How Independent Grocers Can Compete Online

Small food retailers need e-commerce solutions that capitalize on their existing advantages
Photograph: Shutterstock

For independent grocers, doing business in the open market has always looked like David vs. Goliath. The opposition is so large as to seem insurmountable, but the tiny challenger stays in the game through sheer determination.

The comparison is more on-target than one might think. Goliath was probably blind and nearly immobilized by his heavy armor, so all he could do was wait for David to make a mistake. David, meanwhile, had the benefits of mobility and a simple yet effective weapon that he knew how to use.

A similar process is happening in today’s grocery retail sector. The market for online grocery services is growing rapidly—studies estimate growth up to 18.2% by the end of 2019.

The industry giants are holding firm at the top. Amazon is expected to capture the highest market share of U.S. grocery e-commerce at 32.7% by the end of 2019. Other billion dollar-plus companies are stepping up to challenge Amazon and hold on to their market leader positions, using brick-and-mortar resources to offer click-and-collect as well as delivery.

Meanwhile, independent grocers are looking for ways to keep up, but they have many challenges to overcome.

Many independent grocers would love to offer e-commerce functionality—to serve their customers better and expand their market penetration. Unfortunately, they often suffer from a lack of resources and expertise to dedicate to costly e-commerce ventures.

The upfront costs of e-commerce affect grocers more than they do other retailers. Food retail has always yielded slim profit margins, but traditional grocery stores manage by avoiding significant overhead. Customers of brick-and-mortar grocers choose and transport the product themselves, reducing the need for additional staff. Online grocery is appealing because it eliminates this effort for the customer, but then the grocer has to take it on.

A fully functional order management system is a major necessity for click-and-collect or delivery services. Order management solutions power the efficient routing and fulfillment of grocery orders, but they require significant up-front investments. A larger grocery or general retailer can make up for the costs through higher-margin product lines, but independent grocers lack those options. 

Unfortunately, because grocery has inherently slim profit margins, the independent grocer can’t carry the cost of an e-commerce platform until it pays for itself. The grocer also can’t compensate with handling and delivery fees, because those payments would only cover costs if they exceed what grocery customers are willing to pay. 

The average e-commerce platform is not just costly but also challenging and labor-intensive to maintain. E-commerce platforms require advanced technical knowledge, but independent grocers lack the required on-staff technical experts, as well as additional resources, to work with these systems.

Starved of resources, independent grocers often struggle to implement and maintain e-commerce platforms. Without e-commerce platforms, they have difficulty keeping up with the trend toward online grocery adoption.

High-quality e-commerce platforms are technologically advanced tools, and their widespread adoption has made it easier for independent grocers to access them. Retailers need to be careful when shopping for an e-commerce platform that the technology is specifically designed for small independent grocers and gives users easy setup services and access to a diverse product library. They need to look for vendors that allows independent grocers to capitalize on the advantages they already have in their stores and replicate them online. Independent grocers will want to use these e-commerce platforms to display and promote their unique products, reaching many shoppers who might not be aware of their services. 

The e-commerce platform also needs to be customizable so independent grocers can use the system to provide the kind of personalized experience that today’s customers demand. Like David, the independent grocer can play to its strengths and adapt to the challenges of being a small company in a Goliath company's world.

Bagrat Sarafian and Tigran Zograbyan are the founders of Local Express.



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