Interview: How to Make Grocery E-Commerce Profitable and safe during a pandemic.
IPO EDGE Interviews Peter van Stolk, CEO of FoodX Technologies
By John Jannarone, IPO Edge
April 8, 2020
Is it possible for grocers and markets to offer delivery at normal prices to consumers? Unfortunately, razor-thin gross margins along with high costs of additional labor and fleets make it extremely difficult to do so profitably. Even Amazon.com, Inc. appears to offer grocery deliveries at a loss – which is only manageable because it generates profits in other parts of the company. That’s according to Peter van Stolk, CEO of FoodX Technologies, a technology company that helps brick-and-mortar grocers introduce an e-commerce offering and still earn a profit on sales
IPO Edge: Is the coronavirus epidemic keeping shoppers out of supermarkets? Can you share any data on transaction volume to indicate they are ordering for delivery instead?
Mr. van Stolk: It’s important to remember that we are not writing the playbook on consumer behavior with respect to the coronavirus and consumer shopping patterns. Asia and Europe had the pen and in those markets we have seen a huge growth in demand for online grocery. The coronavirus is already changing consumer behavior and that will not stop soon.
In terms of data, we have seen one of our client’s – SPUD.ca – order volume grew by over 350% compared to last year. Across all of our facilities, we are witnessing unprecedented demand for delivery.
Obviously, the pandemic is pushing an enormous amount of grocery business online. In fact, many supermarkets are having a hard time handling the dramatic increase in business.
IPO Edge: Is it truly safe to order from a supermarket that picks up produce from the actual store and delivers it? Or is there a health and safety advantage to a distribution center?
Mr. van Stolk: Supermarket produce is safe; however, we recommend that everyone wash their produce before eating it. A distribution center is a closed environment that is designed to not have customers. There are lots of distinct differences to a distribution center model vs. a supermarket model, which makes the distribution center more efficient and effective thus more profitable.
However, with the situation we are in currently, distribution centers are a closed environment which is perhaps the biggest, most important difference. It is not open to the public, it’s a controlled environment for the food and the workers, and protective gear is mandated.