The fresh produce industry is ripe for disruption. Compared to many markets in developed countries, digital commerce is lagging in Canada. But expect that trend to change as time-starved consumers buy more vegetables and fruit online.
Three months ago, Google Express launched a delivery service in San Francisco and West Los Angeles, upping the stakes against Amazon Fresh which has been in the digital marketplace since 2006. Google, usually known as a “search” engine, is leveraging its homeplate advantage to take a bite of the $10.9 billion online grocery market in the U.S. It’s a space that’s expected to grow by almost 10 per cent annually until 2019.
“Think of the new reality this way,” said Davis Yung, CEO Fresh Direct Produce, at an October 28 webinar hosted by the Canadian Produce Marketing Association (CPMA). “Three big global companies – Airbnb, Alibaba and Uber – have no bricks and mortar. What are the implications for a mature industry such as produce?”
That subject was explored in the webinar: Technology and Changing Consumer Expectations. Initially, it’s tough for the sector to imagine that fresh produce could be ordered online without a sensory experience. And yet, that’s exactly what’s happening in the U.S. and with Grocery Gateway in Canada, an online business operated by Longo’s in the Greater Toronto Area.
Steve Quintin, director of Longo’s Digital Commerce, Grocery Gateway says, “Our business is now at a tipping point, with sales of online groceries growing at about 10-12 per cent a year.” During the CPMA webinar, he explained how online grocery shopping has grown organically since 2004. By 2012, the store fulfillment model was interfering with day-to-day business, demanding its own fulfillment centre. Now, there’s a “dark store” says Quintin, describing it as a hybrid between IKEA and Costco.
“Fresh is important to us,” said Quintin, “but fresh is a big barrier to trial. Buying behaviour is different than a bricks-and-mortar store.”
He described how consumers must put trust in personal shoppers to pick the freshest ingredients. Then they must rely that the service, with a minimum $45 order and $10 per delivery, will execute flawlessly on the day and within the time frame. The logistics are immense to meet customer expectations and to get repeat buyers. But once that confidence is achieved, the shopper’s basket rapidly expands.
To convert browsers to buyers, Quintin said it’s essential to have high-resolution photos and well-written product descriptions on the website. He also noted that online buyers are skewed more heavily towards convenience. Offerings of pre-cut, pre-packaged vegetables and potatoes are popular. Once consumers are hooked, the biggest percentage of deliveries is to the home rather than to a business.
Steve Dotto, tech expert and columnist for Canada.com, is not surprised by this success. As the second featured speaker participating in the webinar, he noted how important it is to view the Internet as a place, not a thing.
“For some in the sector, there are different degrees of resistance to Twitter and Facebook,” he said, “but I guarantee that these channels are relevant and have impact in both business-to-business and business-to-consumer environments. Smartphones are changing how we socialize. Fueling the social fire is mobility.”
Social media is prized for its ability to build relationships, create communities and to engender loyalty. The online irony, Dotto noted, is that with millions of interactions, the consumer still seeks that personal experience. For consumers, that personal interaction is any time of day or night. And the seller has to honour and respect the experience.
In Dotto’s opinion, live streaming will be a game changer. Applications such as Periscope, MeerKat and Blab work well on mobile phones.
“We can expect to see live video in the future,” Dotto said. “This is place shifting in real time.”
The opportunities are immense for growers, shippers and retailers to expand reach into consumers’ homes. This is an era of just-in-time knowledge, telling the story from farm to table. In return, consumers like to participate in review systems. This has proved an important function to Amazon who lets consumers rate their products.
“The education layer greases the skid for everything else,” said Dotto. “The cost of acquiring a customer is becoming more important in the online world. You have to find a way to bind them to you.”
Small and medium-sized produce businesses have an advantage in leveraging these new social media channels. Google Analytics, for example, allows you to market to targeted postal codes. Test and learn.
Instagram is another social media channel that’s skyrocketing in popularity. A high percentage of photos on Instagram are of food.
“It’s a foodie place,” said Dotto. “So take advantage of the fact that 30 per cent of U.S. adults now have an Instagram account.”