Errol Schweizer
I’m pretty skeptical because e-commerce in grocery has not been the big disruptor that a lot of people thought it would be. It’s still a minority share of all grocery purchases. It spiked a bit during COVID-19, but it’s well under 10 percent.
There was a lot of hype around it, especially when Amazon bought Whole Foods, a lot of froth. I’ve worked for a number of e-commerce outfits. You can’t make a profit in online grocery. It’s so expensive to sell food online. It’s either a cost center or you’re subsidizing it through your brick-and-mortar. Instead of you, the customer, walking into a store, shopping for yourself, and checking out, now you have to hire people to do that for them. It adds another 10 to 15 percent in terms of just the labor costs.
E-commerce in grocery has not been the big disruptor that a lot of people thought it would be.
Kroger has lost a ton of money on e-commerce. Their e-commerce has been hemorrhaging money and really lowering their overall rate of profit because it’s been growing as a share. They do a lot of e-commerce at Kroger and Vitacost. People like it, and they’re really good at it, but it’s really expensive and not profitable.
The numbers don’t bear out Kroger’s continued investment in it, yet I think there’s a compulsion that they have at the leadership level to keep growing it as a share. Having worked in that sector, the only way it would be successful is if you’re only e-commerce, if that’s all you do. You have to be selling a differentiated, distinct, high-margin product to pay for the home delivery.
Amazon does nonperishables very well. If you are in a major metro area that is geographically close to one of their distribution centers, you can get stuff within a few hours sometimes. But I haven’t seen the data to show that that is how more people are going to be…
Auteur: Errol Schweizer
