The Battle Between Online & Brick And Mortar Food Retail

As an increasing amount of sales are completed on the sites of online retailers, the battle between brick and mortar stores such as Walmart and Kroger and ecommerce players like Amazon to attract consumers is intensifying. Major changes on the retail scene and shifts in where customers like to shop are factors that have great implications on how tuna products are sold and purchased around the globe. And as internet shopping is growing and rapidly stealing clientele away from physical stores, shelf stable tuna is likely to be one of the first categories affected, as the commodity is ideal for online grocery.

While the vast majority of consumers are still going to actual stores to buy their tuna products, they will increasingly shop online in the foreseeable future, one retail expert predicts. Currently, around 15 percent of global retail sales are conducted online, with grocery making up just under five percent of this amount, and most bets are on strong growth.

Jan Kniffen, a US-based consultant to investors in retail companies, tells Atuna that he expects online sales to cover 50 percent of all retail by 2030. According to a tool that Kniffen built in 2009 when online sales represented 2.5 percent, he predicts “we are right on track to hit that 50 percent number.”

When it comes to groceries specifically however, Kniffen notes that this segment is earlier in the process, but “clearly moving along the same path”. In the US, online grocery sales are being driven by Amazon on the ecommerce side, and Walmart and Kroger on the brick and mortar side through their web shops, he says.

Consumers can be hesitant to purchase products such as fresh fruit and meat by clicking on a computer screen, as they prefer to feel and smell the produce they buy, to ensure they get the best quality.

Although these aspects can make customers reluctant to put fresh and frozen products in their online baskets, they are not factors likely to hold back the sale of ambient references. Shelf stable products such as canned and pouched tuna are ideal for online grocery, as they are commodities that travel well over both time and distance.

And this is a possibility that tuna firms are aware of. Diego Isaza, Vice President of Marketing at Thai Union-owned Chicken of the Sea, one of the US Big 3, tells Atuna that the company believes an increase in online grocery sales can positively affect the overall sales of COS tuna products. He states that COS is already experiencing a “healthy growth trend” for canned tuna product sales on the internet. “Compared to other consumer goods categories, we do see an advantage for canned tuna sales from more shopping being done online,” he says.

He adds that as a larger range of grocery products are becoming available on online platforms, and more convenient to purchase, consumers are increasingly likely to buy more varied types of products. “We think tuna; a top healthy nutritional everyday meal choice, will also be considered and purchased more often by online consumers,” says Isaza.

Chicken of the Sea’s marketing portfolio for online and physical products are currently similar, “so that consumers will have a consistent experience from different channels”. Isaza does however add that the company is considering differentiating the product offerings “to meet the expectations of today’s online consumers”.

The shelf stable segment that ambient tuna products find themselves in is the frontrunner when it comes to online sales of grocery goods, according to Kniffen. “Fresh meat, produce, and fruit will go last, staples and canned goods will go first.” Currently, the grocery business of leading US ecommerce site Amazon is dominated by sales of nonperishable items, such as canned tuna, but the retailer also offers fresh grocery as part of its AmazonFresh service.

While the perception seems to be that canned food will be the main category to benefit from more shopping being done online, fresh food might not be so much on the backburner as people think, Kniffen argues. “I hear all the time that fresh meat, fresh vegetables and fresh fruit will never go online.” The same thing was said about shoes and clothes, he adds, because of fit, color and fabric feel. This year, Amazon will become the largest retailer of apparel. “Everything that I hear cannot go online, does. So will grocery”.

When it comes to what is the cheaper option – going to the store or adding items to your virtual basket– several factors play a part. Firstly, ordering online often comes with a delivery charge. However, this price is becoming lower and lower because of competition, and can also be free if you order outside peak delivery times, or if you purchase food worth a certain amount of money. Amazon, for example, offers complimentary shipping on some products, and the service is always free for those who have an Amazon Prime membership.

According to research by industry analyst firm One Click Retail, Amazon currently represents 18 percent of US internet grocery sales, which is double that of the online sales for Walmart, its biggest competitor. Walmart, the world’s largest retailer, is responsible for around a third of all tuna sales in the US, which mainly consist of products from the Big 3 tuna brands; Chicken of the Sea, StarKist and Bumble Bee, as well as its private label references under the ‘Great Value’ brand.

Although Amazon has the strongest grasp on the US online grocery market currently, Walmart is making increased efforts to expand its online reach, and now offers home delivery in around 100 US cities through the online delivery service Jet.com. The supermarket chain plans that 2,000 of its stores will provide delivery and order pickup by the end of this year.

Similarly, Target, the second biggest discounter supermarket in the US after Walmart, purchased delivery service Shipt for USD 500 million in 2017, which the retailer hopes will strengthen its position when it comes to internet sales.

Amazon however seems to be two steps ahead. Through Whole Foods, which it gained ownership of last year, the ecommerce retailer is trialing free two- hour delivery to Amazon Prime customers in selected cities, which is currently the fastest delivery in the US. It is planned that the service will be available nationwide by the close of 2018.

Ecommerce is seeing steep growth worldwide. In the UK, consumers are increasingly opting for Amazon and online grocer Ocado when doing their shopping, with Amazon being the online market leader. In the UK, online retail represents 18 percent in terms of value sales, compared to 12 in the US.

In addition to brick and mortar stores extending their online services, ecommerce sites have also taken steps to invest in physical retail. The biggest example of this is perhaps Amazon’s more than USD 13 billion acquisition of Whole Foods and its 470 outlets in 2017. Whole Foods sells smaller US tuna brands such as Wild Planet and American Tuna, as well as its own private label line.

The trend has also been seen in China, where JD.com has stated that it plans to open 1,000 physical 7FRESH supermarkets in the country in the next three to five years. Similarly Chinese ecommerce giant Alibaba has made a major investment in the supermarket chain Sun Art Retail. China is the biggest grocery market in the world, worth USD 500 billion, and also one that is increasingly seeing canned tuna being introduced on supermarket shelves. Ecommerce currently makes up around 15 percent of sales in China.

The trend of ecommerce players investing in physical retail hints at the prediction that some shopping will always be done in physical stores. Kniffen explains that he expects ecommerce to “top out” at 70 percent, somewhere beyond 2030. But why will it top out? “Because there is always going to be some entertainment value in going out to shop,” he says. It is also important to note that online sales currently represent 15 percent of all sales globally, meaning that the majority of money is still being pumped into brick and mortar shops.

As is emphasized by Chicken of the Sea’s Isaza; the majority of COS’ sales still come from physical grocery locations. Although he says that there are multiple benefits for the brand in selling products through platforms such as Amazon, in-store grocery shopping experiences contribute significantly to consumer engagement and driving purchase decisions. He adds that it is important to find the balance between online and physical retailers; “to make sure our consumers can have access to our products and brand anytime, anywhere.”

Although physical stores still represent the majority of sales, supermarket chains both in the US and UK are reportedly suffering from the growth of their ecommerce competitors, stating that they are seeing financial losses and lower demand from consumers. In contrast, Amazon increased its sales in the US by nearly 60 percent last year, reaching USD 2 billion, with much thanks to its Whole Foods acquisition. And vice versa, Whole Foods reported a higher clientele in the time after its ownership was transferred to Amazon. When it comes to ecommerce trade Walmart is however not far behind, as online sales for the company have risen by 50 percent in recent times.

Keeping the increase in online food retail in mind, tuna companies should understand the value of ecommerce, as this can be one way for firms to bolster their business. Some companies have already been making such steps. Spanish tuna canners, including Calvo and Jealsa, last year stated that they were working towards inking an agreement with the French website Vente-privee to sell their products, with indications that they were also eyeing an agreement with Alibaba. Some other Spanish tuna companies manage their own web shops, such as Frinsa, but a move to online from leaders Calvo and Jealsa is yet to be seen. Other companies, such as Thai Union have their own web shops as well, with TU also selling its frozen products on Alibaba under the brand King Oscar.

It is clear that the overall retail market is in a period of significant change, and the shift towards more online shopping is likely to impact how tuna products are sold worldwide. Internet sales are expected to explode in the near future, and many are asking themselves exactly how tuna sales will be influenced by this. So far, the notion seems to be that canned and pouched tuna, as well as other shelf stable references can benefit from the development. US big 3 brand Chicken of the Sea states that the canned tuna category can benefit more from the change than other consumer goods, as shelf stable products will be the frontrunners of the trend.

While there are indications that more tuna sales will be conducted online, there is work to be done for the segment to see growth overall. Canned tuna has been declining in popularity among US customers for years now, with the main reason behind this thought to be the lack in quality. There is a general notion in the industry that the only way for shelf stable tuna sales to recover and grow, is for brands to commit to an improvement of the quality of the product. Another reason why shoppers have been moving away from ambient tuna, and the references of the Big 3 brands especially, is concerns of sustainability, with this aspect being more in focus among the smaller brands on the US market.

Whether or not tuna sales will benefit from the online shift, the dominance of physical based retail market as we know it will soon be long gone. However, brick and mortar stores still today have the biggest grip on trade globally, and should not be underestimated. Additionally, there will likely always be consumers who prefer to do their shopping offline, as they prefer wander around the supermarket and discover new products.