From Bulking to Instant Purchase: How the Market Environment is Changing The pandemic has accelerated the slow shift toward convenient, on-demand grocery delivery in many markets.
By Vitaly Alexandrov Edited by Russell Sicklick
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The Covid-19 pandemic has changed the way that nearly every industry does business. There have been innovations, demand shifts and surprising trends across the board, and food delivery is no exception to this.
The global online food delivery services are expected to grow by more than $44 billion by 2024. This includes on-demand grocery delivery as well as takeout services. This forecast is interesting because, while food delivery is undoubtedly increasing in popularity, it hasn't entirely overtaken most consumers' preference for hands-on, brick-and-mortar shopping.
As food delivery services increase their service ranges and refine their business models, we are likely to see a shift from bulk purchasing to a more streamlined, on-demand food buying model.
Will consumers give up the comfort of traditional grocery shopping?
For many consumers, the idea of on-demand food shopping was not even on the radar before the pandemic hit. This is partly because it had not become as widespread across markets in the United States and partly because it is the exact opposite of how most people have always bought groceries.
As with any new technology or service, there are always those who are ready to jump on the bandwagon early and those who prefer to stick with tried-and-true methods for as long as possible. On-demand food delivery is no different. While some consumers immediately make the mental connection between takeout delivery and grocery delivery, many are slower to accept the idea that grocery delivery can really be as simple as ordering takeout. This is one of the challenges that food delivery services face.
Even now, consumers say that they generally prefer to spend a few hours in a brick-and-mortar store purchasing their groceries in bulk. This is especially true in the United States, where grocery consumption still largely follows a more traditional model. However, the pandemic has accelerated the slow shift toward convenient, on-demand grocery delivery in many markets.
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On-demand groceries are on the rise
Online on-demand food delivery services experienced rapid growth in the wake of Covid-19. Much like the shifts in other sectors, the idea of being able to conveniently order groceries online and have them delivered is now part of the new normal.
Improved online ordering has been a significant driving factor in how customers choose to shop. As more consumers become increasingly tech-savvy, they prefer the ease and convenience of online ordering for everything, including food. A study found that about 60% of U.S. consumers plan to continue buying groceries online at a similar frequency once the Covid-19 pandemic subsides completely.
Big companies like Walmart, Amazon and DoorDash have jumped on this trend. They have thrown a significant amount of resources into making the on-demand grocery segment a viable part of their market strategy. However, they are still competing with smaller brands like Food Rocket, 1520 and GoPuff. This is primarily due to the overall customer experience offered by these brands.
Most shoppers are looking for speed, freshness and accuracy, and this is something that the smaller brands have thus far been able to do better than their big-box counterparts. With nearly half of consumers turning to online grocery delivery services for fresh meat, produce and baked goods, the quality and speed of delivery play a major role in customer satisfaction.
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Investors think instant purchase is the future
Investors have noticed that the smaller on-demand grocery delivery brands have been able to thrive despite big names like Amazon and Walmart entering the field. This, combined with the projected growth of the online grocery delivery sector, has made these online grocery startups look like much more attractive investment options.
CNBC has reported that more than $10 billion has been raised by venture-backed grocery startups so far in 2021. In 2020, these startups only raised a total of $7 billion for the entire year. In the U.S. alone, startups like GoPuff, Food Rocket and Fridge No More have raised over $1.5 billion just in the first half of this year. In Europe, similar startups like Getir, Glovo and Gorillas have raised hundreds of millions already. This incredible infusion of capital from eager investors has allowed many of these startups to expand rapidly and improve their overall user experience, which is critical to success in the early stages.
These startups are offering a fresh take on the online on-demand grocery delivery model. They focus on speed and reliability, with Food Rocket and GoPuff offering deliveries in 15 minutes or less. This is akin to the Amazon Prime model of specific markets getting same-day deliveries, and customers feel the allure. Investors understand just how appealing it is to be able to tap a few buttons and have alcohol, snacks and household essentials delivered to your doorstep nearly instantly.
As this trend grows, there's a strong likelihood that it will completely change the way consumers view grocery shopping. Rather than feeling compelled to follow the traditional method of weekly or biweekly shopping for a stock of food, they can rely on a local delivery service to drop off the eggs they need for breakfast or the poultry they need for a healthy dinner. This potential shift toward a more streamlined, slimmed-down view on grocery consumption across markets has investors looking for ways to get in on the ground floor of this new trend.
The future looks bright for on-demand grocery delivery
The biggest question for these grocery delivery services is whether or not consumers will stick with the convenient home delivery model that they have been taking advantage of during the pandemic. It's not likely that there will be a total shift away from brick-and-mortar shopping, but these on-demand services have shown consumers that the traditional bulk purchase model isn't the only way to shop for groceries.
The fact that consumers have been able to successfully experience how easy and convenient online grocery shopping can be means that there is a good chance for a permanent change in their food shopping viewpoint. After all, if ordering groceries can be as easy as ordering takeout, then why not take advantage of it?
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