Page 15 - index

COMMENTS & ANALYSIS
Retailers Should Prepare For Future Leaning Toward Delivery
by jim prevor, editor-in-chief, produce business
It is hard to imagine this today, but back in the 1940s my mother lived in Brooklyn and her grandparents lived in Manhattan.
All alone, my mother would take the subway from Brooklyn to Manhattan, where she would be met at the station by her grandfather. Today, this would be considered child abuse, but, in the 1940s, nobody thought it particularly risky. The world has changed.
When her grandfather would take her by the hand and walk to his apartment, they would pass numerous grocery stores. It was quite common for many of these stores, such as Gristedes, to offer same-day delivery using boys running or on bicycles. There was no Internet, of course, but people could shop themselves at the store and leave the groceries for delivery — a big advantage in urban New York where few people had cars. Or they could call up on the phone and give an order — not very dissimilar from Amazon’s Prime Now service or Fresh Direct’s Foodkick service.
In time, grocery delivery faded from the scene. The population became more suburban, which meant we didn’t have the population density that made delivery economical. And the move to the suburbs meant that cars became more common, so it was easy to put groceries in the trunk. Delivery posed many problems of coordination as people had to somehow be at home to receive deliveries, especially, of frozen and refrigerated foods.
In any case, disaggregating costs — in this case, removing the cost of delivery from the grocery bill — allowed consumers to replace those costs with their own labor, and this was seized upon by consumers.
The renewed interest in delivery now is attributed to many things. Daniel Granderson mentions time pressure because of two-in- come households but also due to a desire by consumers to spend more on leisure and family pursuits. There is also some indication that the interest in online ordering has other motivations and that delivery options may be less important than we believe. Many retailers are now offering drive-through pickups of pre-ordered items — and that seems to be growing in popularity.
It also is true that retailers are beginning
One reason that the pursuit of scale in delivery is a high priority for companies such as Walmart and Amazon is that it becomes less expensive as the number of packages delivered on each drop-off increases.
to experiment with offering Meal Kits and Specialized Weight Control Boxes, Local Farm Boxes and similar things for either pick-up or sale-in-store. This all makes sense because the ecosystem of Internet ordering, delivery and other things related to, say Meal Kits, involves lots of different things that consumers value in different ways and to different degrees.
Daniel McCarthy, an Emory University professor, studied public customer data and estimated that only 28 percent of Blue Apron customers and just 17 percent of Hello Fresh customers were using the services after six months! And new acquisition is expensive. Professor McCarthy estimates it costs Blue Apron $125 to acquire each new customer.
A lot of this falloff probably relates to the aggressive offers made to get people to try the various services — non-sustainable discounts, etc. And some relates to dissatisfaction with a particular offer — consumers want a service that uses more or less prepared foods, organic foods, etc. It is likely, however, that the very nature of subscription services for fresh foods is not really compatible with the lifestyle of many people today.
People get called away on business, are stalled in the office, are invited to a friend’s barbeque, run through fast food when the kids’ sporting activities run late ... In the meantime, there is a relentless march as delivery services keep dropping off boxes to cook based on a wishful decision made six months ago. No wonder people get fed-up and cancel.
But they may still like the concept — if they can order or pick up the box when they want it! Delivery is likely to change soon and become both faster and less expensive: Autonomous vehicles may be coming soon, but already you can go to certain Aloft brand hotels, and if you call the front desk and say you forgot your tooth-
brush, the front desk will send up “Botlr” — an autonomous delivery vehicle — with a new one. It is well known that Amazon, Walmart and others are experimenting with drones. One reason that the pursuit of scale in delivery is a high priority for companies such as Walmart and Amazon is that it becomes less expensive as the number of packages delivered on each drop-off increases. Indeed, one reason you will see these giants look to move to their own delivery services rather than use UPS, the Postal Service or other common carriers is that these giants believe, correctly, that their volume is making it affordable for smaller companies to have these common carriers deliver their
products.
Of course, the very notion of shopping is
bound to be transformed by more advanced technologies. Already you can set Amazon to deliver a bottle of your favorite shampoo every other month; soon RFID chips may let your refrigerator recognize that you are out of milk and order a replacement, and people may respond to advertising differently if one can watch an ad on TV and just tell Siri or Alexa to order one of those things.
Well over 95 percent of the items in a typical shopping cart are items the consumer has bought before. If these are ordered automati- cally through a replenishment service, perhaps driven by an app that will perfectly assess the least expensive way to get that basket, margins in the industry will compress. Retail store square footage will collapse as these items come deliv- ered via specialty distribution channels and, for many consumers, it will become increasingly difficult to find stores selling these staple prod- ucts, and sales will migrate even more on line. On the positive side, retail stores will increasingly become foodservice- and fresh-oriented — with perhaps depots for easy consumer pickup.
PRODUCE BUSINESS / APRIL 2018 / 15