Supermarket Wellness Watch: A changing landscape for selling healthy products online
Given that online shopping and health and wellness are two of the biggest consumer trends, it made sense the two would become more intertwined. That happened big time in 2017 with the Amazon-Whole Foods merger.
As the year comes to a close, this segment of the market is in flux. Amazon is marketing Whole Foods products online. Consumers still have plenty of other online choices for organic, natural and better-for-you products. And the recent demise of one such pure-play e-commerce company raises questions about future prospects for others.
Where will this sector head in 2018? For that question I reached out to an expert on e-commerce, Bill Bishop, chief architect and co-founder of Barrington, Ill.-based consulting and retail advisory company Brick Meets Click.
“I believe that a year from now the market for healthy products will have expanded substantially online,” Bishop predicted. “People are aging and spending more on food and related products to maintain wellness. The healthcare system continues in turmoil. More of these sales will shift out of brick and mortar stores, except in cases where retailers improve service and solutions in stores.”
The big picture is that online grocery shopping overall currently represents about 4% of U.S. food and beverage sales, Bishop said. That number will likely rise to about 10% nationally in five years, he predicted. Some 25% of households are now regularly buying groceries online, a percentage that gradually increases each year.
The Amazon-Whole Foods combination is likely to accelerate this momentum overall, especially in the health-and-wellness products segment. However, Amazon has both positives and negatives working for it. On the plus side, “they have sets of consumer data and ratings, understand households, and can make suggestions to consumers,” Bishop said.
However, he added, working against Amazon is that “while they are extraordinarily good at focusing on individual items, they aren’t well constituted to sell solutions. They don’t really bundle products. They refer to, but don’t sell multi-product solutions. That’s where others have a chance, because health and wellness is so solution-oriented.”
Benefitting from this opening could be traditional brick and mortar retailers, many of which pursue omnichannel strategies. “I think the idea of doing more with personal selling and building solution bundles provides opportunity,” he said. “Brick and mortar retailers are able to do this more effectively than Amazon. But relatively few have invested in the staff capability to do this in stores.”
What about pure-play, online purveyors of health and wellness products? There is still a wide field of these operators, including those with category niches and others selling fuller shopping experiences.
The outlook for these types of companies is changing in the wake of the Amazon-Whole Foods combination. One of the signs is the recent shut-down of online grocer Door to Door Organics, a company that launched some 20 years ago when the Internet was just getting going. Door to Door said recently it would close due to “timing of recent events in our industry and the impact that had on our funding prospects.”
Bishop said that while the reasons for Door to Door’s demise may have been unique to that operator, the bar is now higher for many pure-play companies because investors are more scrutinizing.
“It’s harder today to bet against big tech,” he explained. “You’ve got to be fast, compelling in offer and demonstrate you add value now rather than in the future.”
As we move into 2018, we’ll get a better sense of how all this competition will play out, and whether online takes more share from brick-and-mortar (or the other way around). It’s all part of the quickly shifting food retail reality.
David Orgel is an award-winning business journalist, industry expert and speaker who was the longtime chief editor and content leader of Supermarket News. He is currently the principal of David Orgel Consulting, delivering strategic content and counsel to the food, retail and CPG industries. To read last month’s blog post, click here.