Retail v Wisconsin

Will Amazon dominate online grocery sales? Maybe not

  
Will Amazon dominate online grocery sales,ph01

It seems like a natural progression after Amazon’s purchase of Whole Foods: Consumers will buy more of their groceries online. But at least one real estate expert says that online grocery sales had been on the rise before this big move, so it’s little surprise that grocers are doing whatever they can to capture as many Internet-based customers as possible.

Joe McKeska, president of Elkhorn Real Estate Partners in Oak Brook, Illinois, said that traditional grocery store chains are working hard to capture a significant majority of online grocery sales during the next 10 years.

As McKeska noted during the Sept. 18 Last Mile and Urbanization panel discussion in Milwaukee during Marquette University’s annual commercial real estate conference, online grocery sales are expected to rise from about 2 percent today to more than 20 percent by 2025. The assumption is that Amazon or other e-commerce companies will take the lead in these efforts.

But McKeska said that traditional grocery store chains have already made inroads in developing e-commerce capabilities that might give these traditionally brick-and-mortar businesses an advantage in the fight for online grocery sales.

McKeska has some experience in this field. He is a 25-year veteran of the grocery industry who previously headed real estate operations for Southeastern Grocers and Supervalu. He formed Elkhorn Real Estate Partners in the suburbs of Chicago earlier this year in partnership with A&G Realty in Melville, New York.

McKeska told the crowd of about 400 CRE executives that it’s relatively inexpensive for traditional grocery stores to set up click-and-collect programs that allow shoppers to order products online to later pick up in-store.

“This is not the same thing as retailers having to spend significant capital to build a competitive e-commerce platform from scratch or having to rely heavily on uneconomical home delivery services for the majority of their e-commerce sales,” McKeska said. “Traditional grocers have begun to identify ways to leverage their brick-and-mortar stores. They are rolling out more rational e-commerce business models as a bulwark against Amazon and other online companies.”

McKeska pointed to Walmart as an example. Earlier in September, the retail giant announced that it had rolled out the 1,000 click-and-collect system in its chain. WalMart has about 4,200 stores across the country, so has plenty of room to continue to expand this online service. And Walmart isn’t alone. Kroger has plans to bring the same service to its 1,000th store – out of 2,800 Kroger stores – by the end of this year.

The efforts from these grocery segment leaders show that the industry is committed to building online sales, McKeska said.

“Not many pure online retailers are profitable, which underscores that brick-and-mortar grocers really do stand a fighting chance to compete effectively in the long game,” McKeska said.