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How grocers can cut the cord on third-party marketplaces and take control of their own ecommerce
Some grocers are questioning the profitability and long-term viability of relying on third-party marketplaces
4 Min Read
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Jeff Anders is the co-founder and CEO of Grocerist, an eCommerce technology and marketing solution that helps independent grocers take control of digital to drive growth in-store and online. Jeff is a serial entrepreneur with ventures in software, film studios, and marketing & advertising. Previously Jeff worked at a global management consultancy and completed masters degrees at the Massachusetts Institute of Technology and Harvard University.
Instacart arrived in 2013 and provided grocers the ecommerce presence they so desperately needed. Much later, the pandemic would provide a temporary boost in grocers’ interest in marketplaces, as ecommerce was suddenly more urgent for everyone, and not all grocers were online.
But flash forward to 2023, and those same grocers are questioning the profitability and long-term viability of relying on third-party marketplaces — which do bring them business, but much of it is unprofitable, and it comes at the expense of ceding the digital relationship with their own customers.
Recently, independent grocers have begun looking for ways to get off those marketplaces and take back control of their own ecommerce. We are seeing more grocers cut the cord and run their own profitable ecommerce operations funded by the fees they used to pay a marketplace.
One is the Cleveland, Ohio-based Heinen’s, which announced the launch of its own mobile ecommerce app and website in February, indicating that orders would now be fulfilled “by trained Heinen’s associates who will carefully pick and pack only the best quality groceries for you,” and noting that order questions would now be handled by local Heinen’s staff.
What has changed to enable grocers to liberate themselves? The three most significant changes are:
1. Merchants no longer need to build their own ecommerce sites. E-commerce platforms like Shopify and its partners have tailored their offerings to grocers, making it far easier and less expensive to build and run your own ecommerce business than ever before. These options were not available in 2013 when the first marketplaces launched.
2. Delivery is expensive, and grocers tend to break even on it at best (many lose money). Pickup on the other hand is a profitable fulfillment method. Fortunately, its popularity grew during the pandemic, to the point where customers have shown a willingness to pay for it.
3. Many grocers are already picking and packing for marketplaces, so they have those skills in house now. There’s no need to pay a third party for it.
What does a grocer gain by taking ecommerce in house?
Higher profit margins. The fees that were going into marketplaces — often 20% or more of each transaction paid by the merchant and the customer — can now be invested in ecommerce capabilities and still leave a profit margin for grocers, making ecommerce a profitable endeavor at last
Lower costs for customers, which in turn helps drive more business. Customers never enjoy paying extra fees. Reducing or eliminating those fees — which many grocers can afford to do after taking ecommerce in house — can help attract new customers and bigger basket sizes from existing ones
More and better data on customer buying habits, to drive marketing campaigns. In a marketplace model, the marketplace owns the customer relationship and collects the data. Often, it’s not shared with the grocer at all. Sometimes, it’s available but the grocer must buy it. Once grocers take ecommerce in house, they can link each order to a specific customer, and unlock the ability to send customers offers designed for their specific needs. For example, an email offer for 10% off cat food to customers that ordered cat litter in the last 90 days. This leads to more store visits, higher basket sizes, and more loyalty over time
What grocers should look for in an ecommerce platform:
Grocery-specific. Off-the-shelf ecommerce solutions don’t work for grocers, which have unique needs such as the ability to price weighted items and make substitutions in orders. It’s important to look for a platform that’s tailored just for grocers
Pickup as well as order delivery. Marketplaces were focused on delivery, but pickup (in-store and/or curbside) is also extremely popular and should be part of any grocer’s ecommerce strategy
Support for SNAP EBT and incentive programs. Given the growing popularity of nutrition supplemental programs such as the USDA’s SNAP EBT and Double Up Food Bucks, grocers should look for platforms that support them with rapid onboarding timelines (or can in the future)
Marketing features. If you build an ecommerce platform, they won’t necessarily come. Driving customers to shop - and doing it in a way that doesn’t cannibalize profitable in-store sales — is crucial. Look for an ecommerce platform that incorporates campaign features and templates that enable even novice marketers to create and run email, text, web and social media campaigns
Is the era of grocery ecommerce marketplaces over? Probably not, though it’s certainly on the cusp of big change. For many grocers, the build vs. buy calculus is changing rapidly, with many more likely to land on build.
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