Only The Innovative Will Survive

By Jim Prevor, Editor-in-Chief, Produce Business

The business lesson here is that execution trumps almost anything. When Tesco came to America as Fresh & Easy, its CEO came and promised Whole Foods quality at Wal-Mart prices, but it is fair to say that Tesco never delivered on this ambitious promise. Had the company done so, it is very likely Tesco would have succeeded despite its other issues.

So it goes with produce purchased online. If online retailers execute well, always deliver what is promised and often exceed customer expectations… if they provide effective solutions to consumer problems, well, in all likelihood online sales will boom.

It goes without saying that if unscrupulous operators see the blind purchasers on the web as a great opportunity to ship sub-standard produce, consumers will lose faith in that method of buying or at least won’t buy from those vendors.

Already, however, most online retailers do a better job than physical retailers of identifying the quality they are selling.  Often ranking each item with some kind of five-star system and specifically saying that a particular item is not very good, FreshDirect, for example, uses this system, which it promotes on its website:

Produce offers more opportunities for online retailers to be of service. When buying produce, consumers not only want quality but specific sizes, specific origins, specific ripeness levels and more. Chris Anderson wrote a famous book titled, The Long Tail: Why the Future of Business is Selling Less of More, the basic idea of which is that the Internet provides an opportunity to sell items that it would never pay to stock in a store.

Amazon’s start in books was not coincidental. No physical store can possibly stock all the books in print today, much less the out-of-print books that also could be sold. But a national or international sales and shipping company, with lots of low volume items, can have a selection many times the size of a local store – that is the long tail of demand the book is speaking of. So the idea is that in the old days’ consumers were limited to what the gatekeepers at a bookstore decided to sell; in the Amazon era, they can buy the exact book they want.

Now the question is to what degree this “long tail theory” can apply to produce. Some of it is assortment… few stores have the physical real estate to carry the complete line of products from companies such as Frieda’s and Melissas’s, but that should be very feasible for online services. Then the question is: Can they and will they offer assortments of a type never before seen in produce?

They could offer brands – choose from Dole, Chiquita, Del Monte, Fyffes or other brands of bananas, or they could offer Cuties or Halos, which no single store offers at one time. With origin all the rage, online vendors could offer apples, say, from many states and countries and let consumers choose. There is no need to standardize on sizes – these services could offer all the sizes.

Ripeness is a big opportunity as well. There are seven commonly identified stages of banana ripening… instead of stocking bananas – or avocados – or melons – or pineapple, why not sell SKUs that are “Ripe for Tonight” or “Good for the Weekend” or whatever nomenclature is adopted to symbolize different stages of ripeness?

And brick-and-mortar retailers are clearing the runway for this online approach. The trend to consolidate SKUs creates more value to the “long tail” of online retailers.

Perhaps the biggest opportunity for online shopping, though, is that the very nature of shopping is changing. Some hybrid of Amazon Echo’s voice recognition personal assistants, RFID recognition of missing items and pre-set replenishment systems may make the regular shopping trip to pick up staples out of date.

There are many questions. A notable one is a price. The big growth in brick-and-mortar stores is the deep discount formats such as Aldi and Lidl. Can home delivery or even click-and-collect be done as cheaply as these deep discount formats? Maybe not, in which case we may see a bifurcation of the market, with those affluent enough to pay extra for convenience or to get exactly the product they want gravitating to online shopping while those on a budget go the deep discount route.

It is doubtful anything will go 100 percent. People shop for many reasons, and the explosion in Farmer’s Markets is probably as much due to their social nature as anything else, but it does mean that technological change will drive new shopping habits, and at every step of the supply chain, this much is certain: Only the innovative will survive.