The online food and grocery business has had a turbulent past with a variety of high profile firms such as Webvan, Kozmo and others failing as a result of their impossibly ambitious logistic requirements. Since then, however, companies such as Peapod and FreshDirect have built seemingly sustainable online businesses and online grocery shopping is once again in the headlines with Amazon entering the market.
Amazon is currently selling just non-perishable goods, so is not necessarily competing directly with FreshDirect and their ilk who also offer fresh produce, but Amazon’s economies of scale and logistics expertise will ensure they will have a significant impact on the market.
Online grocery shopping has never been one of the more popular categories of online retail compared with books or music, for example, and research from WSL Strategic Retail shows that just 12% of US Internet users purchased groceries online in 2005, up from 8% in 2003.
Jupiter Research forecast that in 2005 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 total retail e-commerce sales, which eMarketer forecasts to top $104 billion in 2006.
Currently the most popular grocery item bought at Amazon 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.
For more on online retail see eMarketer’s US Retail E-Commerce Report.