Online grocers like Peapod, FreshDirect, Safeway, Instacart, and many more are rapidly expanding, creating new fulfillment centers, new pickup locations and expanding delivery zipcodes. Within the next 5 years, Nielsen expects online CPG sales to increase to $31 billion up from $15.6 billion in 2012 and just about every week there's another article circling around the internet about how this industry is growing and all the potential it offers in the $1 Trillion food retail industry.
There are a number of different online grocery models currently being used in the market. We don't have time to cover all of them but here are a few of the most successful so far:
Warehouse Model:
This model uses large, centrally located warehouses to effectively and efficiently ship out large quantities of orders for groceries before fulfilling online orders. While requiring scale, it offers perhaps the best solution to the 'last mile' problem of delivering fresh produce and products and is used by the online grocery giants Peapod, Fresh Direct, and Amazon Fresh.
Customer
Adv - You can stay at home and simply wait for the groceries to arrive at your doorstep.
Disadv - Most companies have a minimum order size and a grocery delivery fee to boot.
Grocer
Adv - Being able to leverage the scale of their warehouses and their vast infrastructure.
Disadv - Having to deal with the logistics of delivery freshness with massive overhead costs.
Curbside Pickup Model:
A number of stores, including ones that use the warehouse model to delivery fresh produce, offer grocery pickup. Users can order their groceries online and opt to have their groceries pre-packaged and waiting for pickup at the store.
Customer
Adv - No minimum order, no huge delivery fee.
Adv - No minimum order, no huge delivery fee.
Disadv - Driving to the grocery store (but usually there's no need to step out of the car!)
Grocer
Adv - No need to deal with delivery logistics keeping overhead lower plus can use existing stores as pickup locations (Harris Teeter and Publix).
Disadv - The need to create and allocate workers for processing
Crowdsourcing Model:
This model is implemented by companies that have workers/pickers go out and shop for groceries, handling the delivery logistics part without having to handle the supply of the groceries. They have a list of stores from which the users can choose to get groceries delivered from in any given city. The most notable company using this model is Instacart.
Customer
Adv - More diversity in applicable grocers / options (delivering Whole Foods and Trader Joes is pretty awesome)
Disadv - Hefty delivery fees and inaccurate pricing
Company
Adv - No need to create formal partnerships with brick and mortar grocers
Disadv - Decreased information on inventory and pricing information
