost & wastage
 Partner with a reliable delivery service provider that can meet your
customers’ expectations with assurance
 Segment the delivery network into hyper-local networks to manage deliveries
better & make them faster
 Low-Profit Margins & Quality Assurance
Today, people shop online not just for convenience but also because they expect to get
better prices. Online grocers face the same challenge of offering competitive pricing.
But with too much money spent on building & maintaining the storage infrastructure &
efficient supply chain, keeping satisfactory profit margins might become difficult.
Other than that, when it comes to vegetables & fruits, most customers prefer to buy only
after physically checking them for their freshness & quality. When shopping online, such
an option is not possible. So, to persuade customers to buy groceries online remains a
persistent challenge.

There are a bunch of steps you can take

to address these problems:
 Add more non-perishable categories to your store, such as packaged foods,
personal care & beauty products, household items, etc. as their storage & delivery
cost less
 Merge your online & offline grocery business to enhance customer
experience and to cut down the operation cost wherever possible. Below we have a
breakdown of ways to do it:
1. Customer checks products online for availability & buys them at the store
after confirming the quality
2. Customer orders online & pick up order at the store (both a & b will save the
delivery cost)
3. Customer visits store & orders online to get groceries conveniently delivered
at home
4. Self-checkout at stores by using technologies like iBeacon (reduce operation
cost & enhance customer experience)
Online grocery marketplaces that don’t have physical stores can launch their offline
chains to benefit from the blended online-offline grocery shopping concept.

Conclusion
Grocery consumption is the basic human need, and people are increasingly relying on
online shopping. So, online grocery business idea fits perfectly in the current dynamics,
despite the above-mentioned challenges.
The important thing for entrepreneurs planning to enter this sector is to be aware of
these challenges & know how to go about them by leveraging the right technology,
trends & tactics. And that’s where this post serves as a valuable resource.