Food E-Commerce: finally finding its feet

Although it has taken some years to become a serious contender among the multitude of other e-commerce segments, food is finally becoming feasible as an investment. Sell businesses are being flooded with new startups looking for greater corporate financing and potential acquirers, and investors are taking the bait. Just two weeks after reaching a $1 billion valuation on the back of a major acquisition, Berlin-based online food ordering and delivery site Delivery Hero has raised another $350 million in finanacing. So why is food suddenly on investors’ menu?

Visiting a supermarket, queuing at the till and delivering the goods home is increasingly an outdated concept, as time- and price-sensitive consumers switch to grocery e-commerce platforms instead. The segment was worth US$41.6 billion globally in 2013. Traditional bottlenecks to food and drink Internet retailing, such as long delivery times, weak online choices and poor quality produce, are giving way to more consumer-friendly and professional services. Large urban centres, in both developing and developed countries, are providing growing opportunities for web retailers and in-store supermarkets to benefit from a surge in home-delivery demand.

Unlike retailing in electronics, fashion and home furnishings, for many consumers grocery shopping is more necessity than pleasure – a mandatory process to deliver essential but the same food and drink items to the fridge. The regularity and consistency of household grocery habits make it an ideal segment for web retailers, with many physical supermarket brands and start-ups entering the e-grocery market as a result.

Some of the main drivers behind growing food and drink e-commerce include:

  • More females entering the workforce globally means the traditional roles of women as housewives and on-the-premises food shoppers is disappearing;
  • Rising urbanisation is creating population-heavy hubs that are facing overcrowding, high traffic and longer supermarket queues;
  • More consumers are coming online and expanding their awareness of online shopping platforms, while the rise in mobile Internet means users are able to order grocery deliveries on the go.

In a rapidly urbanising and industrialising global economy, time is money and on-the-premises food shopping is a luxury fewer consumers are able to maintain. Convenience is the dominant driver in online food sales and this aspect is especially valued by large households with one or more children for whom a trip to a store can be stressful. Typically, the more produce a home consumes the more value there is in having it delivered to the doorstep, with food commerce marketers likely to find a willing audience among this demographic.

Food e-tailers are seeing especially strong uptake in the world’s emerging market megacities, where Internet usage is high and rising, IT savviness is advanced and incomes permit broadband connections and digital device ownership. Cities such as Shanghai in China and Sao Paulo in Brazil are seeing a web food sales boom, with firms placing a premium on quality of produce and fast delivery times, and the trend is steadily reaching second-tier cities. China already has the world’s second largest food and drink web retailing segment by value globally, driven by a growing middle class, and it is set to grow further.

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