The rise and continued growth of e-commerce companies (ECCs) serving the foodservice industry presents both opportunities and challenges to foodservice manufacturers and suppliers.
Foodservicedirect.com, WebstaurantStore, Supplies on the Fly, Amazon and others have contributed greatly to the complexity involved in selling to certain foodservice segments. These are no longer third party organizations that provide an ancillary service, but are integrated, structural members of the supply chain.
Assessing the future of e-commerce companies is essential for manufacturers making strategic decisions about their own future directions. In 2017, Foodservice IP performed a comprehensive review of the channel that resulted in ground-breaking ECC activities, strategies, performance and implications for foodservice manufacturers.
Three instructive findings from the project include:
- The use of online foodservice purchasing is forecasted to increase by double-digits in the next three years. Manufacturers must account for this channel of growth in strategic plans and contingencies. Operators are expected to increase purchasing in nearly all categories, including fresh vegetables, proteins, hot beverages, soups and juices. The impact to “brick and mortar” supply chain players will not be favorable.
- Price, convenience and availability are the operator drivers of using online purchasing versus traditional means. Foodservice operators use online purchasing for price, convenience, faster-shipping, delivery and overall convenience. Operators may be willing to sacrifice face-to-face meetings for a better price.
- Brand is a critical operator selection factor when purchasing online. Operators were adamant (86%) about brand when selecting online purveyors, likely due to the newness and unknowns regarding online sources. This is favorable to nationally branded companies with a pull strategy, but not so favorable to private labelers using trade spending and push strategies through the channel. Other important/somewhat important factors of operator selection are package size, package formats, online descriptions and return policies.
Most manufacturers are struggling with the implications of online purchasing from third parties. ECCs are likely to continue growing, both in terms of purchasing control and in terms of penetration. Continued margin pressure at the operator level makes ECCs a very attractive alternative. Further, as ECCs capture more of a manufacturer’s current customers, it becomes imperative to develop a strategic framework to ensure that ECCs are being managed correctly by manufacturers.
Looking for more foodservice insights around e-commerce? Contact us today.