Natural and organic e-retailers are balancing price and service as they strive to make gains against both physical stores and larger online competitors.
That's the strategy outlined by executives from Relay Foods and Door to Door Organics during an SN Health & Wellness Summit workshop at Natural Products Expo East in Baltimore.
"The big challenge is consumer behavior change," said Chad Arnold, CEO, Door to Door Organics. "Consumers have shopped brick and mortar for a long time. The role of online grocery has yet to be defined. We need to figure out the different trip types."
Sarah Yates, VP of marketing for Relay Foods, said physical stores are the players to battle for now.
"Online shopping is only about 5% of the business, even for natural and wellness, so we see brick and mortar stores as the primary competitors," she said.
These online players are counting on differentiated services to win over customers. For Relay Foods, one approach is its flex meal planning tool.
"These involve recipes for healthier meals developed by a dietitian," Yates said. "Consumers are seeking these kinds of value-adds that they can't get at grocery stores. They can shop for a week's worth of meals in 15 minutes and then get delivery to their doors."
Despite the enhanced service experience, price remains vital to consumers, she added.
"Sales and price continue to be important," she said. "It keeps consumers coming back and forming habits. Consumers are price sensitive about food, they don't want to be raked over the coals."
Arnold agreed about the importance of price and said, "consumers are building their sense of value."
Asked about competition from larger online competitors, such as Amazon, Arnold said, "There are lots of players, but I don't think people will confuse Amazon with Door to Door Organics. Consumers shop with us for the experience."
Yates said she welcomes competition from Amazon and Instacart.
"Only about 5% of the market share is for online, and as consumers jump over the hurdle of shopping online, they may come in through other players, but they'll find Relay, where quality and meal planning provides a better experience."
The online operators said they found some big surprises in this business, including with the consumer bases.
"We assumed we'd be getting consumers who are high-end foodies, Millennials and digital-savvy, Yates said. "Yet our audience turned out to be a bit older than expected (35-50) and more have families than we expected.
Arnold said he was surprised how much consumers said they are looking for experiences that are better than in grocery stores.
"Moms are going to grocery stores and sorting through SKUs, and it's not a good experience," he said.
Another panelist, Bill Bishop, chief architect, Brick Meets Click, said the future of online grocery in the natural and organic space will be about differentiation.
"Health and wellness will become more of a commodity," he said. "The main points of difference will be elements of your brands."
In a presentation before the panel, Bishop outlined some key points about online grocery.
He said its growth is driven by factors including expanded availability, range of options (such as same-day delivery) and greater affordability that will help to mainstream it.
Bishop said it's important to understand different online shopping occasions, and he pointed to three in particular, each of which have applications to the natural products space, he added.
These include the full basket shop, which typically involves a large range of household needs as well as advance planning with a long list. Another is a partial basket shop, and a third is the targeted shop, usually just for a few items.
"You need to focus on opportunities within online shopping occasions," he said.
SN retail editor Jon Springer moderated the panel.
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