Especially amid the ongoing COVID-19 pandemic, customers are looking to minimize how often they have to leave their homes for various errands, including trips to their local grocery store. And while buying groceries online might not sound quite as common or straightforward as countless other industries’ shift to online shopping (look no further than the immense listing of categories on Amazon’s website) it’s happening, across Chicago and elsewhere.
The “new normal,” characterized by increasing demand for online grocery shopping, has store owners probing their own business models to see how they might be able to meet their customers where they are—online—and whether such a shift might be profitable.
In this post, we’ll attempt to answer the big question, “Is an online grocery business profitable?” by exploring a few different angles. We’ll look at what opportunity there is, identify some best practices for taking your store online, and then explain how partnering with OjaExpress can get your online local ethnic grocery business up and running. This way, you can think through the opportunity and decide whether or not you’re ready to be part of the future of online grocery shopping.
What’s the Opportunity?
First things first: what percentage of grocery sales are online today? In 2020 (and pre-pandemic), only 3.2% of food and beverage sales occurred online. This figure is likely low for two reasons. First, there simply weren’t many large-scale online grocery retailers available to customers. Second, many consumers might not have known they had online grocery options near them. Sure, they might know that many food and beverage products are available through giant commerce networks like Amazon, but what about fresh ingredients?
And what about cultural staples? Local, ethnic grocers who are able to establish an online commerce space can not only serve their loyal customers better, but introduce new potential customers to products they might not otherwise ever hear of or try.
Unsurprisingly, the realities of the pandemic have greatly increased consumer awareness of their online grocery options. As early as June 2020, 45.6 million households shopped for groceries online. Additional data shows that:
- The online (global) grocery market was worth $27.5 billion in 2018.
- It is expected to reach $129.5 billion by 2025 (with a CAGR of 24.8% during 2019-2025).
The data further shows that e-commerce sales are expected to account for 20% of the U.S. grocery market between now and 2026—huge growth from 2020’s figure of 3.2%.
This growth represents a great opportunity for grocers to adapt their business models to accommodate this shift in consumer preferences. That being said, ensuring a positive online grocery profit margin can be difficult. A 2020 Forbes article points out that “no grocer can afford not to offer groceries online, and yet very few are prepared to do so profitably.”
The truth is that a majority of grocers who have recently attempted to join the e-commerce revolution have seen their profits decrease. And purely-digital grocers tend to fold rather quickly. That being said, local ethnic grocers serve a unique need that supermarket chains just can’t compete with.
So what’s the secret? Next, let’s look at the most important things to keep in mind when considering the move from a purely brick-and-mortar business model to one that enables customers to shop online and have groceries delivered to their doorstep.
How to Maximize the Profitability of Your Online Grocery Business
Progressive Grocer magazine outlines 5 keys to a profitable e-grocery business, which can serve as some best practices for taking the leap into online grocery delivery. These five areas, where you can not only survive but stand out, are outlined below.
- Product pricing: It’s important to understand how customers perceive pricing. Keeping delivery fees low helps customers feel comfortable filling their cart with goods. Determining the right fees can be tricky. Set them too high, and consumers bounce; too low, and it endangers profits.
- Order staging: This refers to how orders are fulfilled—specifically, where are the products being pulled from for delivery? For most retailers, it’s going to make the most sense to simply fulfill orders from their brick-and-mortar retail inventory. They can designate an area of their store for “order staging,” where products can be collected and prepared for delivery or pick-up.
- Fulfillment efficiency: Fulfilling online orders shouldn’t have to cut too much into profit margins, but the reality is that some physical, human labor will be required throughout the process. The key to increasing profitability is to assess (and tweak, as needed) the operational efficiency associated with locating products, batch and zone picking, and more.
- Service offer sequencing: By coming up with a plan to prioritize and sequence orders for fulfillment, inefficiencies can be minimized. For newer retailers entering the online space, this often means not eroding consumers’ trust by making promises you simply can’t fulfill. Be realistic about how and when orders can be filled, so customer expectations are achievable.
- Differentiation: Retailers need to consider how/where they’ll fit within the competitive landscape of online grocers in their area. What sets (or will set) you apart? Your customer service? Your efficient fulfillment or orders? Your expertise in ethnic cultures (and their foods)?
Clearly, there’s a lot to consider. If you’re looking to get your ethnic grocery store in Chicago online, OjaExpress can help. Read on for the benefits of joining our growing community of ethnic grocery providers in Chicago.
Serve Your Customers Online With OjaExpress
At OjaExpress, we’re passionate about connecting immigrants with the tastes of their home cultures by delivering them to doorsteps across Chicago. The way our site works is simple. Customers looking for African & Caribbean, Indian, Middle Eastern, Asian, Hispanic, or European products can search on our website for local grocers that deliver to their postal code. They fill their carts, and then we deliver!
For local ethnic grocers, partnering with us not only helps grow our network and connect more customers with the groceries they’re craving. By selling your products on our website, you can provide customers with what they’re looking for, where they’re looking for it, and gain new (and more) customers in the process.
We’d love to field any questions you might have about getting your local ethnic grocery store online, as part of our network! Contact us today to learn about how to become one of our vendors and start connecting Chicago residents with the flavors of home.