ONLINE FOOD SALES – YES OR NO?
Part I - A MODEST PROPOSAL
Online food and beverage sales in the U.S. were $4.8 billion in 2008, and grew 11% in the first quarter. What sort of food? We estimate that easily 90 percent of these sales are mainstream groceries, and foods from long-established firms such as Harry & David. The rest are just building brand and cultivating customer relationships.
The Question: Just what types of food are being sold direct to consumers via the Internet? Has historical consumer indisposition to buy “foods by mail” changed?
The Proposal: If you believe that specialty foods can be sold online direct to consumers, then why not lower your prices? If you are willing to sell food via the Internet exclusively, both you and your consumer will benefit.
“I completely agree with you about the selling food online; it doesn't work for most.” – Ryan Montague, Founder and President, Gourmet Business Solutions LLC
|
Online sales mean that the producer has little if any sales overhead – at least not at the retail level, so a lower price can be charged to the consumer, while allowing the seller (you) to make a higher profit margin. The consumer can access food at much lower prices, even when the cost of freight is added in.
But wait, there’s more: Amazon.com and Overstock.com have pulled out of states that require collection of taxes on food sales, most recently in North Carolina and Rhode Island. California, Connecticut, Hawaii, Maryland, Minnesota and Tennessee all considered similar legislation but decided against it.
Patrick Byrne, Chairman and CEO for Overstock.com is quoted in Gourmet News stating “It is painful to have to terminate these relationships with affiliates, simply because they live in states where counterproductive and likely, unconstitutional laws are being passed. Politicians have to remember that a tax is a price that government charges for a service and when they raise their prices. We’re going to buy less of their services.”
Mini-Case studies: Foods by Mail
1. Thomas Garraway
Owned by Kraft-General Foods, no less. Full page ads in monthly popular magazines, each offering a “food of the month.” Still, profits did not meet GF goals, so they shut this down.
2. Foodzie
Armed with a million dollar angel investment, Foodzie has set out to do business with consumers entirely on line. The firm offers an online marketplace for consumers to discover and buy from small artisan producers and growers.
3. Safeway
Offers home delivery. Jury is still out as to its success. Some recession-induced bumps and the going does not look good.
4. Others
Are there any successful online only specialty food companies?
The operative words are “any” and “successful.” Yes there are some, and yes they sell direct to consumers. Among these are the very specialized Harry & David (mostly gifts and gift baskets), Gourmet Food Mall, and several more.
PART II of this series will include an online reader poll. Our objective will be to see if we can capture credible data about online sales of specialty foods.
PLEASE TAKE OUR POLL
