Food Trend to Watch: Retailers Create Online Marketplaces, Collaborate with Local Producers

All online grocers are trying to convince consumers that it is as convenient to order perishables online as it is to order shelf-stable groceries. Trust is a major factor here, and different companies have greater or lesser success in this regard. For the most part, it is essential to train employees so they have the proper skills to choose appropriate fresh fruits and vegetables and proper cuts of meat.

However, Packaged Facts in the report  Online Grocery Shopping in the U.S., 2nd Edition reveals that there is another factor to the selection and procurement of fruits and vegetables: local foods. Many consumers are looking to local farmers markets, produce baskets, butchers, and bakeries for their perishables. For many consumers, this goal is in direct contrast to ordering those same groceries online from larger grocery stores. Some community supported agriculture programs (CSAs) allow members to sign up for subscriptions and customize their orders online, while offering only items from local merchants. However, farmers markets and CSAs make up an incredibly small part of the online grocery market.

To fulfill demand for local foods available online, retailers such as Instacart and Amazon (with its Prime Now service) offer to shop for products at local stores in addition to larger chains. FreshDirect is doing the same through its FoodKick service.

However, the best way for major retailers such as Amazon and Walmart to engage with local producers and independent grocers is to allow them to use their online grocery marketplaces for a fee in the same way they have opened up their regular online marketplaces to other sellers. Trust issues for picking perishables would be alleviated, assuming the consumer already has a good retail relationship with the local provider.

A less likely scenario is that companies offer online shopping for center-store products and then provide a pickup point at a local farmers market or other local store. This would provide the consumer with a way to support local businesses and would simultaneously alleviate trust issues by allowing consumers to select their own perishables without needing to make yet another shopping trip to purchase the rest of their groceries. Companies would also benefit because offering a set time and location for grocery pickup would be significantly less expensive than delivery. This means companies would be able to provide this service at a substantially reduced price compared to regular delivery, although these gains would be offset by the reduced sales because a portion of each basket is lost to the local provider.

-- by Cara Brosius, market research analyst