Adrien Nussenbaum is co-founder and CEO of Mirakl, the Paris- and Boston-based e-commerce marketplace platform adopted by a number of U.S. grocers bringing additional assortment to their online offering. The following interview has been lightly edited for clarity and style.
Jon Springer: Welcome to the Breakroom, Adrien. According to the recently published Enterprise Marketplace Index, enterprise marketplaces grew at more than double the rate of overall e-commerce growth in 2020. Was that also true of food retailers with online marketplaces? Why?
Adrien Nussenbaum: While demand for online grocery options has risen over the past few years, it exploded in 2020. In June of 2020, U.S. online grocery sales hit a record $7.2 billion, with 45.6 million households turning to online grocery pickup and delivery options. Compare that with less than a year ago, when only 16.1 million U.S. households were using online grocery, totaling just $1.2 billion in sales.
In 2021, we’re seeing those trends continue: In March, e-grocery sales in the U.S. surged to $9.3 billion. The trend stretches beyond the United States, as well. Since the beginning of the COVID-19 pandemic, the number of online grocery buyers has grown by 30% globally—with parallels seen across retail industries as consumers shift away from the in-store buying experience toward convenient online alternatives. According to the Enterprise Marketplace Index report, while traditional e-commerce platforms have experienced steady growth, online marketplaces have grown at double the e-commerce rate—marketplaces grew by more than 80% year over year in Q4 of 2020.
Not all food retailers with e-commerce ambitions currently offer a marketplace option. Generally, what concerns have they expressed? What would be the argument against it?
One thing that comes up in all early-stage grocery conversations is how companies can integrate marketplace with their curbside pickup business. Many grocers, like Wakefern and H-E-B, have a split e-commerce business for ship-to-home and curbside, and the curbside business represents 95% or more of online sales. Integrating marketplace and extended aisles while ensuring that the customer experience is not confusing has been something we’ve had to address.
Grocery marketplaces are one of very few models that can achieve the scalability, operational efficiency and profitability needed to compete in a crowded, hyper-slim margins-based market, and allows for greater flexibility. Online marketplaces are transforming the traditional grocery business model, allowing for grocers to balance the needs of sellers, buyers, partners and their own business with an ecosystem approach.
Integrating marketplace and extended aisles while ensuring that the customer experience is not confusing has been something we’ve had to address.
Marketplaces specifically must be treated as an integrated part of the e-commerce experience—not a stand-alone initiative. Each business section needs to be monitored, bringing attention to both in-store and online customers, their habits and their choices. It comes down to understanding where and how their customers are shopping and meeting them there by offering choice, selection and service.
How has food retailer thinking on marketplaces evolved since 2018?
There has been an overall shift in thinking around marketplaces over the past few years as more and more grocers began to integrate marketplaces into their omnichannel strategies. Marketplaces empower grocers with the flexibility and agility to introduce new products and categories as customers’ needs change, complementing in-store, delivery and pickup offerings. By expanding the assortment at scale, the marketplace also paves the way for grocers to gain more wallet share from their customers–something every retailer strives to achieve.
Marketplaces also resolve important financial questions for grocers. By building a competitive marketplace environment where sellers compete on the best price, grocers can more easily withstand price competition. And crucially, in an industry with challenging margins, the model is profitable, giving grocers a strategy to enhance customer experience with no inventory risk and fewer logistics to worry about. The proof points validate the need and business case for marketplaces, and as more businesses implement them, they are able to reach new sets of customers while still providing essential services to their in-store customers.
Kroger, Ahold Delhaize USA and wholesaler United Natural Foods have all added or intend to add marketplaces soon. How will we know that these are successful for them? And what is required of the retailers to make these offerings a success?
There is currently a narrow window of opportunity for businesses to seize a competitive advantage, and it’s only getting smaller. Marketplaces are quickly becoming table stakes for the modern enterprise and these grocers have recognized this opportunity. But not all marketplaces are created equal. To realize the full benefits of online grocery marketplaces, grocers must follow best practices developed by early adopters of the marketplace model.
They need to integrate with the online grocery experience: Online marketplaces are a departure from the traditional grocery business model, requiring a balance of sellers, buyers, partners and own business with an ecosystem approach. ... Successful grocery marketplaces incorporate third-party offerings into the existing first-party online shopping experience. Doing so allows grocers to hit the ground running and quickly identify the marketplace offerings that resonate most with customers.
Grocers need to work with marketplace sellers to solve the fulfillment puzzle: The economics of shipping groceries straight to customers’ doors is a challenge—and keeping fulfillment and shipping costs down for sellers and customers is necessary for a marketplace to grow. Many successful grocery marketplaces offer “fulfillment by operator,” giving sellers the option of leveraging existing distribution networks for an additional fee.
Grocers also need to look at categories beyond traditional grocery.With an online marketplace, grocers can think outside the box and grow in new categories with little risk. One example would be Kroger Ship, which launched at the end of 2020, targeting categories like toys and homewares in addition to international foods and specialty food items. The marketplace gives grocers the freedom and flexibility to test out new categories and learn what resonates most with customers—all while earning incremental revenue.
Finally, grocers need to treat the marketplace as a pillar of omnichannel strategy.
Even in the new digital-first age, where e-commerce is king, grocery shoppers’ habits are still closely linked with their local stores—and the marketplace must also connect to local stores for it to thrive. This means enabling in-store pickup for marketplace products, making it easy for shoppers to order marketplace products while shopping in-store.
Consider the shot across the bow that was Amazon’s acquisition of Whole Foods in 2017. The mega-marketplace’s first entry into grocery involved offering grocery goods for purchase on Amazon.com. Even with its strong existing customer base, it ultimately realized that a distributed network of stores was essential to growing in the space—and it purchased Whole Foods to make that happen. Now, it’s also building high-tech brick-and-mortar grocery storefronts of its own, both in the U.S. and internationally.
Mirakl closed a $300 million funding round late last year. Where do you need to invest?
The funding will enable Mirakl to reinforce its industry leadership by significantly investing in its technology and partner ecosystem and growing its team. We’re hiring over 300 engineers in the next three years, and significantly scaling our sales and customer success teams to support customers.
Last item you bought online? A hoodie for my new LA style.
I hear you’re a good cook. What’s your specialty in the kitchen? Pasta and raw fish.
A previous company you co-founded and since sold was a network of video-game services. Do you play? No, I’m comically bad at video games.
Fill in the blanks: I thought the hardest part of this business was going to be everything, but it’s turning out to be almost everything.
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