38 Years Later, Grocery Makes Restaurant & Retail Look Stupid Again

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Fool me once, shame on you. Fool me twice, shame on me. Or maybe it’s those who do not study history are doomed to make the same mistakes. Regardless, it’s embarrassing.

Despite the fact that grocery is 10 thousand times more consolidated than restaurant and retail verticals (literally not kidding), you still see substantial cooperation. Nielsen and IRI collect scan data from multiple grocers. Catalina Marketing and Dunnhumby power marketing and consumer trending across grocers as well. While grocers are competitors, it’s the classic rising tide lifts all boats.

Most recently the same aggregation is happening in the burgeoning space of online grocery shopping. It’s even more intriguing when you acknowledge that online grocery services have both item level (SKU) and customer (PII) data. Historically-speaking, tying these two data sets together has been very difficult and it explains grocery’s emphasis on loyalty programs since the 80’s. Maybe this now changes.

HookLogic, a more actionable advertising platform for brands, has put together a deal to become an advertisement portal for online grocers. Fresh Direct, which has raised $91M, Instacart, which has raised $275M, and Drugstore.com, a public company acquired by Walgreen’s in 2011, have all agreed that Hooklogic could drive revenues while providing consumers better options. Remember, a large percentage of a grocer’s meager profits are but supplier marketing dollars, and online grocers should be no exception.

We’re witnessing the next wave of technology companies taking advantage of the data ecosystem benefitting grocers since 1978. As online ordering companies come to represent more grocery volume, they bring more useful data. And despite each of these online grocers being billion-dollar entities on their own, they were smart enough to realize that combining data would produce outsized results while simultaneously establishing a competitive barrier to non-participants.

Of course, you have to wonder what this means for restaurant and retail verticals. Retailers and restauranteurs missed the first wave even though it happened 38 years ago (do the math). Now that online ordering and delivery companies are growing quickly, will they reap the rewards from decades of merchant inaction? Morgan Stanley analysts expect online ordering to grow to a $210B business, and at that scale one would think technology companies have enough data to capture all the value.

It’s hard to say authoritatively.

But what I do know is if $250B grocers like Walmart find value in pooling data, restauranteurs and retailers who are exponentially smaller should catch on. And if billion-dollar grocery ecommerce companies like Instacart make moves toward the same future, their POS counterparts – who will represent the fragmented universe of restaurants and retail in the transition to the online world via Cloud – should follow suit.

That none of these opportunities has so much as budged for nearly 40 years is very telling of the leadership in restaurant and retail. With further fecklessness, it’s possible online ordering and delivery companies come to monopolize that value while operators remain in the 1800’s. How does it go again, ignorance is bliss?

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