what is the business model of grocery

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The $2.5 Trillion Opportunity for Grocers That Are First to the Future

May 19, 2020  By  Chris Biggs ,  Khaled Tawfik ,  Ameya Avasare ,  Henry Fovargue ,  Dewang Shavdia , and  Gavin Parker

One thing is certain in this period of uncertainty: the coronavirus outbreak will permanently transform the grocery retail landscape. Consumer behavior is changing radically. In the wake of the pandemic, first-time users make up 41% of US online grocery shoppers. And about 35% of food expenditures—more than $2.5 trillion globally—is up for grabs as consumers shift to dining at home, experimenting with new buying channels and formats and trying out new products. The competitive balance is fluid as well because weaker retailers are struggling to maintain their positions in this unprecedented economic tsunami.

To come out as winners, grocery retailers need to make bold moves now. But doing so requires understanding how today’s crisis will impact the future—and being first to that future by distinguishing the trends that will persist from those that are transient. If past disruptions are a guide, certain shifts in consumer behavior become permanent or at least endure well after a crisis has passed. For instance, in the wake of the 2003 severe acute respiratory syndrome (SARS) contagion, the rate at which new users signed up for online shopping in China increased fivefold, ultimately resulting in the world’s largest e-commerce ecosystem. And after World War II, the number of companies producing canned goods increased by 230%; consumer demand for food with a longer shelf life grew in the wake of civilian food shortages, which resulted from the massive needs of the military. Many of these products and dozens of offshoots remain popular today.

Shifts that we thought would take as many as five years are occurring in five months.

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To accurately predict what the future holds, grocers and other essential retailers need to discard many of their prior assumptions. Shifts in the business environment that we thought would take as many as five years—such as the rapid rise of grocery e-commerce into more than a relatively small channel—are instead occurring in five months. Other trends that could not have been predicted are presenting unexpected opportunities. And all these changes are happening against the backdrop of potentially the largest recession in several generations.

A Big Shift in Food Spending

An outsized opportunity has arisen from the drop in spending on prepared food, a result of the emergence of COVID-19. Significantly, 35% of food expenditures is in flux, a percentage that is likely to change a few times during the stages of the outbreak. Restaurants have been closed, and takeout has declined. Almost no one has been eating at their jobs because many people have been working remotely. And with money tight and fears about leaving home rampant, consumers have been cooking their own meals to a greater degree. Meal kit sales are up since the outbreak—as much as 40% to 60% over 2019 sales in developed markets.

The new eating habits forged during this period are expected to outlast the pandemic because it will probably be some time before consumers feel safe or economically secure enough to frequent restaurants and takeout providers. In fact, 60% of consumers in recent surveys said that they plan to reduce spending at restaurants and increase at-home eating even as COVID-19 restrictions are lifted. Grocery retailers with the vision to capitalize on consumers’ changed behavior have an opportunity to build a lasting presence in the profitable in-store or at-home dining market.

Future Trends

To survive this uncertain period and succeed long term, grocers must proactively design strategies around the trends and behavior that are expected to outlive COVID-19. (See the sidebar “How the Grocery Market Will Evolve in the Wake of COVID-19.”) Being proactive could make the difference between riding out the next few years and emerging stronger—or failing.

How the Grocery Market Will Evolve in the Wake of COVID-19

Although these past few months have been a boon for essential retailers, with sales growing by as much as 100%, the windfall will almost certainly be short-lived. In fact, most countries are already seeing grocery growth stabilizing at about 5% to 15% because consumers have shifted away from stockpiling. (See the exhibit.)

The identification of coronavirus cases followed by the global lockdown frightened consumers into panic buying, stockpiling food and other essential items. But as the adaptation stage drags on—with the curve of new cases flattening and isolation rules slightly relaxing, yet virus fears remaining and the economic consequences worsening—grocery sales will decline, reflecting sluggish consumer confidence and decreasing disposable income. Lower sales volumes will mostly negate gains in areas such as prepared foods for at-home dining, and overall grocery results will be constrained.

Only when COVID-19 is no longer viewed as a real threat—perhaps at a point in the future when hoped-for virus treatments and vaccines are available—can we expect to return to something resembling normal activities and an economic rebound. At that point, grocers that have already begun to implement growth strategies consistent with new consumer behavior will be in a privileged position.

Forecasting the future is not easy, and consumer behavior, preferences, demographics, and the competitive landscape will differ in each market. But many trends that grocers will have to navigate over the coming years (in addition to the shift in food expenditures) are already emerging. They include:

• The Ascendance of Online Channels. Since the COVID-19 crisis began, e-commerce gains for essential retailers across the world are stunning—more than 100% year-over-year growth in many regions. Grocery retailers need a strategic, well-thought-out plan for a compelling online presence and offering that is based on an operating model that will deliver profits as well as growth. The plan must include a high-quality website or app, dependable logistics, fine-tuned inventory management (to ensure availability), and reliable multichannel convenience. Shortcuts for the sake of speed could backfire and result in consumer dissatisfaction.
• Fluid Formats. Successful store formats will need both a superior customer proposition and better economics. Grocers that are dependent on larger stores may find that short-term like-for-like sales gains in bigger outlets are temporarily covering up a longer-term decline in such stores. In addition, the increasing popularity of online channels may further cut into the viability of larger stores. A smart retailer strategy could be to repurpose larger stores as outlets that better fit local customers’ needs and to develop or acquire distinctive smaller formats. Regardless of the format, grocers will have to integrate features that reflect changing consumer preferences, especially around safety. For instance, grocers will have to implement hygienic practices at counters and temporarily remove salad bars.
• Revised Consumer Attitudes Toward Brands and Products. With pocketbooks tight and health worries a lingering shadow, retailers can gain significant market share through differentiated private labels that target a new consumer emphasis on value, nutrition, and health. Retailers should consider developing or acquiring private labels that dovetail with these new consumer preferences.
• A Shift from Mass Promotions to Targeted Ones. In order to cope with spikes in demand and make sure that stock is available, many grocers have simplified their product categories and reduced their promotional intensity. By continuing this strategy, grocers will have an opportunity to reset promotional programs, rather than let complexity creep back in. The outcome would be more-targeted promotions, perhaps geared toward online channels, that consider purchases and shopping behavior.
• Supply Chain Shocks. In this crisis, most grocers’ supply chains struggled to cope with huge fluctuations in demand. Forecasts were inadequate, leading to stockouts of staples and inconsistent product deliveries. But despite the significant demand shifts, retailers have done relatively well in adjusting their supply chains and expanding capacity as the crisis progressed. Over the longer term, grocers must fortify their supply chains even further to better withstand the next pandemic or any other global crisis. Retailers should remap their supplier networks, adding sufficient backups and redundancy to secure smooth product flows no matter the conditions. Forecasts must also become more precise by using artificial intelligence and other data management systems to analyze internal and external demand drivers that could influence changes in customer trends as they happen in real time.

Grocers have adjusted their supply chains, but they must fortify them further to better withstand the next crisis.

• Increased M&A Activities.  Grocers are one of the few retailers that will have relatively strong balance sheets in the near term, giving them the opportunity to acquire skills, new store formats, online capabilities, and customer pools by purchasing undervalued assets. This has already begun to occur; global M&A volume has declined 20% to 30% across all industries, but it is flat in the retail segment. For most grocers, the competitive environment in the future will be altered by consolidation and the emergence of new digital rivals.
• A Bigger Role for Societal Impact.  Grocers have been pivotal in serving communities during the crisis, leading the way in protecting their employees and shoppers. They have provided desperately needed products and food to consumers through safety-proofed physical outlets, home deliveries, and contributions to food banks. Grocers should build on the momentum toward greater community involvement by permanently embedding total societal impact policies into local and global activities, an approach that has been shown to deliver tangible gains for both communities at large and long-term business. Grocers also have the opportunity to differentiate themselves and gain competitive advantage by embedding sustainability precepts (such as low waste, low plastic) into their operating models.

Make Bold Moves Now

With so much at stake for grocery retailers, and with a high level of uncertainty for the next few years, long-term success stories will come from grocers that make bold moves now to be first to the future. Past crises have taught us that early actors win. The relative return on investment from a major retail transformation when started preemptively in a downturn can be as high as 50%. And companies that expanded business opportunities during a downturn often report purposeful growth that is 8% above those that retrenched.

Retailers need to proactively take actions across three priorities to win the future:

• Reshape channels . Build an attractive e-commerce model that can operate at scale, with the assumption that online sales could grow to as much as 10% to 15% of revenue, compared with their low single-digit precrisis share. Innovate in physical spaces because the unit economics of stores will undoubtedly change. Think through how to reallocate space, downsize large stores, and develop new formats.
• Reimagine offerings. Make changes to the value proposition to better suit customers’ changing needs. This action requires understanding new behavior, such as more at-home dining, and building stronger customer relationships through targeted personalized marketing and differentiated private labels. Stay ahead of shifting trends on an ongoing basis by better monitoring customers’ preferences and needs, rather than view this crisis as a one-off reset.
• Reposition the business. Fuel growth by reallocating resources in ways that reflect future customer behavior and trends; reset costs using a blank-page approach. Build digital capabilities to support business decisions using advanced analytics. Pursue strategic M&A, improve supply chain resilience, and embrace social impact and sustainability policies.

When faced with the need to take such significant action, many retailers pursue what appears to be the easiest, most logical path: they sequence their crisis response. (See the exhibit.)

But for grocery retailers this type of strategy would be unwise. The landscape is changing too rapidly, and customers are realigning their behavior too radically to be reactive. The dynamics of the industry, buffeted so violently by the COVID-19 pandemic, require retailers to be aggressive. In today’s world, and the one to come as the virus ebbs, only parallel decisive actions will produce winning results. In other words, if a retailer is solely focused on stabilization now and plans to prepare for the rebound later, it will likely be too late.

Managing Director & Senior Partner; Global Leader, Retail Sector

Managing Director & Partner

Managing Director & Senior Partner

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Demystifying the Supermarket Business Model: A Comprehensive Explanation

Unravel the complexities of the supermarket business model with our comprehensive guide.

Understanding the Supermarket Business Model

Before we delve into the intricacies of the supermarket business model, it's essential to understand its basics. At its core, a supermarket is a retail store that sells a wide variety of food and household products. It differs from other retail models due to its size, assortment, and self-service format.

In a supermarket, customers have the freedom to browse and select products from the shelves themselves, making it a convenient shopping experience. This self-service approach is one of the key factors that define the supermarket business model.

But let's take a closer look at the supermarket business model and explore its various components and strategies that contribute to its success.

The Basics of the Supermarket Business Model

Supermarkets have several key components that contribute to their success. At the forefront, we have the product selection. Supermarkets offer a vast array of goods, from fresh produce to canned foods, snacks, and household essentials. This diverse product range caters to the varied needs of customers and drives foot traffic.

But it's not just about having a wide range of products. Supermarkets also focus on product quality and freshness . They establish relationships with trusted suppliers and implement stringent quality control measures to ensure that customers get the best products.

Another critical aspect is pricing. Supermarkets operate on a low-margin, high-volume model. They keep prices competitive to attract customers and rely on high sales volumes to generate revenue. This pricing strategy often leads to thinner profit margins but ensures a steady flow of customers.

In addition to products and pricing, supermarkets invest in store layout and customer experience. They strategically arrange shelves to optimize traffic flow and enhance customer convenience. From well-organized aisles to easy-to-navigate sections, every aspect of the store layout is carefully designed to improve the shopping experience.

Moreover, supermarkets prioritize customer service. They train their staff to be knowledgeable and helpful, ensuring that customers have a pleasant and hassle-free shopping experience. From assisting with product inquiries to providing guidance on finding specific items, supermarket staff play a crucial role in customer satisfaction.

Key Components of the Supermarket Business Model

Within the supermarket business model, there are several key components that work together harmoniously. One of the most crucial components is the supply chain. Supermarkets rely on a robust supply chain to ensure a steady and uninterrupted flow of products.

An efficient supply chain management system is vital for supermarkets to maintain optimum inventory levels, minimize wastage, and meet customer demand. From sourcing products from manufacturers and distributors to managing stock levels and replenishment, the supply chain plays a pivotal role in the supermarket business model.

Supermarkets also employ sophisticated inventory management systems that utilize data and analytics to forecast demand and optimize stock levels. By accurately predicting customer preferences and buying patterns, supermarkets can minimize stockouts and reduce excess inventory, leading to improved profitability.

Furthermore, supermarkets place great emphasis on marketing and advertising. They utilize various channels, such as print media, television, radio, and digital platforms, to promote their products and attract customers. Special promotions, discounts, and loyalty programs are often employed to incentivize repeat business and foster customer loyalty.

Lastly, supermarkets actively engage in community outreach and corporate social responsibility initiatives. They support local farmers and suppliers, promote sustainable practices, and contribute to charitable causes. By actively participating in the community, supermarkets build a positive brand image and establish themselves as trusted and responsible retailers.

In conclusion, the supermarket business model is a complex and multifaceted system that revolves around product selection, pricing, store layout, customer service, supply chain management, marketing, and community engagement. By effectively managing these components, supermarkets can thrive in a competitive retail landscape and provide customers with a convenient and satisfying shopping experience.

The Role of Supply Chain in Supermarket Business

Now that we understand the significance of the supply chain, let's explore its role in more detail.

The supply chain plays a crucial role in the success of supermarket businesses. It encompasses all the activities involved in getting products from the manufacturer to the store shelves. An efficient supply chain management system is crucial for supermarkets to minimize costs, meet customer demand, and deliver products in a timely manner.

With a large number of products, managing the supply chain effectively ensures that the right products are available on the shelves when customers need them. This requires streamlining processes, optimizing inventory, and building strong relationships with suppliers.

By streamlining processes, supermarkets can eliminate unnecessary steps and reduce the time it takes for products to reach the store. This not only improves efficiency but also helps in meeting customer demand. When customers find the products they need on the shelves, it enhances their shopping experience and increases customer loyalty.

Optimizing inventory is another critical aspect of supply chain management. Supermarkets need to strike a balance between having enough stock to meet customer demand and avoiding excess inventory that can lead to waste and increased costs. By closely monitoring sales data and using forecasting techniques, supermarkets can ensure that they have the right amount of inventory at all times.

Building strong relationships with suppliers is also essential for effective supply chain management. Supermarkets rely on their suppliers to provide them with quality products at competitive prices. By nurturing these relationships, supermarkets can negotiate better deals and secure favorable terms with their suppliers.

The impact of the supply chain on pricing and profit margins in the supermarket business cannot be understated. By optimizing the supply chain, supermarkets can reduce the costs associated with transportation, procurement, and inventory management.

Efficient supply chain management enables supermarkets to negotiate better deals with suppliers, leading to cost savings. These savings can then be passed on to customers in the form of lower prices, attracting more shoppers and increasing sales volumes.

While the low-margin nature of the supermarket business may seem challenging, effective supply chain management allows supermarkets to maintain profitability by achieving economies of scale and cost efficiencies. By streamlining processes, minimizing waste, and optimizing inventory, supermarkets can maximize their profit margins.

In conclusion, the supply chain plays a vital role in the success of supermarket businesses. It ensures that the right products are available to customers when they need them, minimizes costs, and helps supermarkets maintain competitive prices. By optimizing the supply chain, supermarkets can achieve cost efficiencies and maximize their profit margins, ultimately leading to long-term success in the industry.

Revenue Generation in the Supermarket Business

Revenue generation is a critical aspect of any business, and supermarkets are no exception. Let's explore various revenue streams in the supermarket industry.

Supermarkets have evolved over the years to become more than just a place to buy groceries. They have become one-stop destinations for customers, offering a wide range of products and services. One of the primary revenue streams for supermarkets is the sale of groceries. From fresh produce to packaged goods, supermarkets provide customers with a vast selection of items to choose from.

In addition to groceries, supermarkets have expanded their offerings to include a variety of non-food items. From household essentials like cleaning supplies and toiletries to electronics and clothing, supermarkets have become a convenient place for customers to fulfill all their shopping needs. This diversification of products allows supermarkets to generate additional revenue by catering to a wider customer base.

Supermarkets also generate revenue through various services they offer. Many supermarkets have in-store pharmacies, where customers can get their prescriptions filled or purchase over-the-counter medications. This not only provides convenience to customers but also serves as a revenue stream for supermarkets. Additionally, some supermarkets offer services like dry cleaning, photo printing, and even banking facilities, further expanding their revenue streams.

Another revenue stream for supermarkets is the sale of prepared foods. Many supermarkets have delis and bakeries where customers can purchase ready-to-eat meals, sandwiches, and freshly baked goods. These offerings not only attract customers looking for a quick and convenient meal but also contribute to the supermarket's overall revenue.

Supermarkets also generate revenue through various promotional activities. They often partner with brands to run special promotions and discounts, enticing customers to make purchases. Additionally, supermarkets may offer loyalty programs where customers can earn points or receive exclusive discounts, encouraging repeat business and increasing revenue.

Furthermore, supermarkets have embraced technology to enhance their revenue generation. Many supermarkets now offer online shopping and home delivery services, allowing customers to shop from the comfort of their homes. This not only provides convenience to customers but also opens up new revenue streams for supermarkets.

In conclusion, revenue generation in the supermarket business is multifaceted. From the sale of groceries and non-food items to the provision of services and promotional activities, supermarkets have various avenues to generate revenue. By constantly evolving and adapting to changing customer needs, supermarkets can continue to thrive and remain profitable in the competitive retail industry.

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Business Model Innovation – Grocery Delivery

• by Joel Finningley
• Business Model Innovation (BMi) , Grocery-Delivery

WebVan 2.0 or a new era of grocery?

More than 20 years ago, a startup called Webvan raised more than $800 Million with the promise to revolutionize grocery delivery at the height of the Dot-Com Bubble.

We all know how that story ended (spoiler: it went bust). Now, here we are in 2021 and eGrocery is in the spotlight. Is the business model ready for primetime?

Over the last several years, we have seen many players entering the eGrocery market. The vast majority of those aspiring to lead the charge are either incumbent grocers adapting their model or disruptive eCommerce players using their technological infrastructure to lower costs and modernized apps to acquire new customers.

Grocery Delivery Business Model

How does the grocery delivery business model work.

• What is the Business Model Innovation in Grocery Delivery?

Delivery Fee

Value proposition, revenue streams, cost structure:, what is business model innovation, more egrocery posts.

“ For 2020 , online grocery’s percentage of the $1.04 trillion grocery market is pegged at 10.2%, or about $106 billion … By 2025 , online grocery’s dollar share stands to climb to $250.26 billion of the estimated $1.16 trillion overall grocery market. ” Trending Business Model Analytics Supermarket News

Pureplay ‘ eGrocers ,’ or those who are 100% online with no physical outlets, are having their moment in the sun thanks to the acceleration of the eGrocery shift brought on by the pandemic. Similar to the ‘Challenger Banks’ in the Fintech world, these eGrocers are trying to disrupt the core model of grocery itself by removing the storefront.

That’s about as far as the similarities go, however, as delivering mangoes versus moving money are two vastly different business models.

So while traction and growth are one thing, as we have seen with the Food Delivery Apps ( who continue to lose $Billions years after year ), profitability is another. That’s why we are going to dig into the business model of eGrocers and better understand the mechanics behind the business model innovation .

At its core, grocery is a low-margin/high-volume business.

Grocery retailing is fundamentally a low margin business. Depending on the format or how developed the market is, EBITDA margins generally range from 4 to 8% and EBIT runs between 2 and 5% of net sales. Foley Retail Consulting

Pureplay eGrocers don’t necessarily fare much better on a margin basis ( depending on which company you analyze and where ) generally, as the lease/storefront costs get redistributed into other areas of the business (technology, distribution costs).

The main point is that ‘ going digital’ with the business model doesn’t suddenly make grocery a higher-margin business.

Profitability of the model will depend what mix of products an eGrocer decides to sell (based on margins), how they merchandise those goods, what discount models are applied ( ie. via subscription or reward points) and several other factors. What consumers buy will also shift significantly from a bricks ( physical retail) versus clicks ( eCommerce) model.

With a different mix of goods, changing consumers preferences for delivery vs. in-store pickup, and rapid supply-chain innovation , it is a lot of work just to decipher who is doing what in the eGrocery space.

Now that the pandemic has rapidly accelerated consumer demand , we are starting to see the rise of the disruptors emerge in the eGrocery space. More than 20 years on from WebVan debacle, the question is whether or not consumer demand is the missing ingredient combined with a dash of Business Model Innovation?

What is the Business Model Innovation in Grocery Delivery ?

As we have seen above, there are many different players in the space who are pushing the limits of innovation to try and become one of the dominant players in the new grocery industry. Recently, we have seen big deals to illustrate how hot this market is becoming, for example:

“On-demand grocery delivery platform Instacart has raised a $265 million … pushes the company’s valuation to $39 billion. ” TechCrunch

We also have seen smaller examples of innovative new companies localizing the supply-chain and re-inventing the distribution through so called ‘dark store’ model where companies hold goods in ‘ micro-warehouses ’ and ship directly to the consumer.

Examples of smaller deals in the space show how this Business Model Innovation is changing the way the whole grocery model works by cutting out the middleman:

• ”Flink, the Berlin-based grocery delivery startup that operates its own ‘ dark stores ’, raises $52M“
• Mexican online grocer Jüsto raises $65M “It claims to be the first supermarket in Mexico with no physical store .”

The so-called ‘ dark store ‘ is similar to what we are seeing in many different industries ( ghost kitchens , co-living, etc.) where real-estate is being repurposed to suit these new industrial models. In this case, the dark store enables a new model for on-demand grocery delivery of fresh foods by increasing productivity and repurposing space.

“This will provide major gains in your productivity but that’s balanced against the cap-ex associated with bringing that on,” he said. “The nice part is that cap-ex continues to get more and more attractive as we see more come online.” Winsight Grocery

In a hyper-growth market like eGrocery right now. this model makes sense; however, the volume will need to continue accelerating into the future for the dark-store model alone to pay off.

That’s why the “disruptors” – who don’t have the burden of legacy IT system or customer relationships – can also work at the supply-chain level to localize distribution, like we are seeing with Mexican-based Jüsto.

The startup only sells items from local suppliers, with whom it prides itself on developing fair trade agreements (“Jüsto” means fair in Spanish). It also uses artificial intelligence to forecast demand and to try to reduce food waste at its micro-fulfillment centers. The company’s approach results in “competitive prices, lower transaction costs, and improved convenience to consumers by eliminating intermediaries in the supply chain,” according to the company. TechCrunch

The business model innovation here, on the Cost Structure side of the Canvas, can be summarized as follows:

• cut out the middlemen
• use technology to lower logistical costs
• leverage data-science to better match supply & demand
• remove physical infrastructure costs associated with retail

Increased fill rates on orders ( ie. less waste) and arrival of fresher products are among two of the consumer benefits of this model.

As we mentioned in the section above, none of these points change the fact that grocery is a low-margin business. The question is whether or not all of these factors working in unison can shift the business model enough to make it profitable for upstart companies to deliver fresh groceries, on-demand and turn a profit.

When you look at the mechanics of the Food Delivery business model, one can be forgiven for being skeptical that the eGrocer model will work long-term for the disruptors. Nonetheless, the business model innovation is notable and worth considering against the models used by incumbents and their partners/acquisitions to preserve their own market share.

Grocery Delivery – Competition

This dark-store/micro-warehouse model is new in this space. Most of the eGrocery competition (Instacart, Shipt, and other global high-flyers) source their grocery/retail products from 3rd party Grocers and Partners, rather than creating their own inventory and fulfilling orders Direct-to-Consumer from their own spaces.

Enter the concept of a “dark store,” a converted supermarket or former supermarket space converted into an e-commerce warehouse. These stores offer no retail—no cash registers or merchandising—but can meet online demand more efficiently than picked stores. Winsight Grocery

Many of the pureplay business models in the eGrocery space are similar to Food Delivery Apps in terms of structure and pricing. There are:

• delivery/origination Flat Fees for each order that is placed ( tiered Delivery Fees + others like ‘Heavy Fee’ if necessary)
• Service Fees typically based on the % of the order
• some type of Membership offering that allows you discounts on the fees based on usage
• Tipping is also becoming a common practice on many of the eGrocery apps, which creates another cost for consumers.

In fact, on the margin, shopping with eGrocers is typically more expensive (on average) for consumers than retail in-store shopping.

In a sense this makes sense, as the service offers convenience and a new experience; however, will consumers sustain their purchasing on these new eGrocers in the middle of a large-scale economic contraction if their bills are consistently higher? We shall see.

Yet shoppers exhibited less price sensitivity as product availability took precedence. Supermarket News

The following is an example from Instacart’s delivery pricing, where Service Fees generally range from 5 – 10% on the order.

Instacart delivery starts at $3.99 for same-day orders over $35. Fees vary for one-hour deliveries, club store deliveries, and deliveries under $35.  Instacart

If you sign up for  Instacart Express  (starting at $99 for the year or $9.99 if you do it by the month) you’ll get free delivery for orders that are more than $35. The Kitchn

We can see from our analysis of Uber (Eats) and other Food Delivery Apps, that the pricing structure is very similar for services like Instacart, Shipt and other similar eGrocer models who send ‘personal shoppers’ in to buy from local and national grocery/retail chains on behalf of consumers.

This is why many Food Delivery businesses are expanding their services rapidly into the grocery market.

On the merchant side of the eGrocery model, services like Instacart charge an average Commission as a % markup on the in-store price (average of 15%, but potentially much higher or lower depending on the situation). The way that fee is calculated and how it is determined for specific partner stores vs. other local stores is the subject of much debate.

What we do know is that the net effect for Grocers is margin erosion.

Margin erosion: Instacart charges a five to eight percent platform fee to retailers. Some choose to pass this on as a markup; others absorb it and lose margin.  Retail Wire

On the incumbent side, many mainstream grocers are bundling the eGrocery model into their core model in order to ensure they don’t lose market share to upstart eGrocers. That doesn’t necessarily mean they prefer to have customers shop online only , as we have shown in the analysis above.

Their business model is built on volume, but because of their physical presence they run huge costs to maintain high-quality physical spaces and can use those spaces to build strong customer relationships in ways that pureplay eGrocers can’t.

Some examples are a hybrid, like the Whole Foods/Amazon model (Amazon bought Whole Foods in 2017), where they derive elements from each to create new services for their core customers.

BMi – Key Components of the Canvas

These new players ( dark-store model ) in eGrocery cut out the middlemen by sourcing locally, sell groceries direct to the consumer (and thus no markup from in-app vs. in-store pricing), and hold inventory in their own dark stores/micro-warehouses.

What unique value does a Grocery Delivery company’s product or service create for customers?

On-demand, fresh, and local grocery service. Lower waste, potential to create better profits for local-market suppliers (compared to other models).

Customer Segments

What group(s) of customers is a Grocery Delivery company targeting with its product or service?

The space is still very young and consumers are experimenting, but generally we would expect mid/high income consumers in large urban areas ( as many services are not available in rural markets). As the market expands in the next few years, we will see more defined customer segments emerge.

…. project that online grocery will account for 21.5% of total grocery sales by 2025 – an estimated $250 billion- which is a more than 60% increase over pre-pandemic estimates.  Mercatus

Customer Relationships

How does an eGrocery company plan to build and maintain relationships with the customers it is serving?

Similar to pureplay eCommerce providers, the relationship with consumers is purely digital. In many ways, this is where traditional/hybrid grocers still maintain an advantage.

Customer Channels

What channels does an eGrocery company use to acquire, retain and continuously develop its customers?

Most of the customer engagement is in-app or via online channels (social media, customer support, etc).

How is a Grocery Delivery company pulling all of the above elements together to create a revenue stream(s) and generate cashflow?

• dark-store eGrocers charge Delivery Fees , like their competitors
• whether they charge Service Fees is still unclear, as this space is still new and they hold their own grocery inventory
• we assume they make the majority of their revenue on Gross Margin from selling groceries much like a traditional grocer; this is the main difference between these new models and services like Instacart

The above 5 Building Blocks represent the right side of the canvas and contribute to the Revenue side of the business model.

Key Resources

What assets and knowledge does a Grocery Delivery company possess that allow it to deliver its value to customers in ways that other companies can’t?

This model uses technology in many different ways: but fundamentally, they own the relationship with the consumer and they own their own inventory, so the knowledge they build around these assets via data science, etc. will be key in the future.

Key Activities

What activities does a Grocery Delivery company engage in that allow it to execute its strategy and either establish a presence in the market or gain market share?

Right now they are the new/innovative upstarts who are expanding their warehouses rapidly in order to try and meet rapid demand. They are raising large amounts of capital (in some cases debt) to expand, and so their goal is to maintain momentum while impressing new customers with the quality of the service.

Key Partnerships:

What strategic and cooperative partnerships does a Grocery Delivery company form to increase the scalability and efficiency of the business?

This will be an interesting space to watch in the future. The model is so new, but if some of these new eGrocers build strong relationships with local suppliers, this would be an opportunity to forge alliances that will help them take on the Grocery Giants.

What are the key costs associated with running a Grocery business and how can key partnerships/resources be leveraged to reduce the cost structure?

Depending on the model, most of the cost base is absorbed either in physical space and the logistics of running that space. New players are investing heavily in technology/innovation in order to try and preserve another 1% in margin. In such a low-margin industry, even a 1 or 2% cost savings in the long-term can make the difference between winning and losing in the massive grocery space.

The remaining 4 Building Blocks come together to form the left side of the canvas, and contribute to the Cost Structure of the business model.

With very little data publicly available, it is necessary to draw some assumptions here. The likely problems they face will probably be similar – although not exactly the same – to the Food Delivery Apps : losing money on a per order basis, lack of loyalty (consumers using multiple apps), and a requirement to constantly compete on margin (race to the bottom) because of how competitive the space is becoming.

One interesting stat is the MAUs (Monthly Active Users) in the US market are ordering 2.8X per month per average on eGrocery services. This helps paint a picture of frequency of use .

In the US market, AOV (Average Order Value) was $95 as of September 2020, up 32% YoY (year over year).

If frequency of ordering and AOV continue to trend up, this bodes well for leaders in the space.

In the Food Delivery space, we have seen ‘promiscuous’ customers using multiple different Food Delivery Apps. A lack of customer loyalty would create big problems long term for eGrocers , so we will need to maintain a close eye on how app usage plays out over time in relation to customer loyalty.

Overall, this is a new and exciting space with lots of competition and a lot of business model innovation, as seen by the new ‘dark-store operators’ and their industry partners. Let’s see consumers respond in key markets to these new offerings, and how traditional retail operators innovate their own models in order to defend their market share.

Innovation using the Business Model as the main mechanism, rather than product or technological innovation. Reinventing a business model – or creating a new one – is a matter of remixing the core components of a business model and developing new value propositions, revenue streams, and cost structures.

Strategy & Grocery – Thrive Market + Memberships

Business Model Innovation – Food Delivery Apps

Business Model Trends – Dark Stores

Instacart Business Model Analysis

• Luxury, CAC & The Next Farfetch
• Is Social Commerce the next eCommerce?
• Live Commerce, Influencers & Conversion

StartBizEasy

The Business Model Utilized by a Grocery Store: Crafting a Profitable Grocery Business

A grocery store is a retail establishment that sells food and household items. To understand how these stores operate and make money, you must first understand their business model.

No matter the business model a grocery store adopts in doing business, they are all known for 2 basic things;

• Purchasing and Storing of Products: The grocery store purchases food and household items from suppliers which are then kept in a warehouse. The objective of doing that is to keep a wide selection of goods on hand to be offered for sale to customers.
• Selling Products: The grocery store then sells these products to customers in a retail setting. Grocery store owners use a variety of strategies to draw customers in order to stay competitive, such as; discount prices, high-quality products, and a convenient shopping experience (online shopping).

This article aims to offer a thorough overview of the grocery store business model and the various elements that contribute to its success.

Table of Contents

What is a business model for a grocery store.

A grocery store’s operational and financial structure is referred to as its business model.

It describes the various actions and procedures that the shop takes to give its clients essential products and services.

You can gain insight into how a grocery store operates and maintains its competitiveness in the market by comprehending its business model.

This information can assist you in making wise decisions whether you’re a consumer or a member of the industry.

Know more about the basic Business Model

Types of Business Models for Grocery Stores

Traditional grocery stores, discount grocery stores, and specialty grocery stores are just a few examples of the various business models that exist for grocery stores.

Traditional Grocery Stores

The most prevalent kind of grocery store is a traditional one which is also known as the Classic Model.

They provide a variety of goods, such as fresh produce, dairy, meat, and baked goods.

Additionally, they sell a wide range of non-perishable goods like snacks, canned goods, and household essentials.

Despite the difficulties presented by alternative models like online grocery stores or home delivery options, the traditional business model for a grocery store in the USA, based on a brick-and-mortar structure, has proven to be a successful option for grocery retailers.

These businesses give customers the benefit of being able to touch and examine products in person before making a purchase and benefit from a personalized shopping experience with knowledgeable and trained staff.

Family-owned stores like Smith’s Family Market and mid-sized stores like Greenway Grocery are two examples of successful traditional grocery stores in the United States.

By providing excellent customer service, a large selection of goods, and cutting-edge services like online ordering, curbside pickup, home delivery, and educational in-store events and workshops, these stores have been able to maintain their customer base and stay competitive.

Having been in operation for more than a century, Smith’s Family Market is a family-run grocery store in a small town in the United States.

It stands out from larger chain stores and attracts customers who value quality and local sustainability.

On the other hand, Greenway Grocery has adopted cutting-edge technologies to enhance the shopping experience.

Discount grocery stores

Compared to regular grocery stores, discount grocery stores offer products at lower prices.

They put a lot of effort into giving customers affordable options without compromising on quality.

They do this by buying in bulk, negotiating better prices with suppliers, and cutting expenses overall. Customers benefit from significant savings on their shopping expenses as a result.

Discount grocery stores are becoming more and more well-liked due to the extensive product selection, convenient shopping environment, and affordable high-quality products.

This type of Grocery model is what is normally referred to as the Wholesale Club model which is a membership-based business where Customers pay an annual fee to use the store’s discounts and bulk purchasing.

The emphasis is on selling goods in large quantities for less money, which can help customers cut costs on their grocery bills.

The bulk products in this model frequently require more storage space, but the membership fee system helps to keep overhead costs low.

Specialty Grocery Stores

Unique and specialized products are the main focus of specialty grocery stores for their patrons.

These shops offer products that are organic or gluten-free to customers who have special dietary requirements. They also sell goods from various nations and cultures.

These stores offer a more personalized and intimate shopping experience, with knowledgeable and passionate staff who can help customers find the perfect product for their needs or recommend a better option.

The reason many customers prefer Specialty Grocery stores to others;

• Wide Selection of Products: Specialty grocery stores offer a diverse range of products not commonly found in traditional grocery stores. From specialty cheeses and cured meats to exotic fruits and international foods, these stores cater to customers with a discerning palate.
• High-Quality Products: Specialty grocery stores take pride in stocking only the best goods, sourced from domestic and foreign vendors. These goods have been carefully chosen for their superiority in taste, quality, and originality.
• Personalized Service: Specialty grocery stores frequently offer a more personal touch than large chains. And staff members are allowed to provide individualized recommendations and advice to customers because they are knowledgeable about the goods they sell -Which is a result of proper training.
• Supporting Local Businesses: By making purchases at a specialty grocery store in the USA, you are promoting local commerce and preserving the diversity and vibrancy of your neighborhood.

Examples of Specialty Grocery Stores in America

• Gourmet Food Stores: These establishments focus on high-end and gourmet foods, frequently offering a wide range of fine wines, charcuterie, and cheeses.
• Natural Food Stores: In the United States, natural food stores sell a variety of organic and non-GMO goods, such as fresh produce, meat, and dairy.
• Ethnic food markets: These stores offer customers a taste of various cultures and cuisines by specializing in international foods and ingredients. According to PRNewswire Ethnic food market is projected to grow by USD 22.02 billion by 2026,
• Health Food Stores: In the USA, health food stores sell a range of products that are designed to be healthy, such as gluten-free, vegan, and paleo-friendly options.

Online Grocery Shopping Model

Online grocery shopping has grown in popularity as a result of advancements in technology and an increase in internet users.

Customers can place grocery orders using this model while relaxing in their own homes.

It functions by combining online and mobile ordering platforms, as well as collaborations with nearby retailers or warehouses for product fulfillment and delivery.

While it is convenient to shop online, doing so also necessitates a significant investment in logistics and technology.

Over the years we’ve seen popular online grocery stores that were once operating in the traditional model move to the online grocery shopping model like; Amazon Fresh, Walmart, and Kroger. They provide a wide range of goods, such as dairy, bakery, and fresh produce, and frequently at affordable prices.

Even though online shopping is a generalized term, there are diverse kinds of online grocery shopping, the major two are;

• Subscription-based online Grocery models: Grocery delivery services like Blue Apron and HelloFresh allow customers to sign up for regular deliveries, making it more affordable and offering discounts for ordering a certain amount of groceries each month.
• Meal kit delivery services: Businesses like Plated and Sun Basket give customers all the ingredients they need to prepare a meal at home, providing a practical solution for active families who still want to eat at home.

The Hybrid Grocery Store Model

Some supermarkets employ a hybrid business model that combines aspects of the traditional, wholesale club, and online business strategies.

As a result, the store is able to serve a wider variety of customers and their needs.

For those customers who prefer traditional shopping, a grocery store might provide online ordering with in-store pickup or delivery options in addition to a physical location.

This model combines the best of both worlds for the store, but it also necessitates significant investments in technology, logistics, and physical operations.

Know more on the Types of Business Models

Factors Contributing to the Success of a Grocery Store Business Model

A grocery store business model’s success depends on a number of variables. These consist of:

A grocery store’s success depends on where it is located. The target market should be able to easily access it, and it should be highly visible.

Product Selection

A grocery store’s product selection ought to take its target market’s needs and preferences into account.

In order to keep its product selection current and relevant, the store should review it frequently.

Consumer Assistance (Customer Service)

A successful grocery store business model requires excellent customer service.

Grocery stores should train their staff to offer customers prompt, cordial, and informed service.

Promotional and Marketing

For boosting brand recognition and drawing customers into the store, marketing, and promotion are essential.

This can be accomplished using a variety of techniques, including social media marketing, advertising, and in-store displays.

Supply Chain Management

Successful supply chain management is essential to the operation of grocery stores.

To make sure that products are delivered on time and in the right quantities, the store should have a dependable system in place.

• Exploring the Basics of a Solid Business Model: Business 101
• The 5 Key Elements of a Business Model?
• A Comprehensive Guide to the Business Model Canvas
• The 4 Types of Business Models?

A grocery store’s success depends greatly on the business model it utilizes.

Grocery stores should concentrate on offering a large selection of products, superior customer service, and efficient marketing and promotion to their customers.

In order to guarantee that products are delivered on schedule and in the appropriate quantities, they should also have an effective supply chain management system.

What is a grocery store?

An establishment that sells food and household goods is a grocery store. Customers can buy these items in a retail environment, where there is a wide variety of merchandise available and different tactics are used to attract customers, such as low prices and a convenient shopping experience.

What is the business model of a grocery store?

A grocery store’s operational and financial structure is referred to as its business model. It describes the steps the store takes to deliver necessary goods and services to customers and aids in understanding how the store runs and keeps its competitiveness in the marketplace.

What are the various types of grocery store business models?

Traditional grocery stores, discount grocery stores, specialty grocery stores, online grocery stores, and hybrid grocery stores are just a few examples of the various business models available for grocery stores. Each type of model has its own distinctive traits and tactics, such as providing a range of goods, offering discounted goods, or providing specialized goods.

What is the main objective of a grocery store?

The main objective of a grocery store is to provide customers with a wide range of food and household products for purchase, at convenient locations and competitive prices.

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I am Eghosa Kester Igbinigie, the owner of StartBizEasy.com and Richnuggets.com. As a business enthusiast, writer, and speaker, I hold a degree in Business Administration (BSc) and own several successful businesses

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Instacart Business Model: Decoding How It Works

Instacart’s business model revolves around simplifying grocery shopping for busy individuals, allowing them to conveniently select their groceries from anywhere. As a result, Instacart has emerged as the leading grocery delivery service in the U.S., valued at an impressive $17 billion.

What is Instacart?

Founders, funding, and key milestones, revenue-sharing model in instacart, flexible delivery pricing and additional fees in instacart, instacart express, targeted advertising opportunities in the instacart app, revenue generation strategies of instacart, instacart’s business model, instacart’s customer acquisition methods, the shopper recruitment process, key problems and solutions, instacart’s competitors, instacart’s strengths, instacart’s weaknesses, instacart’s opportunities, instacart’s threats, instacart’s ambitious expansion plans for future growth.

Instacart, the technology-driven platform, brings groceries and home essentials straight to your doorstep. With their innovative business model, they offer speedy deliveries in major US cities, often within just 1 hour. Embracing the sharing economy concept, Instacart has garnered significant attention as a leading force in the on-demand sector.

Aspiring entrepreneurs are drawn to understanding their business model and how they generate revenue. In this post, we delve into the inner workings of Instacart, unveiling its remarkable success and providing intriguing facts and figures about this $2 billion valuation company.

Founded in 2012, Instacart swiftly emerged as a disruptive force in the technology landscape, revolutionizing the on-demand economy. With substantial funding, this leading grocery delivery platform expanded its operations nationwide, making waves across the United States. Here are essential facts about Instacart:

The remarkable amount of funding received by Instacart reflects the confidence investors have in its potential and future prospects. To comprehend why Instacart stands out as a promising company, let’s explore its unique features, value propositions, and delve into its core operations and customer segments.

How Instacart Works: A Seamless Grocery Shopping Experience

Instacart generates income by means of revenue sharing, delivery charges, price mark-ups, premium subscription fees, and in-app advertising.

Instacart operates on a revenue-sharing model where they collect a commission for each order processed on behalf of their clients. It is important to note that this commission is borne by the retailer rather than the app user.

In order to foster mutual growth and success, Instacart has established revenue-sharing agreements with its retail partners. The specific rates of these agreements are flexible and negotiated based on the transaction volumes of each retailer.

This approach allows Instacart and its retail partners to collaboratively benefit from the platform’s operations and ensure a fair distribution of profits.

When utilizing Instacart’s delivery service, consumers are subject to delivery fees based on various factors such as city, location, and timeframe. These fees ensure the smooth transportation of orders to customers.

As per the information provided on their website, standard delivery fees for orders exceeding $35 are $3.99 for scheduled or 2-hour delivery and $5.99 for 1-hour delivery. For orders below $35, the fees are $7.99 for scheduled or 2-hour delivery, and $9.99 for 1-hour delivery.

In addition to delivery fees, a service charge is applied to orders, typically ranging from 5% to 10% of the total order value. Instacart may also impose supplementary charges including a ‘heavy’ fee when items exceed a specified weight limit, a bag fee, a bottle deposit fee, and an alcohol service fee.

Similar to popular ride-sharing platforms like Lyft and Uber, Instacart operates on a surge demand model. This means that during peak demand hours, such as busy times of the day, week, or month, prices may be higher and delivery times may be longer.

It’s important to consider these factors while planning your grocery delivery. Additionally, customers have the option to provide tips to the shoppers, which are directly received by the individuals handling the orders.

Instacart offers consumers the convenient Instacart Express model, which provides a subscription service tailored for regular users. By opting for Instacart Express, customers can enjoy unlimited free delivery for their orders in exchange for a monthly or annual upfront fee.

The monthly membership fee is $9.99, while the yearly membership fee amounts to $99.

The Instacart Express subscription brings several benefits to consumers, including:

• No delivery fee on any orders totaling $35 or more;
• Reduced service charges;
• Freedom from demand surge pricing.

With Instacart Express, users can experience a seamless and cost-effective grocery shopping experience, eliminating the hassle of delivery fees, benefiting from reduced service charges, and enjoying consistent pricing without worrying about surge pricing during high-demand periods.

With a vast user base of nearly ten million Instacart shoppers across North America, the platform presents a lucrative avenue for generating revenue through in-app advertising. Sellers and brands have the opportunity to purchase advertising space directly on the platform, gaining direct access to their desired consumer base.

Instacart’s in-app advertising is designed to be highly targeted, following a similar advertising model employed by industry leaders such as Amazon and Etsy. Renowned brands like Mars and Coca-Cola have already capitalized on this advertising platform.

The rates charged by Instacart to advertisers are undisclosed and vary based on factors like the brand’s size, the desired advertising space, and the duration of the ad campaign. In certain cases, Instacart adopts a ‘cost-per-click’ payment model, where the company advertising is charged a fee only when a consumer clicks on their ad.

Furthermore, advertisers have the opportunity to bid on search terms entered by users while creating their shopping lists within the Instacart platform. This ensures a dynamic and competitive advertising environment within the app.

Instacart employs various strategies to generate revenue and sustain its operations. Here are the primary sources of revenue for the platform:

• Delivery Fees: For orders exceeding $35, Instacart charges a standard delivery fee. Customers can expect to pay $3.99 for scheduled or 2-hour delivery and $5.99 for 1-hour delivery. Orders below $35 incur higher fees of $7.99 for scheduled or 2-hour delivery and $9.99 for 1-hour delivery;
• Membership Fee (Instacart Express): Instacart offers an annual membership called “Instacart Express” priced at $99. Members enjoy the benefit of free delivery for their grocery orders throughout the year, subject to certain terms and conditions;
• Mark-up Prices: While some stores on Instacart maintain the same prices as their in-store counterparts, others may have mark-ups of 15% or more. The revenue generated from these mark-up prices is retained by Instacart, enabling them to compensate shoppers and sustain their operations.

Customer Segments of Instacart:

• Users: Individuals who dislike shopping, elderly individuals, and those with busy schedules;
• Shoppers: People possessing a smartphone and a vehicle (car or bicycle), individuals who enjoy shopping, and those seeking additional income;
• Stores: Businesses aiming to boost sales and expand their customer base.

Value Propositions of Instacart:

• Users: Convenient grocery shopping, speedy delivery, and a wide inventory selection;
• Shoppers: Flexible work schedule, supplemental income, and part-time employment opportunities;
• Stores: Increased sales and a larger customer base.

Channels of Instacart:

• Android and iOS App;
• Internet marketing.

Customer Relationships of Instacart:

• Customer service;
• Social media;
• Local stores;
• Community engagement.

Revenue Streams of Instacart:

• Commissions;
• Markup on prices;
• Delivery fees;
• Service fees;
• Membership fees;
• Advertising.

Key Resources of Instacart:

• Partnerships with stores;
• Human resources.

Key Activities of Instacart:

• Software development;
• Platform maintenance;
• Payment processing;
• Delivery services;
• Shoppers management;
• Local market management.

Key Partners of Instacart:

• Local grocery stores and supermarkets;
• IT platform providers.

Cost Structure of Instacart:

• Technological maintenance;
• Shopper payments;
• Payment processing fees;
• Administration and operations;
• Word of Mouth Advertising;
• Internet Marketing;
• Free first delivery;
• Various promotional offers.
• Inviting applications from individuals interested in earning money through part-time shopping;
• Processing the applications through the recruitment team and scheduling face-to-face, one-on-one interviews;
• Providing comprehensive training to the selected individuals to prepare them for shopping and delivering groceries.
• Shopper Retention: Retaining part-time shoppers for an extended period is challenging. To address this, Instacart introduced a tipping option during the checkout process, enhancing shopper earnings and incentivizing them to stay longer;
• Delivery Time Reduction: Ensuring timely grocery delivery within 2 hours posed a challenge. Instacart strategically positions shoppers outside partner stores, enabling them to be ready for orders and saving 50% of the delivery time;
• Shopper Shortage: Managing a fleet of freelance shoppers and assigning immediate tasks is difficult. Instacart implemented a “busy pricing” policy, adding a small delivery charge based on shopper availability. The additional fee partly goes to shoppers, encouraging them to work efficiently;
• Customer Trust: Some customers lost trust upon discovering Instacart’s marked-up pricing compared to in-store prices. Instacart acknowledged this issue and clarified its pricing structure. Despite a few users discontinuing their use, the majority were willing to pay the markup for the convenience of doorstep grocery delivery;
• Wrong Item Delivery Possibilities: Occasionally, shoppers may deliver the wrong item. Instacart addresses this concern by providing dedicated customer support accessible via phone or email. Refunds are processed for missed items by the personal shopper;
• Out-of-Stock Items: Items on the shopping list sometimes become unavailable. To tackle this, shoppers offer substitute items, which may not always meet customer preferences. Instacart introduced features such as customer notes and an “often out of stock” button, allowing customers to provide specific instructions and be aware of frequently unavailable items.
• Shipt: Owned by Target, Shipt operates in 300 cities across the USA and partners with renowned grocery stores such as Costco, CVS, Jewel, Kroger, Office Depot, and Publix;
• Amazon Fresh: Offered by the world’s largest retailer, Amazon Fresh is available in only 15 cities and exclusively for Amazon Prime members;
• Walmart+: Walmart’s membership program provides exclusive perks and discounts to its members, leveraging the strength of one of the largest retailers globally;
• Fresh Direct: Established in 1999, Fresh Direct specializes in direct delivery from farmers, artisans, and fishermen. They offer a wide range of products, including beverages, flowers, health and beauty items, and baby products. However, their service is limited to six cities;
• Blue Apron: A grocery delivery company focused on providing customers with meal kits that include ingredients and recipes for preparing meals at home.

Analysis of Instacart’s SWOT

• Reliable Suppliers: Instacart partners with established and trustworthy stores, including major retailers in the country;
• Quick Delivery: Customers can receive their groceries as quickly as within one hour;
• Customer Service: Instacart provides 24/7 customer support through social media managers on their site and social networks;
• Strong Financial Position: The company’s balance sheet allows for investments in new and diverse projects;
• Brand Recognition: Instacart has a strong brand that consistently attracts new customers;
• Diverse Portfolio: The brand portfolio enables Instacart to target different customer segments effectively.
• Project Management: Internal focus on delivery may result in neglecting the interests of external stakeholders, leading to potential public relations issues;
• Pricing Strategy: Instacart’s premium pricing may sometimes be perceived as unjustified by customers.
• International Markets: Instacart can expand its market share through globalization and leveraging the internet;
• Artificial Intelligence (AI): Advancements in AI can assist in predicting consumer demand and improving recommendation engines;
• Environmental Policies: New policies focused on sustainability can provide additional benefits for Instacart’s technology-driven operations;
• Changing Consumer Behavior: Shifts in consumer trends and habits, such as those observed during the COVID-19 pandemic, can promote increased app usage.
• Competition: The growing number of competitors, including major retailers like Amazon and Walmart, poses a significant challenge;
• Sticky Prices: Instacart operates in an industry where pricing is often resistant to change, potentially undermining the value of its premium service;
• Economic Conditions: Economic downturns can impact customer spending patterns and purchasing power, affecting Instacart’s business.

Instacart is gearing up for significant growth in the coming years, aiming to expand both its user base and partner merchant network. Recognizing the need for diversification and a broader reach, the company is actively working on attracting more consumers to its platform, focusing not only on groceries but also on a wider range of consumer goods.

The COVID-19 pandemic highlighted the strong demand for diverse products among Instacart users, leading the company to seize the opportunity by expanding its offerings through its partner network.

To further enhance its services, Instacart recently launched the Priority Delivery service in 15 major cities across the United States. This new offering guarantees grocery deliveries within a speedy timeframe of just 30 minutes, providing an even more convenient experience for customers.

In addition to its domestic plans, Instacart has also indicated its intention to expand internationally. This commitment was demonstrated by the appointment of two new product leaders in May 2021, tasked specifically with developing the company’s presence beyond North America.

Instacart is firmly dedicated to becoming a global leader in the e-commerce market, leaving no doubt about its aspirations for global expansion and success.

The Instacart business model revolves around delivering convenience, a timeless aspect that remains essential in this industry. Despite the increasing competition, Instacart continues to dominate the online grocery shopping market, establishing itself as the frontrunner.

It appears that competitors will struggle to catch up if the current trajectory remains unchanged.

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Kroger: Business Model, SWOT Analysis, and Competitors 2023

Inside This Article

In this blog article, we will delve into the intricacies of Kroger's business model, conduct a SWOT analysis to identify its strengths, weaknesses, opportunities, and threats, and explore its primary competitors in the market. As one of the largest supermarket chains in the United States, Kroger's business model encompasses a vast network of grocery stores, fuel centers, and online platforms. By analyzing its internal and external factors, we aim to gain insights into Kroger's position in the industry and its potential growth opportunities in the upcoming year, 2023.

What You Will Learn:

• Who owns Kroger and the significance of understanding the ownership structure of a company.
• The mission statement of Kroger and how it guides the company's strategic decisions and actions.
• The various revenue streams and business strategies employed by Kroger to generate profits.
• An explanation of the Business Model Canvas and how it applies to Kroger's operations and success.
• The major competitors of Kroger in the retail industry and the challenges they pose to its market share.
• A comprehensive SWOT analysis of Kroger, highlighting its strengths, weaknesses, opportunities, and threats in the market.

Who owns Kroger?

Overview of kroger's ownership structure.

Kroger, one of the largest supermarket chains in the United States, is a publicly traded company. This means that its ownership is distributed among numerous shareholders who hold shares of the company's stock. As of the latest available information, Kroger has a diverse ownership structure, with both institutional and individual investors owning its shares.

Institutional Ownership

Institutional investors, such as mutual funds, pension funds, and investment firms, play a significant role in owning Kroger. These entities often purchase large quantities of shares, giving them a substantial ownership stake in the company. Institutional ownership provides stability to the stock and can influence the company's decisions through voting rights and active involvement in its governance.

Some well-known institutional investors that own shares of Kroger include Vanguard Group, BlackRock, and State Street Corporation. These institutional investors manage funds on behalf of their clients, which may include individual investors, retirement funds, and other organizations.

Individual Ownership

Individual investors also have the opportunity to own shares of Kroger. This can be done through purchasing the company's stock directly on a stock exchange, such as the New York Stock Exchange (NYSE), where Kroger is listed under the ticker symbol "KR."

Individual ownership allows investors to benefit from the company's performance and potentially earn dividends on their shares. It also gives them the ability to vote on certain matters affecting the company's operations during annual general meetings.

Employee Ownership

Kroger also offers its employees the opportunity to own shares of the company through various employee stock ownership plans (ESOPs) and stock purchase programs. These initiatives aim to align the interests of employees with those of shareholders, fostering a sense of ownership and commitment within the workforce.

Employee ownership not only serves as a valuable retention tool but also allows employees to share in the company's success. By owning shares, employees can benefit financially as the company performs well in the market.

In conclusion, Kroger has a broad ownership structure consisting of institutional investors, individual shareholders, and even its own employees. This diverse ownership contributes to the stability and growth of the company while aligning the interests of various stakeholders. Whether it's large institutional investors shaping the company's direction or individual investors benefiting from its success, Kroger's ownership structure reflects the wide-ranging support and confidence in the supermarket chain.

What is the mission statement of Kroger?

The mission statement of kroger: delivering exceptional value and service to customers.

The mission statement of Kroger is centered around the idea of delivering exceptional value and service to its customers. Kroger aims to provide high-quality products and services that meet the diverse needs of its customers in a convenient and affordable manner.

Kroger's mission is reflected in its commitment to offering a wide range of products, including fresh and organic produce, affordable groceries, and a variety of household essentials. By consistently delivering value through competitive prices, promotions, and loyalty programs, Kroger ensures that customers can stretch their budgets without compromising on quality.

Moreover, Kroger is dedicated to providing exceptional customer service. Whether it's through knowledgeable and friendly staff, convenient store layouts, or innovative digital solutions, Kroger strives to make the shopping experience as seamless and enjoyable as possible. By understanding and exceeding customer expectations, Kroger aims to build strong and lasting relationships with its patrons.

In addition to serving customers, Kroger's mission extends to benefiting the communities it operates in. The company actively participates in various philanthropic endeavors, including hunger relief programs, supporting local schools, and promoting sustainability initiatives. By investing in the communities it serves, Kroger aims to make a positive impact and contribute to the overall well-being of society.

Overall, Kroger's mission statement encompasses its commitment to delivering exceptional value and service to customers while also being a responsible corporate citizen. Through its focus on quality, affordability, convenience, and community engagement, Kroger strives to maintain its position as a trusted and preferred grocery retailer.

How does Kroger make money?

Grocery sales.

The primary source of revenue for Kroger is through its grocery sales. Kroger operates a vast network of supermarkets, hypermarkets, and convenience stores across the United States. These stores offer a wide range of products, including fresh produce, meat, dairy, packaged food, beverages, and household essentials. Kroger's grocery sales account for a significant portion of its overall revenue.

Private Label Brands

Another way Kroger generates revenue is through its private label brands. These are products that are exclusively sold under Kroger-owned brands such as Simple Truth, Private Selection, and Kroger Value. By offering these private label options, Kroger can not only offer customers a variety of products but also earn higher profit margins as they have control over the pricing and manufacturing of these brands.

Pharmacy Services

Kroger operates pharmacies within many of its stores, offering prescription medications, over-the-counter drugs, and health and wellness products. The pharmacy services provided by Kroger contribute to its revenue stream. With increasing healthcare costs, many customers rely on Kroger's pharmacies to fulfill their medication needs, thereby driving revenue for the company.

Fuel Centers

Kroger operates fuel centers at many of its supermarket locations. These fuel centers provide customers with a convenient place to fill up their vehicles while they shop for groceries. By offering fuel services, Kroger not only attracts more customers to its stores but also earns revenue from fuel sales. Additionally, Kroger often partners with various fuel rewards programs, allowing customers to earn discounts on gasoline purchases, which further encourages loyalty and increases revenue.

Digital Initiatives

In recent years, Kroger has invested heavily in its digital initiatives to adapt to changing consumer preferences. The company offers online grocery shopping, delivery services, and curbside pickup options through its website and mobile app. These digital efforts allow Kroger to expand its customer base and generate additional revenue through online sales. Furthermore, Kroger has also ventured into the technology space by developing data analytics and personalized marketing solutions, which can be licensed to other companies, creating an additional revenue stream.

Partnerships and Acquisitions

Kroger has also pursued strategic partnerships and acquisitions to diversify its revenue sources. For instance, the company has partnered with Ocado, a leading online grocery retailer, to enhance its e-commerce capabilities. Additionally, Kroger has acquired various companies in recent years, such as Murray's Cheese, Home Chef, and Vitacost, to expand its offerings and tap into new markets, thereby driving revenue growth.

In conclusion, Kroger generates revenue primarily through its grocery sales, private label brands, pharmacy services, and fuel centers. The company's investment in digital initiatives, strategic partnerships, and acquisitions has further contributed to its revenue growth. By continuously evolving and adapting to consumer demands, Kroger has positioned itself as a leader in the retail industry and continues to find innovative ways to generate revenue.

Kroger Business Model Canvas Explained

Introduction to the kroger business model.

The Kroger Company, one of the largest retail grocery chains in the United States, has a well-defined business model that has contributed to its success in the highly competitive industry. Understanding the Kroger Business Model Canvas can provide valuable insights into how the company operates and maintains its market position.

Key Partnerships

A crucial aspect of Kroger's business model is its strategic partnerships. Kroger collaborates with various suppliers, manufacturers, and distributors to ensure a steady supply of products. These partnerships enable Kroger to offer a wide range of groceries, including both national and private-label brands. By working closely with suppliers, Kroger can negotiate favorable pricing terms and maintain a diverse product portfolio, enhancing its competitiveness.

Additionally, Kroger has developed partnerships with technology companies and delivery service providers to enhance its online presence and offer convenient shopping options to customers. Collaborations with companies like Instacart and Ocado have enabled Kroger to expand its digital capabilities and provide efficient grocery delivery services.

Key Activities

Kroger's key activities revolve around retail operations, supply chain management, and customer engagement. The company operates a vast network of supermarkets, hypermarkets, and convenience stores across multiple states, ensuring a broad market reach. By investing in store infrastructure and improving the customer experience, Kroger aims to attract and retain a loyal customer base.

Efficient supply chain management is another critical activity for Kroger. The company leverages its scale to optimize procurement, distribution, and inventory management processes. Kroger's sophisticated logistics system allows for streamlined operations, reduced costs, and improved product availability.

Furthermore, Kroger focuses on customer engagement through various initiatives. Loyalty programs, personalized marketing campaigns, and digital platforms enable the company to understand customer preferences and offer tailored promotions. By investing in customer relationship management, Kroger aims to build long-term customer loyalty and increase customer lifetime value.

Key Resources

To execute its business model effectively, Kroger relies on several key resources. One of the most critical resources is its extensive physical infrastructure, including its network of stores and distribution centers. These assets enable Kroger to efficiently manage its operations, stock products, and fulfill customer orders.

Kroger also heavily invests in technology and data analytics to support its business model. Robust IT systems, data warehouses, and advanced analytics tools help Kroger gain insights into customer behavior, optimize pricing strategies, and improve operational efficiency.

Additionally, Kroger's workforce plays a vital role in its success. The company employs a diverse team of employees, including store associates, logistics professionals, technology experts, and customer service representatives. By nurturing its human capital, Kroger can deliver exceptional service and drive innovation within the organization.

Customer Segments

Kroger serves a broad range of customer segments, targeting different demographic groups and geographical locations. The company caters to value-conscious shoppers, health-conscious individuals, and those looking for high-quality and organic products. By offering a diverse product assortment, Kroger can appeal to a wide customer base and capture market share across various segments.

Furthermore, Kroger recognizes the growing demand for online grocery shopping and digital convenience. The company targets tech-savvy customers who prefer the convenience of ordering groceries online and having them delivered to their doorstep. This customer segment appreciates the ease of use and time-saving aspects of Kroger's digital platforms and services.

The Kroger Business Model Canvas provides a comprehensive overview of how the company creates value for its customers and stakeholders. By leveraging strategic partnerships, optimizing key activities, utilizing key resources, and targeting specific customer segments, Kroger has established itself as a leading player in the retail grocery industry. Understanding the intricacies of Kroger's business model can inspire other businesses looking to succeed in a competitive market and adapt to changing consumer preferences.

Which companies are the competitors of Kroger?

Major competitors.

Kroger, being one of the largest supermarket chains in the United States, faces fierce competition from several major players in the industry. These competitors constantly strive to attract the same customer base and increase their market share. Here are some of the main companies that pose a significant challenge to Kroger:

Walmart: As the world's largest retailer, Walmart is a formidable competitor for Kroger. With its extensive network of supercenters and discount stores, Walmart offers a wide range of products, including groceries. The company's aggressive pricing strategy and convenient one-stop shopping experience make it a popular choice for many customers.

Amazon: With its acquisition of Whole Foods Market in 2017, Amazon has made a strong entry into the grocery industry. Leveraging its vast online platform and efficient delivery system, Amazon has disrupted the traditional grocery market. The convenience of ordering groceries online and having them delivered to the doorstep has attracted a growing number of customers, posing a significant threat to Kroger's market share.

Regional Competitors

In addition to the major competitors mentioned above, Kroger also faces competition from various regional grocery chains. These companies may have a smaller footprint but often have a loyal customer base in their respective regions. Some prominent regional competitors of Kroger include:

Publix: Primarily operating in the southeastern United States, Publix is known for its high-quality products and exceptional customer service. The company has built a strong reputation over the years and has a dedicated customer following in the regions it serves.

Albertsons: With a presence in multiple states, Albertsons competes directly with Kroger in various markets. The company operates under different brand names, including Safeway, Vons, and Jewel-Osco, offering a wide range of products to cater to diverse customer preferences.

Ahold Delhaize: This international retail group operates several supermarket chains in the United States, such as Food Lion, Giant Food, and Stop & Shop. Ahold Delhaize's regional presence and focus on providing value to customers make them a significant competitor for Kroger in specific markets.

It is worth noting that the grocery industry is highly competitive, and new players, both traditional and online, continue to emerge. Kroger, therefore, must continually innovate and adapt to maintain its position in the market and stay ahead of its competitors.

Kroger SWOT Analysis

Strong market position: Kroger is the largest supermarket chain in the United States by revenue and the second-largest general retailer. With over 2,700 stores operating under various banners, Kroger has a strong presence in multiple markets.

Extensive product offerings: Kroger offers a wide range of products, including groceries, pharmacy items, household essentials, and even apparel. This diverse product portfolio allows the company to cater to the needs of a broad customer base.

Private label brands: Kroger has successfully developed and expanded its private label brands, which offer high-quality products at a lower price compared to national brands. This gives Kroger a competitive advantage by appealing to price-conscious consumers.

Customer loyalty programs: Kroger has a well-established customer loyalty program called Kroger Plus, which offers personalized discounts, rewards, and fuel points. This program helps in fostering customer loyalty and encourages repeat purchases.

Intense competition: The retail industry is highly competitive, with several major players vying for market share. Kroger faces intense competition from other supermarket chains, discount stores, and online retailers, which may impact its market position and profitability.

Limited international presence: While Kroger has a vast presence in the United States, it has limited international operations. This puts the company at a disadvantage compared to some of its competitors who have successfully expanded globally.

Reliance on traditional store format: Kroger primarily operates through traditional brick-and-mortar stores. With the rise of e-commerce and online grocery shopping, the company needs to adapt and invest in its online platforms to keep up with changing consumer preferences.

Opportunities

E-commerce growth: The COVID-19 pandemic has accelerated the shift towards online shopping, including grocery. Kroger has an opportunity to further expand its e-commerce capabilities and invest in technologies that enhance the online shopping experience for customers.

Health and wellness trends: Increasing consumer awareness and focus on health and wellness present an opportunity for Kroger to expand its offerings in organic, natural, and healthier food options. By catering to this growing trend, Kroger can attract a broader customer base.

Acquisitions and partnerships: Kroger has the opportunity to strategically acquire or partner with other companies to expand its market share or enter new markets. This could include acquiring smaller regional supermarket chains or partnering with technology companies to enhance its digital capabilities.

Online competition: Online retailers, such as Amazon and Walmart, pose a significant threat to Kroger. These companies have invested heavily in their e-commerce platforms and offer competitive pricing and convenience, which could lure customers away from traditional supermarkets.

Changing consumer preferences: Consumer preferences and shopping behaviors are constantly evolving. If Kroger fails to adapt to these changes and meet the evolving needs of customers, it risks losing market share to more innovative and agile competitors.

Supplier relationships and pricing pressures: Kroger's profitability could be impacted by fluctuations in commodity prices, as well as by the bargaining power of suppliers. Additionally, intense competition may exert pressure on Kroger to reduce prices, which could affect profit margins.

Key Takeaways

• Kroger is a publicly traded company, meaning it is owned by its shareholders who hold its stock.
• The mission statement of Kroger focuses on providing value and quality to customers, emphasizing their commitment to being a leader in the retail industry.
• Kroger primarily generates revenue through the sale of groceries and other merchandise in its supermarkets, as well as through its various subsidiaries such as pharmacies and fuel centers.
• The Kroger Business Model Canvas highlights key aspects of their operations, including key activities such as procurement, distribution, and customer service, as well as key resources such as their physical stores and technology infrastructure.
• Kroger faces competition from various companies in the retail and grocery industry, including Walmart, Costco, and Amazon. A SWOT analysis of Kroger reveals its strengths in its extensive store network and brand recognition, weaknesses in its relatively low profit margins, opportunities in expanding its e-commerce presence, and threats from increasing competition and changing consumer preferences.

In conclusion, understanding the ownership, mission statement, revenue generation, business model, and competition of Kroger provides valuable insights into the company's operations and position in the market. Kroger, as a public company, is owned by its shareholders. Its mission statement focuses on enhancing the shopping experience, providing quality products, and improving the communities it serves. The company generates revenue through various channels, including retail sales, digital offerings, and partnerships. The Kroger Business Model Canvas highlights key aspects such as customer segments, value propositions, key activities, and revenue streams that contribute to its success. Kroger faces competition from a range of companies, including Walmart, Amazon, and Costco. Conducting a SWOT analysis on Kroger reveals its strengths, weaknesses, opportunities, and threats, giving a comprehensive understanding of the factors that impact its performance in the market. By considering these aspects, one can gain a deeper understanding of Kroger's position in the industry and its potential for growth and success in the future.

What are Krogers weaknesses?

Some potential weaknesses of Kroger could include:

Strong competition: Kroger faces intense competition from other grocery chains, discount retailers, and online platforms. This competition can put pressure on Kroger's market share and profitability.

Limited international presence: While Kroger is one of the largest grocery retailers in the United States, it has a limited international presence compared to some of its competitors. This limits its growth opportunities and exposes it to potential risks from a concentrated market.

Margin pressures: The grocery industry is known for its low-profit margins, and Kroger is not an exception. Rising costs of labor, transportation, and food products can squeeze Kroger's profit margins and affect its financial performance.

Dependence on suppliers: Kroger relies on a vast network of suppliers to stock its stores with groceries and other products. Any disruptions in the supply chain, such as natural disasters or supplier issues, can impact Kroger's ability to meet customer demand.

Changing consumer preferences: Consumer preferences in the grocery industry are constantly evolving, with increasing demand for healthier, organic, and locally sourced products. Kroger needs to adapt to these changing preferences and invest in product innovation to remain competitive.

Online competition: The growth of online grocery shopping poses a challenge to Kroger. It needs to invest in e-commerce capabilities and provide a seamless online shopping experience to compete with online giants like Amazon.

Labor relations: Kroger employs a large workforce, and labor relations can be a potential weakness. Strained relationships with labor unions or high turnover rates can disrupt operations and impact customer service.

What are Kroger's competitive advantages?

Kroger, one of the largest supermarket chains in the United States, has several competitive advantages that contribute to its success in the industry. Some of these advantages include:

Scale and Market Presence: Kroger operates over 2,700 supermarkets across 35 states, making it one of the largest grocery retailers in the country. Its extensive network and widespread presence give it a competitive edge in terms of customer reach and market penetration.

Customer Loyalty: Kroger has a strong focus on customer loyalty through its loyalty program, Kroger Plus Card. The program offers personalized discounts, rewards, and fuel points, which incentivize customers to shop at Kroger stores regularly. This loyalty program helps retain customers and fosters long-term relationships.

Private Label Brands: Kroger has a robust portfolio of private label brands, which account for a significant portion of its revenue. These brands offer quality products at lower prices compared to national brands, attracting price-conscious customers and driving customer loyalty.

Data Analytics and Personalization: Kroger leverages customer data and analytics to gain insights into consumer preferences and shopping habits. This allows the company to personalize its offerings, provide targeted promotions, and enhance the overall shopping experience.

E-commerce and Digital Capabilities: Kroger has made significant investments in its e-commerce capabilities, including online ordering, home delivery, and curbside pickup options. These digital offerings enable Kroger to cater to changing consumer preferences and compete effectively in the growing online grocery market.

Strong Supply Chain: Kroger operates an efficient and reliable supply chain network, enabling it to maintain a wide assortment of products and ensure timely deliveries. This allows the company to meet customer demands efficiently and effectively.

Diverse Store Formats: Kroger operates various store formats, including supermarkets, supercenters, convenience stores, and marketplace stores. This diversified portfolio allows Kroger to target different customer segments and adapt to local market needs.

Sustainability Initiatives: Kroger has made sustainability a priority by focusing on reducing food waste, implementing energy-efficient practices, and promoting sustainable sourcing. These initiatives not only align with growing consumer preferences but also contribute to cost savings and brand reputation.

Overall, Kroger's competitive advantages lie in its scale, customer loyalty programs, private label brands, data analytics capabilities, e-commerce investments, supply chain efficiency, diverse store formats, and sustainability initiatives. These factors contribute to its strong market position and success in the highly competitive grocery industry.

What is Kroger's strategy for 2023?

As an AI language model, I don't have access to up-to-date information or Kroger's internal plans. However, I can provide you with some general strategies that Kroger or any retail company might consider for the future:

Expanding E-commerce: The growth of online shopping has been accelerated by the pandemic, and Kroger might focus on enhancing its e-commerce capabilities, including improving its website, mobile app, and delivery services to cater to the evolving customer preferences.

Personalization and Customer Loyalty: Kroger might invest in data analytics and customer insights to tailor its offerings and promotions to individual shoppers. By leveraging personalized recommendations and targeted marketing, they can enhance customer loyalty and engagement.

Health and Wellness Focus: With an increasing emphasis on health and wellness, Kroger could continue to expand its offerings of organic, natural, and healthier food options. They might also invest in partnerships or acquisitions to strengthen their presence in the health and wellness market.

Sustainability and Social Responsibility: Given the growing consumer demand for environmentally friendly practices, Kroger might adopt sustainability initiatives to reduce waste, promote renewable energy, and support local communities. This could include initiatives like reducing plastic packaging, increasing recycling efforts, and sourcing products from local suppliers.

Innovation and Technology: To stay competitive, Kroger might invest in emerging technologies such as artificial intelligence, automation, and data analytics. This could be used to optimize inventory management, improve supply chain efficiency, and enhance the overall shopping experience for customers.

Remember, these are just potential strategies, and Kroger's actual plans for 2023 can vary based on market conditions, industry trends, and internal considerations.

What are the key success factors of Kroger?

The key success factors of Kroger include:

Strong brand reputation: Kroger has built a strong brand reputation over the years, known for its quality products, competitive prices, and customer service. This has helped in attracting and retaining customers.

Diversified product offerings: Kroger offers a wide range of products, including groceries, household items, pharmacy products, and fuel. This diversification helps in attracting a larger customer base and increases sales opportunities.

Focus on customer satisfaction: Kroger is committed to providing excellent customer service and meeting customer needs. This includes initiatives like personalized offers, loyalty programs, and convenient shopping experiences such as online ordering and curbside pickup.

Effective supply chain management: Kroger has a robust supply chain management system that ensures efficient delivery of products to its stores. This enables them to maintain a wide selection of products and meet customer demand effectively.

Innovation and technology integration: Kroger has embraced technological advancements in the retail industry, including the use of data analytics, digital platforms, and automation. This enables them to optimize operations, improve inventory management, and enhance the overall customer experience.

Strong partnerships: Kroger has established strategic partnerships with various brands and suppliers, allowing them to offer exclusive products and competitive pricing. These partnerships help in differentiating Kroger from its competitors and attracting customers.

Commitment to sustainability and social responsibility: Kroger has made efforts to promote sustainability and social responsibility through initiatives like reducing food waste, supporting local communities, and promoting healthy living. This resonates well with customers who prioritize these values.

Strong financial performance: Kroger has consistently demonstrated strong financial performance, including revenue growth and profitability. This provides stability and resources for further investments, expansion, and innovation.

Strong employee engagement: Kroger recognizes the importance of its employees and invests in their training, development, and well-being. This contributes to a motivated and productive workforce, resulting in better customer service and overall operational efficiency.

Adaptability to changing market trends: Kroger has shown the ability to adapt to changing consumer preferences and market trends. This includes expanding into new segments like organic and natural foods, online grocery delivery, and health and wellness products.

Overall, Kroger's key success factors revolve around its customer-centric approach, operational efficiency, strategic partnerships, and adaptability to changing market dynamics.

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How Amazon Is Assembling The Future Of Grocery

The crucial ‘unlocks’ behind Amazon’s push into grocery

Imagining the future of grocery retail is the easy part:  all the products you need available on your smartphone; a wide variety of convenient home delivery or pickup options, including ‘on-demand’ one-hour delivery; and, if you feel overwhelmed by the choices and possibilities, a virtual butler to make suggestions and help you manage your needs.

“Jeeves, we have friends coming round for dinner on Thursday”.

“Would you like to cook Portuguese Cod again?  Yes, OK great. The order will arrive Wednesday evening at 9 p.m., you’re usually in at this time. Would you like me to add three healthy meals for the kids to the order? OK, done. I’ve added their favorites”.

Amazon is already the acknowledged leader in digital retail, and it is preparing its assault on food by establishing each of the elements needed to realize a vision of the future of grocery

Implementing all this is much more challenging. It requires access to a wide range of food products; delivery is costly unless drop densities are high and orders carefully organized; and the analytics and intelligence required to develop a genuinely useful ‘butler’ are clearly not straightforward.

Who might be able to put all that in place – and turn a profit?

Amazon is the biggest retail success story in the past two decades, and its ambition remains to let customers buy anything they want online. But it is not yet a major player in food, the biggest retail segment of all. Thus far, Amazon Fresh has been small: an interesting experiment for Amazon, and something to keep an eye on for traditional food retailers.

Now though, through a series of innovations, tie-ups and acquisitions – including the recent purchase of Whole Foods – Amazon is assembling the elements needed to become a major force in food retail. That does not, however, mean it will simply take market share in the current market for groceries. Instead, it is aiming to reinvent the grocery business according to a new set of rules. In this model, Amazon will own the relationship with the customer at the front, “ordering” end of the chain, as well as the back, “delivery” end – and be much more flexible about how things are done in the middle

The Future Starts Now

So, what is Amazon up to? We see them building the future of food retail piece by piece, step by step; and like one of those pictures that appears blurred until you stare at it for a while, soon the full image will become clear. And it will be a very different vision of what food retailing means.

To be a great food retailer, you obviously need excellent food products that customers want to buy. Many thought this would be an early stumbling block for Amazon, but they are simply solving this through partnerships – such as with Morrisons in the UK – and acquisitions such as the recent Whole Foods deal.

So, in the future, Amazon customers will be able to order online all the brands they know, plus a range of own-brand products. They will combine purchases of food with other products. Shoppers will order the way they find easiest, selecting products themselves, using auto-populated shopping lists, or setting parameters for an app to make suggestions. Or, they will simply bark an order at Alexa, Amazon’s voice-interactive personal assistant. Already, consumers can execute an order with a click of an Amazon Dash Button.

This revolution will turn groceries from a business that delivers a good – food – to a service that helps customers plan and manage their food needs. Subscription services could monitor store cupboards, and then suggest a few additional items to complete a new recipe. As Amazon gets to know individual customers – their preferences, dietary requirements and seasonal habits – it will take over the management of basic household items and start coming up with customized meal ideas. Alexa is already well on the way to becoming a food butler; it does not take much imagination to think through where this could go

Delivery: Frequent and Flexible

Creative delivery options will complete the new model.  Amazon’s partnership with DHL in Germany, which has a highly efficient delivery network, shows how it is working to reduce the cost of delivery. This, in turn, will make it feasible for customers to order smaller baskets more frequently rather than doing one big shop. Technologies such as DHL’s passive cooling packaging make frequent deliveries viable, as DHL will be able to carry them out in regular – instead of refrigerated – trucks. Many urban areas already have rapid, on-demand delivery services, and we expect these to increase.

We believe one of the keys to unlock the future of grocery retail will be the role of the food butler in helping customers organize orders at times and in ways that make the fulfilment more efficient. This will reduce costs for Amazon and, therefore, the prices it needs to charge. For example, it could proactively suggest orders at times when a delivery is already in the neighborhood, or optimize order slots in real time as different customers make requests: “Would you mind if the order came 30 minutes earlier?”

And, let’s not forget Amazon’s advantage in non-food retail.  Many Amazon Fresh customers already add one or two high-margin non-food items to their baskets. This may not sound like much, but it can transform the economics of the order from loss-making to breakeven or even profit-making – giving Amazon a huge advantage over other retailers without this capability.

Indeed, serving customers needs as broadly as possible is a crucial part of Amazon’s model. Their move to make Prime the “loyalty program” for Whole Foods is not a surprise – a significant part of the early upside they will gain from the deal will be in selling a wider range of products to (mostly affluent) Whole Foods shoppers, who only spend a small proportion of their wallet on the products Whole Foods offers today.

Overall, these innovations will save customers time, money, or both. They will also better serve food needs in new and imaginative ways, re-inventing how people think about food shopping, and driving penetration of the new service. 

The Next Step in Digital Retail

The result will be a transformation of food retail into an information business, where the collection, analysis, and use of data underpin competitive advantage. There is a first-mover advantage in machine learning, because algorithms improve as they absorb more information; and Amazon will gather more information than other retailers because it will be ahead of the game in more markets. And, let’s not forget, this data will be incredibly valuable – particularly as it will probably be the best (and perhaps only) treasure trove of information on food purchasing habits on a global scale. Global food manufacturers – that is, Amazon’s suppliers – will be prepared to pay a lot for access to this information and analysis, providing Amazon with a final, and probably unassailable, economic advantage.

Unassailable economic advantage

In the end it is this economic advantage – assembled from multiple ‘unlocks’ across the business model – which will eventually enable Amazon to confidently offer unbeatable prices for a great products in food, just as it does in non-food.

Amazon is already the acknowledged leader in digital retail, and it is preparing its assault on food by establishing each of the elements needed to realize a vision of the future of grocery. It’s doing this incrementally, but soon the whole picture will become clear.  This will help bring its grocery efforts to scale, beginning a virtuous circle of growth that will be hard to stop.  Amazon might be nearing its ultimate goal.

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Different Business Models To Launch An Online Grocery Business

Last Updated: 3rd April, 2023

Online grocery shopping is one of the fastest-growing niche markets in the eCommerce segment. According to a study by Neilson, 70% of consumers will be shopping online for groceries by 2024. Digital grocery will be a $243 billion market in the US by 2025.  The success indicates that establishing online grocery operations is not only possible but is essential to meet the rising demand of customers. Covered in this blog are various business models that can be used to launch an online grocery business. 

Table of Contents

• Types Of Grocery Delivery Business Models – Landscape Overview – Inventory Based Business Model – Multi-vendor Marketplace Business Model – Hyperlocal Grocery Business Model – Click and Collect OR Buy Online Pick-up In-Store (BOPIS) Business Model

Types Of Grocery Delivery Business Models – Landscape Overview

With the continuous expansion in the grocery eCommerce sector, the need to understand the efficacy of each business model along with its potential challenges is a must. Discussed below are the types of grocery delivery business models along with their advantages, challenges, and their example. 

Inventory Based Business Model

The inventory-based online store works on the concept where the inventory is bought and stored by the eCommerce grocery store. The eCommerce player purchases products from different companies and self maintains a warehouse.

The grocery eCommerce platform is responsible for managing the inventory, interacting with consumers, and ensuring the timely delivery of products.

Whenever there is a shortage of produce, the company places orders with the seller or manufacturer, instead of letting the customer interact with them. There is only one entity involved in the whole cycle i.e. the online grocery website. The invoice too is issued in the company’s name rather than the manufacturer’s. 

Advantages of Inventory Model 

Businesses that adopt the inventory model are able to manage the supply chain entirely. They do not have to rely on a third party for order fulfillment as they do it directly from their warehouse. This leads to speedier delivery as only a single player is involved. Even the grocery items delivered are fresh so the customer’s trust and satisfaction are built. 

Challenges of An Inventory Model

An inventory-based business model is expensive as it calls for a warehouse to be set up, requires quality controls, warehouse transportation, and administration. There can also be logistical issues.  

FreshDirect is a successful example of an inventory-based business model. It sources local and fresh food, stores the inventory in its warehouse, and delivers it to the customers when an order is placed. 

Multi-vendor Marketplace Business Model

Multi-vendor Marketplace business model provides a common platform for multiple buyers and sellers to come together to engage in commerce through a dedicated website. It is also commonly known as the ‘Zero inventory model’, as the owner of the online entity does not maintain an inventory of its own.

The shipping and payments are also facilitated through the platform. And, In this form, either the seller is responsible for packaging and dispatching, or after the packaging by the seller, the owner of the multi-vendor marketplace handles dispatching. Further, the eCommerce player charges a percentage of the overall sales as commission. 

Advantages of a Multi-Vendor Marketplace Business Model

The multi-vendor marketplace is technologically rich. Moreover, it provides customers with varied grocery products on a single platform. This helps in boosting the traffic as the availability of several vendors lures the customers. In addition, one doesn’t need to bother about maintaining inventory which further reduces the operational cost of a multi-vendor marketplace. 

Challenges of a Multi-Vendor Marketplace Business Model

A multi-vendor marketplace comes with its own set of challenges as there are a large number of sellers that provide a variety of options to buyers. This includes price competition, quality maintenance, customer and delivery management, and so on.  

Peapod is an example of a multi-vendor marketplace business model. 

Hyperlocal Grocery Business Model

A hyperlocal grocery business model caters to the needs of consumers within a definite geographical circumference. It helps in balancing out the demand for groceries with multiple supply options in the most optimized way. This business model also gives the local offline retailers a chance to amalgamate technology, and to take their business on an upward trajectory.

The most critical driving factor for the hyperlocal business model is the capacity to make deliveries to the end-users at lightning speeds. When following the hyperlocal business model, the eCommerce grocery store can collaborate with local vendors to fulfill orders.

Advantages of A Hyperlocal Grocery Business Model

The rise of online grocery shopping has paved a threat to traditional stores. But the hyperlocal business model supports the traditional stores as it provides them with an opportunity to optimize sales. Local retailers just need to enlist their businesses on the platform. Everything else from pickup to delivery is managed by the aggregator. Furthermore, the hyperlocal business model is environment friendly, i.e. due to short transportation carbon footprints are reduced. 

Challenges of A Hyperlocal Grocery Business Model

Hyperlocal business model is for fast delivery. Hence, timely delivery of arbitrary orders can become a challenge if there is a scarcity of delivery fleet and staff. Moreover, it can be a daunting task to carry out operations efficiently, due to unorganized and unstructured execution.

Also, entrepreneurs must ensure that they cooperate with maximum local suppliers for the availability of inventory. It should also be kept in mind that for small and medium sellers, being featured on a brands’ tech-driven platform can be an additional cost that they may try to avoid. 

Instacart is a leading grocery delivery platform that is based on a hyperlocal grocery business model. It provides services by connecting customers with personal shoppers. 

Click and Collect OR Buy Online Pick-up In-Store (BOPIS) Business Model

Online Pick-up In-Store Business Model

Click & Collect digital model merges the brick & mortar and eCommerce forms of shopping. This concept enables shoppers to purchase products online and later collect them from the physical store themselves, as per their convenience. It is an omnichannel type of retail strategy where the customer’s time that would have been spent in the store is either minimized or eliminated. 

It is a major form of contactless delivery that has been in trend and is also popular as Buy Online Pick-up In-Store (BOPIS) . As per research conducted by Post and Parcel, approximately 10% of sales will be drawn by adopting the click and collect retail strategy by 2025. Furthermore, it is predicted that in-store purchases will fall by almost 60%. Brands such as Safeway, Walmart, and Instacart have also initiated the development of plans to invest in the click and collect business model. 

Advantages of Click and Collect Business Model

Click and Collect business model enhances the omnichannel customer experience by bringing online stores and brick-and-mortar into one ecosystem. Further, the in-store traffic is positively impacted as picking up a digital order often results in additional purchases. It also helps in saving at least 28% of total transportation costs by eliminating last-mile delivery. In addition, click and collect gives retailers a chance to reduce their return rate by making sure that customers are satisfied with their grocery orders before they leave the store.

Challenges of Click and Collect Business Model

The BOPIS model relies on customers coming to the store for their order pickup. However, if the store is at an inconvenient location then customers won’t be inclined towards it. So the convenience of customers is a critical factor in the success of BOPIS. Moreover, the implementation of this model requires you to have employees who are fully trained for the pick-up system including the nuances of inventory management. In order to access your stores’ inventories in real-time, omnichannel order management is needed so that the physical and online operations are consolidated. 

Kroger is an online grocery store that successfully operates on the click and collect business model. 

Planning To Launch Your Online Grocery Business

Grocery eCommerce is one of the fastest-growing niches in the eCommerce industry. The traditional means of grocery shopping are being replaced by technology-driven ways. So if you are an entrepreneur who is planning to invest in an eCommerce grocery business, then it is important to understand in-depth the aspects of every business model mentioned above and to weigh its suitability with your business requirements. For a consultation, you can get in touch with us at FATbit Technologies, we will help you every step of the way.

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Author: Guncha Kishore

Guncha Kashyap is a professional tech blogger, guest writer, and content marketer. With a master’s degree in Commerce, she likes to explore the prevalent industry trends. She is currently associated with FATbit Technologies as a content marketing and branding professional. Her interests include writing about changing digital trends, the ever-growing gig economy, eCommerce marketplaces, and much more. Netflix and chill happen to be one of her hobbies.

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Grocery Delivery Business Model That You Need To Initiate a Successful Startup

The majority of grocery shoppers, as well as sellers, are most concerned about online grocery delivery. Perishable goods, edible goods, and anything else related to foods must be delivered the same day. The on-demand grocery delivery concept comes to the rescue in this situation. The on-demand Grocery Delivery Business Model is based on the notion of delivering goods as soon as possible, according to the customer’s preferences. In reality, online grocery shopping and CPG (consumer packaged goods) businesses rely on this sort of delivery strategy to stay afloat.

The grocery delivery sector has gained momentum in recent years, and the ongoing COVID-19 pandemic has just surged recently. Indeed, in 2021, grocery delivery will be one of the fastest-growing segments of eCommerce. According to the facts and figures on online grocery shopping services, the industry is predicted to triple every year, and any investment, whether it’s opening a grocery store or beginning a grocery delivery service, will pay off.

Challenges Of Grocery Delivery Business

If you’re starting a grocery delivery service, you don’t have an easy road ahead of you. The greatest obstacles that a grocery delivery service company would encounter in a pandemic would come from the customer side, as evidenced by the fact that during the Coronavirus epidemic in the United States, roughly 40% of customers complained about delayed grocery delivery. At the same time, another 20% of respondents expressed dissatisfaction with the grocery delivery time range.

During COVID-19, just 9% of customers indicated that making a purchase online was not difficult for them. However, the good news is that all supermarket delivery businesses are experiencing identical issues, so you just need to be better than the competition. The ultimate objective must be to establish a viable grocery delivery service . Different problems that the online grocery delivery firm encounters come from other directions.

• Changes in demand
• Lack of supply chain management
• Delivery Charges
• Changes in Customer behavior
• Stiff Competition

Top Grocery Delivery Business Models

Here are the many grocery supply business models you may utilize if you truly want to build your grocery supply app or start a hyperlocal mobile grocery delivery enterprise.

The Inventory Model

The Multi-Vendor Marketplace Model

An internal logistics network manages the transportation, gathering the items and shipping them to the client. The firm fulfills orders for customers by using the store’s logo. Amazon uses this concept in all of its operating areas. Because of its market success and the role it plays in maximizing conversion, a multi-vendor model becomes an excellent addition to the online or on-demand grocery framework. You may simply follow this strategy if you use a multi-seller module that is appropriate for your eCommerce site. Magento Multi-Seller Extension is one of these apps for the Magento platform.

The Shopping Model

Hyper-Local Model

The hyper-local marketplace, as the name implies, is a competition that caters to the needs of a limited area. A walk about your neighborhood will very certainly lead you to a similar business, albeit small and limited, but self-sufficient, that caters to almost all of the local inhabitants’ requirements. The most recent e-commerce term is a hyperlocal structure. As a consequence of grocery distribution, ordering groceries, home shopping, personal care services, and other services, the success of hyper-local e-commerce websites has taken on a radically new dimension. 

Related read: How Does The On-Demand Hyperlocal Delivery Model Work?

Local offline merchants and service providers have been given fresh leases for their businesses as a result of the creation and growth of hyperlocal networks. Despite the fact that the concept is fresh, the globe has become old owing to the widespread use of the internet. It has the potential to raise the firm of offline merchants to entirely new heights. Hyperlocal distribution methods guarantee that the things you order will be picked up in as little as an hour. Hyperlocal credits have made ordering meals from restaurants that you don’t normally bring home or that you need in a short period of time considerably easier.

The Online Selling Model

Merchandising

One of the most well-known methods for businesses using this business model to make money is by selling their own products online. You build your brand and authority online first, and then your branded things and products, such as reusable containers, cans, bottles, and kitchen appliances, can be sold separately on your website, generating direct revenue.

• Commissions

Another approach to monetizing your business is to charge the seller/store fees for each sale they make via your websites. Different commission fees for different commodities and geographies might also be levied from them, based on market and supply chain considerations.

Subscriptions

Services Charges

They can charge an additional fee to shops/partners who do not subscribe to your membership for each sale they make. They would have to join the subscription package in order to avoid paying the subscription price.

Allow stores to pay a fee in order to increase views on the homepage or specific searches. Advertisement banners will also be seen by sellers in this source. These programs might also be clubs that offer discounts on membership plans.

Memberships

Provide customers with beneficial offers such as spike charges, early delivery, faster arrival, and no need to subscribe to shipping rates. You might also provide a compatible loyalty package to the shop/partners, allowing them to sell or get additional advantages on their website.

Choosing The Right Business Model For Your Grocery Delivery Startup

If you’re unsure about the business model to utilize when beginning a grocery delivery service, keep the following considerations in mind. The actions that follow will undoubtedly be beneficial to you. Choose the right business model for your grocery delivery business before you consider these factors:

Knowing Your Company’s Value In The Market

Customers also complain about modern ways not being intuitive or included, while earlier technology may be more pleasant and optimized. Calculate the cost as a lower price cap with a 50% gross margin. Expenses that are too high will not compete for the consumer, and costs that are too low can expose you. Compete based on pricing and market demographics.

Confirmation About Your Product Viability

When you have an alpha version or a prototype, ask real clients if you share the same enthusiasm and enjoyment. Looking for ideas on how to improve things. If it does not alleviate misery or function, no company model will save you.

Testing Your Channel

It’s now time to present the updated company strategy to a select selection of clients or focus groups. All packaging, advertising, shipping, and servicing elements must be covered, not simply the sales pitch. Here’s another example of your capacity to pivot at absolutely no cost.

Communicating With Investors and Industry Leaders

A small consultation board with subject expertise will give you unbiased feedback and connections to production and delivery networks. Even if you can’t make a difference, it’s equally beneficial to communicate your thoughts with potential investors.

Planning And Executing A Local Roll Out

A successful business model validation is excellent traction on a tiny implementation. It allows you to compare costs, efficiency, and rates in any store or city, with less risk and maximum recovery and corrective speed. Later, you may download the viral campaign as well as materials.

Collecting Customer References

Offer exceptional treatment to the first few consumers in exchange for publishable information and word-of-mouth recommendations. If you can’t get their help despite your best attempts, consider it a red indicator that the firm isn’t progressing at the expected rate.

Targeting Nationwide Stores

You need significant recognition, reputation, as well as feedback from these organizations as the ultimate confirmation of your market strategy and product concept for the key competitors. As part of the ultimate launch and scale-up, this might also be an excellent source of feedback.

Related read: Formulating a Business Plan For Grocery Delivery Startup

How To Make Money In Grocery Delivery Business?

The sort of grocery delivery business model you pick will determine how much money your firm generates. As a result, after examining the revenue model, you must carefully pick the business model.

Following are the various sources of revenue of the grocery delivery business:

• Selling Banner Ads in Apps
• Monthly Subscription Charges
• Promoting Vendors

The Grocery Delivery App – The Ultimate Game Changer

You now have a better understanding of the on-demand grocery business model, including the issues it poses as well as the revenue sources it employs. All of this, however, is only possible if you have a capable and amazing grocery delivery app . It is critical to understand how to create a practical grocery delivery app. Getting the proper grocery delivery app development firm and the correct app solution from them is crucial to creating a great app. The second option is to purchase a Grocery Delivery Franchise and immediately start your own business. Getting a franchise can help you go to market faster and generate money right away. Get started with AllRide Grocery Delivery Solution Development today!

Swarnendu De

Swarnendu De is the Co-founder of AllRide Apps . He leads the product, sales, and marketing divisions at AllRide. Swarnendu is also the co-founder of Innofied Solutions , a technology company helping SMEs and Enterprises in digital transformation, product strategy, and development. With more than 15 years of industry experience, Swarnendu has been the author of top technology books, a speaker at numerous events, a mentor to startups, and has more than 10,000 online students. He has helped more than 600 businesses launch their tech products. Connect with Swarnendu on LinkedIn .

Formulating a Business Plan For Grocery Delivery Startup

How To Get Funding For Your Grocery Delivery App Startup?

Table of content

Zepto Introduction

Zepto business model: dark store model, benefits of zepto business model, zepto's usps, conclusion: a way ahead, frequently asked questions (faqs), what is the business model of the grocery delivery app zepto.

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Grocery delivery is a booming sector in terms of focus, participation, and investment. Changing consumer behavior and customers becoming more accustomed to online shopping has been the key factors for the growth of online grocery in these markets. 

Thus the grocery delivery sector is seen to be a very optimistic market. On similar lines, the Indian grocery delivery business was valued at USD 2.9 billion in 2020 and is expected to expand at a compound annual growth rate of 37.1 percent from 2021 to 2028. 

But Swiggy Instamart, Blinkit, BigBasket, Amazon Fresh already exist in the field. Is there any scope for a new business to set up?

Yes! Not only is an aggregator booming, but it is also disrupting the grocery delivery space. Yes, It is Zepto that we are talking about. 

Zepto is simply the fastest grocery delivery service and also the fastest-growing startup. Zepto claims to deliver groceries to your doorstep in less than 10 minutes. But how does the superfast delivery take place? 

While the other grocery delivery services take around 30mins. This blog entails the core of Zepto. Stick to the end of it to know more.

Zepto was developed by Aadit Palicha and Kaivalya Vohra, two teen Stanford dropouts. In an interview, they said they were facing trouble with grocery delivery during their homestay in the pandemic. 

As a saying says, the problem is the mother of a brilliant startup, so came Zepto . 

Though Zepto wasn't the firstborn, they started with KiranaKart. They played with a couple of models before morphing it into Zepto. And after its inception, it has been in the headlines. 

Their idea was simple: build the fastest grocery delivery service ecosystem in the subcontinent. However, the proposition is difficult to achieve accounting for traffic congestion, roads, and discount-seeking Indian consumers. 

So, they had to do enough brainstorming to plan the execution of their business, which now seems to pay off. 

In an interview with YS, Aadit says, "I think a lot of the competition in the space is either in executing grocery delivery or is focused on multiple different models, which is where we saw the opportunity."

The Mumbai-based startup Zepto operates in Mumbai, Delhi, Bengaluru, Gurugram, and Chennai. Also, it is about to venture into Hyderabad, Kolkata, and Pune markets. Up till now, the startup has had an amazing customer response.  

Suggested Reading: How To Start On-Demand Grocery Business

Dark stores may seem sinister, but it undermines one of the many bright ideas that have helped several retail businesses stay afloat during the pandemic. Dark stores are distribution outlets that are not open to visitors. 

These micro warehouses quickly and accurately fulfill orders and thus provide shoppers with resources and options like purchasing products online, same-day delivery, or pickup in-store.

The founders said that the magic of the dark store model is how they pick, pack and dispatch goods in under 60 seconds. However, the last mile is like any other delivery model.

Such a model has been implemented in developed nations, but the model was never explored in the Indian context. The "dark store model" curbs the trivial challenges any delivery service faces, traffic congestions, navigation, and connectivity. 

Zepto states that utilizing location intelligence, geography, population, road patterns, traffic dynamics, weather, last-mile supply availability, real estate values, and so on has improved the network's performance. And currently, it has over 40 dark stores in various locations.

However, dark stores are meant for instant deliveries and can't handle sales volume. 

But Zepto didn't compromise with the shortcomings of this model. They have over a thousand products on display: fresh produce, milk, meat, kitchen refills, and more at the best bargain. 

Moreover, their AI-powered tools ensure a smooth transition from picking, packing, and delivering. 

There are numerous benefits of the business model that Zepto employs. Here we have mentioned a few.

Improved Distribution and faster delivery

The dark store enables Zepto to fulfill orders more quickly and efficiently. Micro and cold warehouses provide several distribution choices and physically bring groceries closer to a certain market segment. 

This way, Zepto has more control over the market spread and Distribution.

Broader Customer Reach

The dark stores bring distribution centers closer to consumers, and the stores are always online to take in orders. This brings consumers to such platforms and to use their services.  

Suggested Reading: Why on-demand grocery delivery apps reach out to more customers?

Contactless Shopping

The requirement of contact-free shopping has been a key factor for businesses to adopt the 'dark store' approach. Dark stores allow consumers to purchase groceries without coming in contact with others or entering a physical store. 

They place online orders, get them instantly delivered.

Improved Inventory Control and Better Product Assortment 

Dark stores are customer-free zones and have better control inventory and manage larger order volumes. The dark stores are specifically designed for easy navigation, allowing packers to move as quickly as possible to pack the items in an order. 

Further, Zepto's AI-powered tools keep inventory stock track and product assortment.  

And if you wish to build an app like Zepto, then contact AppsRhino . AppsRhino is a custom app development platform that caters to the need of various industries: 

• Home Services
• Laundry Delivery
• Alcohol Delivery
• Grocery Delivery

Zepto's business model is indeed a customer-centric and instant service model. However, Zepto too provides certain selling points that set it apart from its competitors. Still, these are also included in the model. 

Zepto has instant delivery and is regarded as quick commerce. It fulfills grocery delivery within 10 mins and claims to have a median delivery time of 8 mins 47 seconds.  

The founders said that by the time a user checks his order, the order is already shipped out for delivery. Also, almost all orders are fulfilled in under 10 minutes, but one percent of the orders might take 15-16 minutes or a little more.

Zepto provides free shipping. This USP has got dim beside the former, but it doesn't charge a delivery fee. Whereas Instacart, Amazon Fresh, and others have certain delivery fees.

The free service doesn't mean costlier products. Yet another USP is it provides some fascinating discounts on the listed products and groceries.

Zepto has raised $100 million in Series C funding led by Y Combinator's Continuity fund, valuing $570 million. The founders say that investments in Zepto will help it reach more customers and provide them with better service. As of now, Zepto operates in the Indian metros. 

However, it has not revealed its consumer count, but sources say Zepto is growing at 200% every month.

As we mentioned earlier, the 10 min grocery delivery service has disrupted the grocery delivery space. Blinkit (December 2021) announced a temporary shut down of its service in areas where it couldn't deliver groceries in under 10 minutes. 

While incumbent Swiggy announced a major investment of $700 million in its grocery delivery vertical -- Swiggy Instamart, and will make deliveries in 15 minutes by January 2022. Fraazo-- a Mumbai-based grocery delivery service, also announced a tripling of its dark stores to 750 by the end of Q2 in FY22. BigBasket and Dunzo are bucking to launch into the quick-commerce space.

Coming back to Zepto, it's a combination of razor-sharp focus, quick execution, and a strong-headed team. Moreover, it timed perfectly into the grocery delivery space. 

Though Zepto is just a 5-month-old company, any prediction can be a fallacy. But we are confirmed that it has raised customer expectations, and we are thriving towards a more consumer-centric business.  

If you also want to develop a Zepto-like mobile app then contact AppsRhino to get the app within your budget and desired delivery time. 

Suggested Reading: What is the best way to make a good grocery delivery app?

What is Zepto's revenue model?

Zepto's revenue model is based on charging a commission fee from the grocery stores for every order placed through the app. The commission fee is a percentage of the total order value and varies depending on the store's agreement with Zepto.

How does Zepto make money?

Zepto makes money by charging a commission fee from the grocery stores for every order placed through the app. Additionally, Zepto may charge a delivery fee from the customers for the delivery service.

How does Zepto differ from other grocery delivery apps?

Zepto differs from other grocery delivery apps by offering a wide range of grocery stores to choose from, including local and independent stores.

 Additionally, Zepto offers a subscription service that provides free delivery for a monthly fee.

How does Zepto ensure the quality of the products delivered?

Zepto ensures the quality of the products delivered by partnering with reputable grocery stores and conducting regular quality checks. 

Additionally, customers can rate and review the products and the delivery service, which helps Zepto to improve its service quality.

How does Zepto handle customer complaints?

Zepto has a customer support team that handles customer complaints and queries. Customers can contact the support team through the app or website, and the team will respond promptly to resolve the issue.

How does Zepto ensure the safety of its delivery personnel?

Zepto ensures the safety of its delivery personnel by providing them with personal protective equipment (PPE) and training on safety protocols. Additionally, Zepto conducts regular health checks and provides sick leave to its delivery personnel.

How does Zepto ensure the security of customer data?

Zepto ensures the security of customer data by using encryption and other security measures to protect the data from unauthorized access. Additionally, Zepto has a privacy policy that outlines how it collects, uses, and protects customer data.

How does Zepto handle refunds and returns?

Zepto handles refunds and returns by following the store's refund and return policy. Customers can contact the store or Zepto's customer support team to initiate a refund or return request.

How does Zepto ensure timely delivery?

Zepto ensures timely delivery by partnering with reliable delivery partners and using advanced logistics technology to optimize delivery routes. Additionally, customers can track their orders in real-time through the app.

How does Zepto plan to expand its business?

Zepto plans to expand its business by partnering with more grocery stores and expanding its service to more cities and regions. Additionally, Zepto may introduce new features and services to enhance the customer experience.

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Thousands of grocery workers in region approve union contract

Katrina Keffer was supposed to keep a neutral expression on her face when the company officials told her their proposal for pay increases for employees of Spokane-area Fred Meyer, Albertsons and Safeway stores.

The 23-year veteran employee of Fred Meyer failed.

“I almost started crying. I literally had to turn my back,” said Keffer, a Colbert resident. “I was smiling and tears were forming in my eyes because they were going to give us what we wanted. It was so exciting.”

Keffer, 62, is one of about 6,200 employees of both Albertsons-owned and Kroger-owned grocery stores who ratified agreements earlier this month for new contracts that provide higher wages for all employees regardless of their departments or places they live.

The agreement reached with the United Food & Commercial Workers International Union, or UCFW 3000, covers workers who live in a geographical region that includes all of Washington east of the Cascades, northeast Oregon and North Idaho.

Sean Embly, chief of staff for UCFW 3000, said negotiations with the stores began in November and concluded with a tentative agreement on April 30. Grocery store workers in Spokane voted to ratify seven separate contracts on May 2.

The new contracts will run for three years from the end of the last agreements. The agreement, which does not include local Rosauers Supermarket employees, will bump workers’ pay by at least $2 an hour and an additional $1 per hour for each of the two successive years of the contracts.

“We feel this negotiation was a step forward for getting the same pay in our jurisdiction. We think grocery store workers deserve more than we were able to win,” Embly said, “but the biggest piece of the settlement agreement was a good wage settlement.”

The negotiations occurred during the backdrop of $24.6 billion merger negotiations between Albertsons and Kroger, and they marked the first talks for grocery workers since the COVID-19 pandemic shutdowns placed those employees on the frontlines with scared locals.

After government officials declared them essential workers, many stores gave grocery workers a $2 bump in pay. However, most of those “hazard” or “hero” pay bumps were rescinded in a few weeks, Embly said.

“That was an essential focus of the negotiation,” he said. “The workers in the greater Inland Northwest had settled their contract right before COVID hit. That is why when we were bargaining the $2 up front was so important because it was symbolic for the hazard pay they got during the pandemic.”

Keffer, the Fred Meyer worker, was part of the negotiation team for the recent contracts.

“There were days I came back to work crying because of the awful things that were said during negotiations,” Keffer said. “But (coworkers) hugged me because I have the largest mouth in the store, my boss said. I don’t have a filter.”

The talks lasted about six months and workers staged an information picket in the first week of March to inform customers of what was at stake. When the negotiation team informed management that they had a hard date of May 2 to settle or strike, the companies came back with the wage increases, Keffer said.

Keffer returned to hugs from coworkers.

“I don’t even have words,” she said. “I’ve been walking round with a smile on my face.”

Keffer said she and her husband can now start putting money in savings for the first time in a decade.

“I feel like it’s giving me more security,” she said. “I am stoked.”

Equity across positions

Embly, the union chief of staff, said area grocery workers had already negotiated for good health care plans and pensions as part of their benefits packages prior to the new contract negotiations.

“But you can’t feed your family or pay your rent with health care benefits or your pension,” Embly said. “Getting that wage increase in these negotiations was tremendously important.”

Going forward, the wage for experienced grocery workers went from $16.88 an hour to $19.71 as of the signing of the contract. Those same employees would then get a $1 bump in each of the two subsequent years of the contract.

Another major piece of the contract involved getting similar pay for different jobs, said Embly, whose union also is representing nurses and other workers at Providence Sacred Heart Medical Center .

For example, grocery stores traditionally had paid lower wages who worked in “perimeter” departments, like delis or bakeries.

“If you walk into a grocery store today, you see predominantly women and people of color working the perimeter departments,” he said.

They will now work under the same pay scale as clerks and checkers, he said.

“This is a way not only to reward workers for the hard work they do, but also address some equity issues that had existed for a long time in our grocery stores,” he said.

Joyce Loffelmacher, 61, of Spokane is one of those employees. She’s worked 19 years at the deli at the Albertsons at 6520 N. Nevada St.

“The raises are amazing,” said Loffelmacher, who immediately got a pay bump of $2.83 an hour. “Especially for those of us in the outer perimeter departments who have been neglected for a number of years.

“That raise,” she continued, “is going to be make a difference in my life.”

Like Keffer, Loffelmacher served as part of the negotiation team. She said she’s been losing her hearing for years and worked to get a provision in the contract so that the health benefits now cover the expensive hardware for hearing aids.

Before, the health insurance would only cover testing, not the corrective equipment.

“At our contract signing, when we explained that to the members, there were six other people cried over that fact that this finally got negotiated in,” she said. “I call it ‘My baby.’ Now I can actually afford to go out and get the proper devices.”

In addition to equal pay for different jobs, grocery workers in Yakima and Wenatchee may have been paid less for the same job in Spokane, Embly said. The contract bumps pay for all of those employees regardless of where they live.

“In Washington state, we now have predominantly one wage classification that will cover grocery clerks going forward,” Embly said. “We felt this negotiation was a step forward for getting the same pay in our jurisdiction.”

Merger faces legal hurdles While most of the workers have voted to ratify the new contract, workers in Cheney and a handful of stores in northeast Oregon are expected to hold votes later this month.

The contracts for Spokane-area workers settled the wages question, but several concerns continue to swirl about the effort of Albertsons and Kroger to merge, which was first announced in October 2022 . The companies claimed a merger is the only way to compete with retail giants Amazon and Walmart.

The merger has brought lawsuits from the attorneys general of Washington and Colorado, and a federal suit was filed in Oregon by the Federal Trade Commission, which are all trying to block the merger over concerns that it would reduce customer choices and bargaining positions of employees across the country.

Last month, the two grocery giants announced that they would sell an additional 166 stores to C&S Wholesale Grocers. That would bring the total to 579 stores the companies would shed to address concerns raised by regulators.

But Tom Geiger, the special projects director for UCFW 3000, said the union fears that the merger would be a repeat of the debacle from Seattle a decade ago when the Albertsons merger with Safeway led to selling dozens of locations to local grocer Haggen.

It prompted a $1 billion lawsuit in 2015 by Haggen , which argued that the grocery giant hoodwinked the smaller chain into buying stores and then sabotaged Haggen’s entry into the new markets.

Geiger fears a similar ending with the deal for C&S Wholesale, based in New Hampshire.

“They are looking to increase, more than 25 fold, the number of stores they would run,” Geiger said. “That’s just not feasible. It would be the Haggen experience on steroids.”

Kroger officials have said that the merger would not result in any store closures. But Geiger, whose union has joined more than 100 other organizations who are against the merger, said Kroger loses the ability to keep a store open as soon as it sells it.

He noted that UCFW 3000 officials met in February with leaders from C&S Wholesale.

“The bottom line was they do not commit” to not closing stores, Geiger said. “We are not surprised.”

C&S is buying the stores for roughly half the commercial value of the real estate value of those 579 locations, he said.

“In lay person language, they could sell a lot of those pieces of real estate … never operate a store, and they would be fine,” Geiger said.

Efforts to reach Kroger and Albertsons officials on Friday afternoon were not immediately successful.

Geiger said keeping stores in neighborhoods would give shoppers better choices to choose lower prices, but conversely, it would give the larger company a stronger position to argue for lower wages, he said.

“It puts the consumer in a harder spot,” he said. “All sorts of folks think they would be harmed in a significant way.”

From prenatal care to pediatrics, Providence is creating a healthier future for families

Like many expectant mothers, Miranda Kekauoha had a plan.

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A Model for Expanding Your Business into Foreign Markets

• Joshua Conrad Jackson

Four strategies leaders should adopt when taking their brand abroad.

It used to be thought that globalization would flatten out cultural differences among countries and regions of the world, making it easier than ever for companies to move into foreign markets. According to a new study by the author and a colleague, however, cultural differences are greater today than they were 40 years ago, which explains why some major corporations have failed in their recent efforts to establish a foothold in new countries. Companies need to adapt, the author argues, and to that end in this article he presents a general model for global leadership in the face of cultural divergence.

Walmart in the 1990s seemed on pace to become a global giant. After rapid growth in the U.S. domestic market throughout the 1980s, the company opened its first international store in Mexico City in 1991, followed by Canada in 1994. By 1998 it had expanded to Germany and South Korea, betting that its “always the low price” approach to business would be enough to outcompete foreign vendors.

• Joshua Conrad Jackson is a Neubauer Family Assistant Professor at the University of Chicago’s Booth School of Business.

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I tested all available versions of ChatGPT to see which model writes the best work emails

• OpenAI unveiled GPT-4o, its latest generative AI model, on Monday.
• GPT-4o is available as a text-based chatbot on ChatGPT.
• Business Insider tested GPT-4o's email-writing capabilities and compared it to older models.

OpenAI 's newest model, GPT-4o, is predicted to shake up multiple industries, but its email writing skills might need some work.

During a flashy display Monday, the company unveiled the latest version of the generative AI model predicted to shake up multiple industries: GPT-4o .

GPT-4o is already available as a chatbot on ChatGPT , which many workers use for boring, text-based tasks. Free ChatGPT users are stuck with GPT-3.5 but get limited access to a handful of responses from GPT-4o, per OpenAI's pricing page .

The ChatGPT Plus membership costs $20 a month and includes more answers from the faster GPT-4o model, access to GPT-4, and features like an image generator.

As someone who has previously tried and grown frustrated with ChatGPT's inability to write non-robotic-sounding emails, I wanted to see if GPT-4o would actually help me out for once.

Using ChatGPT's "temporary chat" feature to prevent the chatbot from spitting out similar responses based on previous answers, I tested three available versions of the chatbot — GPT-3.5, GPT-4, and GPT-4o — using three different email prompts to see if GPT-4o is superior to the earlier versions. Here's what I found.

Interview requests

This is one of the most common emails I send at my job, so I was an expert on how they should be structured. I've tried having GPT write these emails, but it never works out — the emails ChatGPT constructs are always extremely long and ridiculously official-sounding. I'm sending an email, not a quill-and-inkpot letter to the King of England .

I had hoped GPT-4o would change its ways, but it's hard to teach an old chatbot new answers.

Here's the prompt I gave:

Can you write an email to an expert I am interested in interviewing about the history of generative AI models? I want the email to be brief and friendly. Let the expert know I work at Business Insider.

GPT-4o returned the shortest draft, which I was grateful for. However, I did find it odd that the chatbot wrote that I would be "honored" to interview a subject. Do not worry, future interview subjects — I will not come off this strong in an email.

The older models provided lengthier answers. I did find it interesting that these models made up topics my fake source and I could discuss, and that they were topical. For example, the older GPT-4 model said the faux interview would "focus on the key milestones and future implications of generative AI technology."

GPT-4o's answer wasn't quite as detailed — it took the "brief" part of my request seriously.

Winner: GPT-4o

Scheduling a meeting

Sending meeting emails isn't particularly difficult, but it's always easier to have someone — or something — else write them for you.

My second prompt:

I want to schedule a virtual meeting with my boss to discuss an ongoing project. Can you write an email asking to put something on the calendar this month? I want the email to be brief and conversational.

I was surprised that all three models constructed their emails concisely and similarly. My simple and straightforward prompt may have helped.

I found it interesting that the previous generation, GPT-4. asked me to elaborate on the meeting topic at one point to draft a better email. Still, all three models gave responses that would work well for someone trying to communicate with their higher-ups.

Winner: Three-way tie

Cold emailing about a career opportunity

A cold email : It's probably one of the scariest messages that someone can send. For my final prompt, I asked ChatGPT to take on the anxiety-inducing task for a persona I made up — a financial advisor looking for a gig at JPMorgan .

I am a budding financial advisor looking for a new job. I would like to introduce myself by cold-emailing someone at JPMorgan. Can you write this email for me and include details that would make me stand out?

For this one, I did not add a line about brevity, resulting in all of the models churning out responses that were far too long. Interestingly, GPT-4o wrote the longest email, at nearly 300 words. The other two were around 250.

All the emails were structured very similarly. For example, all three lost sight of the topic and thanked the email recipient for "considering my application."

Both the GPT-4o model and the 3.5 model added the phrase "What sets me apart…" which indicated to me that it was pulling from my prompt. It was something I would expect to read in a middle school essay — not from an adult job seeker.

Winner: GPT-4

And the winner is...

ChatGPT will be ChatGPT.

The bot has a distinct voice and style that makes it obvious that a non-human is composing whatever text output you ask for.

I don't think the newer model has shed that sound on paper — though maybe having the text read aloud by a human-sounding, and perhaps flirty, voice assistant , as OpenAI recently demoed, would change things.

The text-generating capabilities of each model were fairly similar to me. Sometimes, the older models gave me answers that I found more conversational and less robotic. So, if you only want ChatGPT to write emails for you, the monthly $20 is probably not worth it.

However, if you want to avoid sending emails and generate images of cute cats in Amazon packages to pass the time at your desk, it may be time to pull out your wallet.

OpenAI did not immediately respond to a request for comment.

Axel Springer, Business Insider's parent company, has a global deal to allow OpenAI to train its models on its media brands' reporting.

• Main content

Inflation Cooled Slightly, Offering Some Relief for Consumers and the Fed

Prices climbed 3.4 percent in April from a year earlier, a moderation after some hot inflation readings this year. Stocks rose as investors bet that the Federal Reserve could cut interest rates sooner.

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+3.6% excluding

food and energy

+3.4% in April

Ben Casselman

What to know about the inflation report.

A closely watched measure of inflation eased last month, an encouraging sign for the economy after three straight months of uncomfortably rapid price increases.

The Consumer Price Index climbed 3.4 percent in April, down from 3.5 percent in March, the Labor Department said Wednesday. The “core” index — which strips out volatile food and fuel prices in order to give a sense of the underlying trend — rose 3.6 percent last month, down from 3.8 percent a month earlier. It was the lowest annual increase in core inflation since early 2021.

The slowdown will likely come as welcome news to consumers, and as a relief to policymakers at the Federal Reserve, who have been concerned that they were losing ground in their fight against inflation. But economists cautioned that one month of encouraging data was far from enough to set those worries to rest.

“I would characterize it as a small step in the right direction,” said Stephen Stanley, chief U.S. economist at Santander.

Both overall and core prices rose 0.3 percent from the previous month, down from 0.4 percent in February and March.

Inflation fell rapidly last year, giving rise to hopes that the Fed was on the verge of succeeding in its effort to rein in price increases without causing a recession, and that the central bank could soon begin cutting interest rates. But progress has since stalled, and investors have all but given up hope of rate cuts before September.

The encouraging inflation report on Wednesday is unlikely to change those expectations. But it could be a step toward giving policymakers confidence that inflation is returning to normal, which they have said they need before they begin cutting rates, which are currently set at about 5.3 percent.

“I think there will be something of a sigh of relief from the Fed, but at the same time there’s still work to be done,” said Sarah House, senior economist at Wells Fargo. She noted that services prices, in particular, continued to rise quickly in April, albeit more slowly than they had in recent months.

The report is also likely to be met with relief at the White House after what has been a rough recent run of inflation data for President Biden. Grocery prices fell outright in April, and are up just 1.1 percent over the past year, encouraging signs of progress in what has been one of the most painful categories of inflation for families.

But the report also provided fodder for Republicans. Gasoline prices rose a seasonally adjusted 2.8 percent in April from March.

Still, while Wednesday’s report contained some mixed signals, it did at least stop the bleeding after several months of bad news.

Had the data come in hotter than anticipated yet again, it could have led policymakers to conclude that high rates needed more time to bring inflation to heel. Speaking at an event in Amsterdam on Tuesday , Jerome H. Powell, the Fed chair, reiterated that recent inflation readings had made him more cautious about cutting rates.

“We did not expect this to be a smooth road, but these were higher than I think anybody expected,” he said. “What that has told us is that we will need to be patient and let restrictive policy do its work.”

Any further delay would be bad news for investors, who have been eagerly anticipating lower rates, and for low- and moderate-income Americans, who are increasingly struggling to manage the burden of higher borrowing costs. Data from the Federal Reserve Bank of New York on Tuesday showed that a rising share of borrowers are falling behind on their credit card bills as rates on those debts have skyrocketed.

Wednesday’s report showed improvement in some of the categories that had driven the recent uptick in inflation. Health insurance costs, which jumped in March, rose more slowly in April. Car insurance rates, too, rose more slowly, although still at an uncomfortably rapid clip.

But prices in one key part of the economy remained stubborn: housing. For more than a year, forecasters have been predicting that the government’s measure of housing inflation would ease, citing private-sector data showing rent increases slowing.

Instead, housing costs in the Consumer Price Index have continued to rise more quickly than before the pandemic, a pattern that continued in April.

“The initial reaction from the market to this data is that this is a relief, and it’s good news, because we’re not re-accelerating,” said Blerina Uruci, chief U.S. economist at T. Rowe Price. “But when I look at the details, it seems to suggest a degree of stickiness in inflation,” in part because of housing.

Still, the latest data could restore some confidence that policymakers will be able to keep bringing down inflation without causing a recession. The Fed had seemed on track to do that last year, defying predictions that high interest rates would inevitably cause a large increase in unemployment.

But as the fight has dragged on, some economists have become more concerned that the Fed will prove unable to control inflation fully without slowing the economy so much that people lose their jobs. Job growth slowed more than expected in April, and the unemployment rate has gradually crept up.

“The labor market has held up so well,” Ms. House said. “But the longer we keep interest rates where they are, the more I get worried about the labor market side.”

Jeanna Smialek and Jim Tankersley contributed reporting.

J. Edward Moreno

Stocks are rising in early trading as investors celebrate the inflation data, which has boosted hopes of Fed rate cuts this year. The S&P 500 is up about 0.5 precent and the tech-heavy Nasdaq Composite is up about 0.3 percent. The Russell 2000 index, which measures smaller companies more exposed to changes in the economy, is up 1.3 percent.

S&P 500

Jim Tankersley

No boasting over the inflation numbers from President Biden today. “Fighting inflation and lowering costs is my top economic priority,” he said in a statement. “I know many families are struggling, and that even though we’ve made progress we have a lot more to do.”

Biden has been trying for months to find the right balance between claiming credit for economic gains and expressing solidarity with voters struggling with high prices . Here, he’s leaning into the “feel your pain” side of the equation .

Former President Donald J. Trump’s campaign is, not surprisingly, hitting Biden on today’s report. “Joe Biden’s poll numbers continue to sink as prices for the American people continue to rise,” Karoline Leavitt, the campaign press secretary, said in a statement.

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Lydia DePillis

Volatile energy costs — especially gasoline — led the increase in inflation in April, but it was partly counterbalanced by categories such as vehicles and some food items.

Monthly changes in April

Gasoline (all types)

Motor vehicle insurance

Cereals and bakery products

Hospital services

Medical care commodities

Rent of primary residence

Food away from home

All items excl. food, energy

Dairy, related products

Alcoholic beverages

Physicians’ services

Tobacco products

Motor vehicle repair

Electricity

Nonalcoholic beverages

New vehicles

Meats, poultry, fish, eggs

Fruits, vegetables

Airline fares

Used cars, trucks

Piped utility gas service

All items excluding food and energy

Dairy and related products

Tobacco and smoking products

Motor vehicle maintenance and repair

Nonalcoholic beverages and materials

Meats, poultry, fish and eggs

Fruits and vegetables

Used cars and trucks

Madeleine Ngo

Food price gains moderated in April.

Food inflation eased in April, providing some relief to grocery shoppers struggling to deal with higher costs.

Overall, food prices were flat compared with the prior month, a slowdown from March, when prices rose 0.1 percent. Grocery prices fell 0.2 percent in April after remaining flat for two straight months. The cost of dining out rose 0.3 percent for the second month.

Compared to a year earlier, food inflation climbed 2.2 percent in April, the same rate it rose in March . Still, that is a faster rate than prices were rising before the pandemic.

Prices for fruits and vegetables declined 0.8 percent over the month after increasing 0.1 percent in March. Meats, poultry and fish prices fell 0.1 percent, down from an increase of 0.6 percent the month before. Some products saw more rapid price gains. Costs for cereal and cereal products increased 2.2 percent over the month, and prices for ice cream and related products rose 3.3 percent in April.

Egg prices declined 7.3 percent over the month. That was a reversal from the two months prior, when they rose 4.6 percent in March and 5.8 percent in February. Economists have mostly attributed the recent rise in egg prices to bird flu outbreaks hitting commercial farms.

Although egg prices declined in April, David Ortega, a food economist at Michigan State University, said there was still a lot of uncertainty surrounding bird flu outbreaks, and he expected prices to rise in the coming months if outbreaks continue to worsen.

Overall food inflation has cooled over the past several months as transportation and raw material costs have moderated. Economists have said they expect overall food inflation to continue easing in the coming months.

Still, the high cost of food has posed a political problem for President Biden ahead of the election. Although food prices have been rising at a slower rate in recent months, economists have said consumers might not be taking much comfort with that fact because prices are still significantly higher than they were a few years ago.

Meanwhile, retail sales came in weaker than expected, in a potential sign that high prices are continuing to depress purchases. The flat number came after a strong February and March, however, so it may not add up to real evidence of a downturn.

Jeanna Smialek

Blerina Uruci, chief U.S. economist at T. Rowe Price, said that she thought that the Fed still hasn’t “seen a sufficient deceleration to feel confident,” and said that she is forecasting a rate cut in December — but predicating that on cool inflation readings over the summer.

“I don’t think there is any benefit right now to signaling too strongly in either direction for the Fed,” she said.

Joe Rennison

Renewed signs of cooler inflation have bolstered hopes of rate cuts this year. Investors have tilted their bets toward September for when the Fed will first cut interest rates, based on prices in interest rate futures markets, with another cut expected by the end of December.

“This is the first good C.P.I. report in four months and the market likes it,” said Gary Pzegeo, head of fixed income at CIBC Private Wealth US.

Paul Ashworth, chief North America economist for Capital Economics, said, “all things considered, this is consistent with the Fed cutting interest rates in September,” in a note he wrote to clients.

Of interest to parents of young children, the cost of daycare and preschool rose 0.4 percent over the month. It has been rising slightly faster in the pandemic era than it had been in the years before, though it is less volatile than other categories.

One reason why: According to a report out today from Child Care Aware of America, the supply of new daycares hasn’t kept up with demand as parents go back to work in person.

This report ends what has been a rough run of inflation data for President Biden. White House officials would love to see even more cooling in price growth, but they will welcome this reading as a start.

I would expect Biden and his team to highlight falling grocery prices — progress on an issue that consumers are paying an enormous amount of attention to.

Airfares appear to have resumed their downward slide, after having risen sharply in the second half of last year. They have declined 1.2 percent over the past two months.

Housing inflation held steady in April, as a more marked slowdown remains elusive.

Housing inflation remained unchanged in April, offering little comfort for Federal Reserve policymakers as they look for further evidence that inflation more broadly is slowing down in a sustainable way.

Economists have been closely watching housing inflation, which makes up about a third of Consumer Price Index inflation. They have expected it to cool meaningfully, but so far it has moderated only slowly.

Forecasters have been looking for a slowdown because market-based rents on new leases have cooled notably, and economists have expected that to slowly feed into official inflation data. But the government’s inflation figures capture more than just new rents: They try to represent what is happening to all rental units, including those with existing leases, and also estimate how much it would cost to rent owner-occupied housing.

It is taking an unexpectedly long time for the slowdown in real-time rents to move into those measures, though it is slowly happening. The Bureau of Labor Statistics’ rent of primary residence index picked up 0.4 percent in April from the previous month, in line with its March gain. And a measure that tracks how much it would cost someone who owns their house or apartment to rent it climbed by 0.4 percent, also unchanged.

That pace of increase is slower than last year, but it is also a reminder that it is taking time to turn the tide on housing inflation.

Economists broadly still expect official housing inflation measures to moderate this year. Rent growth on existing leases must eventually slow down to look more like the rent growth on new leases, the logic goes, because otherwise people who are facing big rent jumps will simply move.

But there is uncertainty around both when that moderation will happen and how extensive it will be. And some economists have been eyeing a recent tick up in at least one measure of new leases — a nervousness that is likely to linger in light of the new data.

One component pushing up the headline inflation index was energy, which has been bouncing around a lot since peaking in 2022. It rose 1.1 percent over the month and is up 2.6 percent since last year.

The two-year Treasury yield, which is sensitive to changes in interest rate expectations, fell sharply after the numbers were released, as investors appear to have dialed back how long they expect interest rates to stay elevated for.

The dollar is also sharply weaker, a welcome sign for many countries around the world.

Stocks are rallying, as investors welcome a return to the trend of cooling inflation data. Futures on the S&P 500, which allow investors to trade before the official start of trading, rose 0.5 percent in premarket trading, on course to push the index to a fresh record high.

Emily Flitter

This inflation report shows that car insurance prices are still rising, but at a slower rate than last month. The index for motor vehicle insurance rose 1.8 percent in April, after a 2.6 percent rise in March.

Even though it’s slowing, the rise in car insurance is still staggering compared with other inflation components. Car insurance prices haves risen by 22.6 percent over the last year. Insurers have just recently gotten permission to adjust their prices to conditions that have since faded, and now they’re hoping to start turning a profit again.

One of the biggest drags on inflation came from cars — prices for used vehicles were down 1.4 percent over the month, and the cost of new vehicles declined 0.4 percent.

The combined used and new vehicles index is now down about three percent from its peak in May of last year.

Food prices were flat in April compared with the previous month, a slowdown from March, when prices rose 0.1 percent. Grocery prices also fell 0.2 percent, providing some relief to consumers.

Egg prices fell 7.3 percent in April, a reversal after prices rose 4.6 percent the month before.

Jason Karaian

The numbers are in: U.S. consumer prices rose 3.4 percent in the year through April, a slight downtick in the inflation rate. That’s roughly in line with what economists expected.

We are all watching closely to see what happens with rent and a measure of rent that applies to homeowners this morning. Economists have been waiting for months (and months) for it to come down.

Stocks are mixed as investors await the inflation data. The S&P 500 is flat in premarket trading. The tech-heavy Nasdaq Composite is down slightly, after some lukewarm news from big tech companies like Apple and Amazon.

A positive report could be enough to push the S&P 500 back up to another record high, after a brief blip in this year’s rally.

The Fed chair’s confidence in cooling inflation is ‘not as high’ as before.

Jerome H. Powell, the Federal Reserve chair, reiterated Tuesday that policymakers were poised to hold interest rates steady at a high level as they waited for evidence that inflation is slowing further.

Fed officials entered 2024 expecting to make interest rate cuts, having lifted borrowing costs sharply to a more than two-decade high of 5.3 percent between 2022 and the middle of last year. But stubbornly rapid inflation in recent months has upended that plan.

Central bankers have been clear that rate cuts this year are still possible, but they have also signaled that they are planning to leave interest rates on hold for now as they wait to make sure that inflation is genuinely coming under control.

Speaking during a panel discussion in Amsterdam, Mr. Powell said officials had been surprised by recent inflation readings.

“We did not expect this to be a smooth road, but these were higher than I think anybody expected,” Mr. Powell said on Tuesday of recent inflation readings. “What that has told us is that we will need to be patient and let restrictive policy do its work.”

Mr. Powell said that he expected continued growth and a strong labor market in the months ahead, and that he believed inflation would begin to slow again.

But, he said, “my confidence in that is not as high as it was, having seen these readings in the first three months of the year.”

Woman found living in Michigan grocery store sign, complete with computer and Keurig, for months

A woman was found living in the rooftop sign of a Family Fare grocery store in Michigan and had been there for about a year, police said.

Police in Midland were notified about the woman living in the small space that hosts the supermarket’s sign on April 23 after contractors working on the roof found her there.

The woman had flooring, a computer, a desk, a printer, a Keurig and a pantry of food in the space, which was 10 to 15 feet long, five feet wide and approximately 8 feet tall at its highest point, according to the Midland Police Department.

"We made contact with her and she was advised she was not allowed to live there," said Brennon Warren, a spokesperson for the Midland Police Department. "She was formally trespassed from the store and was provided with information on services within our area, however, she did not wish for any of those."

The woman, who police are not identifying, left without incident. Police found that she'd been living in the space for approximately one year, but it's not clear how she was getting up onto the roof.

She was not formally charged for living in the space, police said.

Breaking news reporter

The path forward for European grocery retailers

The following is an excerpt from the full report that focuses on what's in store for grocery retail in 2021. For a comprehensive backward-looking analysis of how the COVID-19 pandemic has reshaped the European grocery retail landscape along five major forces in 2020, as well as detailed analyses of specific trends, please download the full report.

Disruption and uncertainty: The State of Grocery Retail 2021 - Europe

About the authors.

This article was a collaborative effort by Claus Gerckens, Franck Laizet , Daniel Läubli , and Eugen Zgraggen of McKinsey’s Retail Practice and Jean-Albert Nyssens of EuroCommerce.

Consumer shifts around online, value, and lifestyle agendas are creating an attractive opportunity for grocery retailers to capture market shares over the next two to three years. However, both the growth of online and the trend toward value are likely to put further pressure on grocers’ margins, especially given that the overall market may shrink once restaurants return. Grocery retailers thus will need to strive for further efficiency and find new margin pools to grow profitably.

In January 2021, EuroCommerce and McKinsey conducted grocery retail surveys across Europe (see sidebar, “About the research”). The research identified ten trends we expect to shape the grocery retail market in the coming years (Exhibit 1). The essence of these trends is shaped by three key shifts: online becomes core, value is king again (downtrading), and consumer lifestyle agendas drive demand through a focus on health, sustainability, and convenience food. These shifts emerged as consistent patterns across most European markets. Low-income consumer segments trend more toward downtrading, while high-income segments trend more toward online and lifestyle-driven products. But all the shifts are emerging to some extent across income groups.

About the research

This article is part of the report Disruption and Uncertainty—The State of Grocery Retail 2021: Europe , a partnership between McKinsey & Company and EuroCommerce designed to provide executives with a comprehensive view on an industry forced to adapt at unprecedented speed. We surveyed more than 10,000 consumers and around 50 grocery executives across Europe. We interviewed six industry thought leaders and pioneers. We combined EuroCommerce’s policy and sector knowledge with McKinsey’s global expertise and analytical rigor.

The combination of continued online growth after the penetration spike in 2020 with shifts to value or downtrading and from grocery sales back to restaurants is very likely to put more pressure on grocers’ profitability. They will need to further increase their efficiency—through automation, for example, or an evolved online business—and find new pools of margin, through analytics or a shift to more differentiated, premium-type products. These trends are a top concern for many of the CEOs we surveyed.

A declining market?

Following a record year for sales in 2020, the CEOs and consumers we surveyed expect that the European grocery market will stagnate or decline over the next one to two years as COVID-19 restrictions are lifted. However, consumers plan to keep spending more on groceries after the pandemic subsides compared with before the pandemic, suggesting that the market will not return fully to pre-COVID-19 levels but will remain slightly larger. The timing and magnitude of the likely future contraction of the market are highly uncertain and dependent on several factors linked to the further evolution of the COVID-19 crisis.

In line with this, nearly half of CEOs expect that the market situation will worsen in 2021 and remain highly uncertain. Just 26 percent anticipate that the situation will improve. The words CEOs most commonly associate with their expectations for 2021 are “challenging,” “uncertain,” “price-focused,” “competitive,” and “online” (Exhibit 2).

Consumers indicated that they plan to maintain some of their changed behaviors in the postpandemic era. In particular, up to 10 percent of consumers said they intend to keep spending more on grocery stores and less on other food channels than they did pre- COVID-19. This could be because consumers have become more accustomed to cooking at home or because they expect to keep working from home more than they did in the past (Exhibit 3).

Key trends shaping the industry

Based on both CEO surveys and consumer research, we identified ten trends that we believe will shape the industry over the next years. This analysis is based on what CEOs see as the key industry-shaping changes (Exhibit 4) and the shopping intentions of consumers (Exhibit 5).

The most pronounced trends show that online is becoming core for grocery retailers, value is king again, and lifestyle agendas are driving food demand.

Online becomes core

Following an exceptional take-up rate for online shopping in 2020, consumers are eager to make even more of their food purchases online in 2021. In particular, the 25 percent of consumers who already bought online at least occasionally want to increase their online purchasing even further. The more often consumers bought online in 2020, the more likely they seem to be to increase their share of online buying (Exhibit 6).

However, the trend toward increased online shopping does not extend to all consumer groups. Consumers who rarely purchased food online in the past (10 percent of all consumers) said they plan to cut rather than increase their online spending (–4 percent net intent). And of the consumers who did not shop online in 2020—the clear majority at 65 percent—only 7 percent said they intend to start buying online in 2021.

Less frequent online shoppers may have had to resort to online grocery shopping in 2020 and found the experience disappointing, which could explain their reluctance to continue shopping online in 2021. When non-online and rare-online shoppers were asked what is preventing them from buying online, 49 percent indicated they preferred personal contact in stores, 33 percent think delivery charges are too expensive, and 22 percent said minimum order requirements are too high.

CEOs rank the accelerated growth of online channels as their second most important priority. They also see a need to improve online profitability (ranked sixth).

Value is king (again)

CEOs see downtrading, or increased price sensitivity, as the most influential trend for the grocery market, with 56 percent of CEOs listing it among their top three priorities. The downtrading trend is amplified by an increased quality expectation of consumers at the entry-level price tier (ranked at number seven in the CEO survey), as it puts pressure on grocery retailers regarding both price and quality.

Our consumer survey confirms this downtrading trend. Across Europe, net 34 percent of consumers indicated that they want to save money when shopping in 2021 compared with 2020, 27 percent plan to research promotions more actively, and 17 percent want to switch to less-expensive products.

Lifestyle agendas drive food demand

The COVID-19 crisis accelerated the trend toward more healthy, sustainable, and local products with no apparent slowdown so far. Across Europe, net 30 percent of respondents plan to focus more on healthy eating and nutrition in 2021 compared with 2020, 24 percent plan to spend more on regional and local products, and 19 percent plan to spend more on environmentally friendly products. These effects continue to be strongly influenced by individual economic situations.

Higher-income segments tend to be less price conscious and more willing to spend on healthy eating and nutrition. In contrast, lower-income segments focus more on saving money and are less concerned about healthy food choices (Exhibit 7).

The consumer survey results confirm CEOs’ expectations of overall trends toward price sensitivity and healthy products. The findings also illustrate the continued polarization across consumer segments seen in 2020, with lower-income consumers expecting to focus more on saving money and overall downtrading, while higher-income segments’ product preferences may drive them to overall uptrading despite increasing price sensitivity.

Implications for grocers

All three of these key consumer shifts represent excellent opportunities for grocery retailers to win new customers. These shifts are happening at substantially greater magnitude and speed than ever before and could lead to significant changes in market share over the coming years. Smaller players could win by excelling in one or two of these areas and nurturing their niche. However, leading grocery retailers will have a hard time keeping or winning market shares unless they excel in all three dimensions.

While all grocery retailers are likely to work on capturing these trends, executives should examine whether their efforts are ambitious and fast enough to win. We see some retailers making bold moves—for example, introducing new health-focused private labels or expanding and improving their opening-price-point assortments. Others are reorganizing their businesses to substantially reallocate resources to online.

Value becoming king, online becoming core, and the return of restaurants will put pressure on the profitability of retailers. While the push for value-added or premium products will counter some of this, retailers will likely have to make substantial efforts to maintain their profitability. Retailers need to further reduce their costs and find new margin pools to tap. Supply chain and back-office process automation can be one lever to do so. In addition, advanced analytics offer the opportunity to identify new margin pools and further optimize profitability (for example, through more personalized offerings or optimized prices and promotions). In particular, assortment planning at a more granular level (even down to local or store-specific assortments) to better reflect the dynamics in the individual store’s catchment area might offer significant potential, given that the polarization of consumers is likely to further increase.

Claus Gerckens and Eugen Zgraggen are associate partners in McKinsey’s Zurich office, where Daniel Läubli is a partner; Franck Laizet is a senior partner in the Paris office. Jean-Albert Nyssens is the chief economist for EuroCommerce.

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