Why Amazon Will Be the Biggest Loser in 2022’s Food Fight

The digital grocery sector is booming, and 2022 will be the year that this food fight becomes more intense than ever. The market is worth an estimated $800 billion, and we’re seeing more and more hungry consumers ditching their carts for smartphones and laptops to do their weekly grocery shopping.

As recent research of U.S. shoppers has found, almost half (47 percent) of Americans buy at least some of their groceries online. I’m expecting to see this number grow in 2022, with revenue in the online food delivery segment expected to reach $339,257 million this year. Everyone wants a slice of the pie, but it’s not just anyone’s for the taking. This year, David will beat Goliath in the food fight.

Stale Offerings

Seeing the size of the opportunity, grocery giants like Walmart and big tech firms like Amazon.com have tried to capitalize on the market’s rapid growth. Though their efforts have been, for the most part, fruitless. Amazon threw its hat in the ring with Whole Foods in 2017. But it seems Amazon has lost its Midas touch, with Whole Foods hemorrhaging cash and sales plummeting year-over-year.

Meanwhile, Amazon Fresh is already looking like old news. Research found almost half (45 percent) of American consumers are bored of grocery shopping. And Amazon Fresh isn’t doing anything to change that. Though it initially captured a large market share, it’s now facing challenges and has already fallen behind on its schedule of opening new physical stores. Even if it were luring in new customers, Amazon lacks the speed or efficiency to hang onto them. Jeff Bezos claims shoppers want two things: speed and choice. But, as it stands, Amazon Fresh’s delivery infrastructure is sluggish, and the brand will fall behind more nimble firms in the coming years.

Despite spending a decade investing in the food segment, Amazon and its behemoth brethren won’t win the food fight. The names we hear for the first time in 2022 will be the ones that stick around.

The Return of the Milkman

Enter the local hero. We’re witnessing the emergence of a new type of delivery model that has already taken parts of Europe by storm. This form of grocery delivery, following what’s been dubbed “the milkman principle,” allows customers to order their weekly grocery list via a smart device, selecting a short delivery window for the following day. This system involves a designated picker, who collects stock from a local distribution center. The driver then runs a regular delivery route, like a milkman would. One business championing this method is Picnic, a Dutch grocery innovator, which does six to nine local drops per hour, to Amazon’s three. Picnic also has green appeal: its vehicles are all electric.

Aside from the added speed and efficiency offered by this type of model, it’s also cheaper to run. By operating from a small number of distribution centers, Picnic is free from the expense of running multiple brick-and-mortar stores, which would require more staff and higher operating costs. The structural cost of running a regular route is also far cheaper than the “on-demand” routes used by many food delivery services, allowing businesses to pass this benefit onto their customers through free deliveries and lower prices. With waiting lists of thousands, there's clearly a growing demand for these types of local delivery services, proving shoppers want experiences that are tailored to them and their location. As this model finds its feet in the U.S., businesses should remember that shoppers in Portland, Maine couldn’t care less what stock is available in Portland, Oregon. Local personalization and supply is key to the success of this business model.

Seizing a Slice of the Pie

If grocery businesses want to seize their share of the market, they’ve got to act this year. It will never be as cheap as it is now to win over new food delivery customers, and many are likely to try out the first supplier to post a discount voucher through the mailbox. Research has shown that six in 10 (61 percent) are not tied exclusively to one grocery business, indicating that it’s still all to play for this year. And American shoppers are prepared to spend more on groceries in 2022: a monthly average of $611, up from last year ($532). U.S. retailers would be wise to look at the rise in online grocery shopping in other countries — there's huge appetite for further growth.

As more consumers go digital, retailers that choose to upgrade their technology infrastructure now will give themselves an advantage. They’ll be better placed to meet those customers on whatever touchpoint they choose, as well as deliver innovative localized services. Smart businesses will invest in optimizing their tech stack with a “composable” best-of-breed approach that lets them develop a flexible and fast digital commerce offering. With this strategy, businesses decrease their time to market and total cost of ownership, and increase return on investment. Legacy providers stand to lose market share, and the local underdog will triumph.

Boris Lokschin is the co-founder and CEO of Spryker Systems, a B-to-B, B-to-C and marketplace solution renowned for its ease of use, flexibility and speed.