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The Spoon

Daily news and analysis about the food tech revolution

online grocery

The USDA Launches Its Pilot Enabling SNAP Users to Grocery Shop Online

Today, the USDA announced the launch of a pilot program that will make online grocery shopping available to those receiving SNAP benefits. According to the official press release, “lessons learned from this pilot are expected to inform future efforts to expand online purchasing in SNAP.”

To start, the program allows those SNAP users in the state of New York with electronic benefit transfer (EBT) cards (also issued by New York) to order groceries online, for either pickup or delivery. These users will be able to buy USDA-approved food products (No booze, for example.) SNAP benefits do not cover service or delivery fees.

As of right now, the USDA is working with Amazon as well as Walmart on the program. Regional chain ShopRite will join next week. For now, Amazon and ShopRite are piloting the program in New York City only; Walmart is serving upstate New York areas. In the coming months, the pilot will expand to other areas of New York as well as Alabama, Iowa, Maryland, Nebraska, New Jersey, Oregon and Washington, the press release stated.

The program is launching at a time when online grocery is growing rapidly. Nielsen recently revealed that roughly a quarter of Americans buy groceries online, and that number will jump to 70 percent over the next few years.

But the roughly 39 million Americans using SNAP (also known as Food Stamps), have largely been left out of this brave new world of online shopping. A startup called All_ebt made some progress at the end of 2018 by using Facebook Messenger and virtual Visa cards to help SNAP users shop online.

Now, however, it seems the Feds are finally starting to recognize on a national level the need to include lower-income and underbanked populations, who have the same busy schedules as anyone else, or may suffer from disabilities that make physically going to a grocery store challenging.

USDA Secretary Sonny Perdue called this need out in the press release:

“People who receive SNAP benefits should have the opportunity to shop for food the same way more and more Americans shop for food — by ordering and paying for groceries online. As technology advances, it is important for SNAP to advance, too, so we can ensure the same shopping options are available for both non-SNAP and SNAP recipients.”

As online grocery continues to grow, retailers would be wise to join in these initiatives to include SNAP users and others on assistance programs, or risk facing the kind of backlash Amazon recently got over its Go stores, which many have seen as discriminating against lower-income and underbanked households. We expect other major grocery retailers to join the SNAP program in future, so stay tuned.

For Good Eggs, the Real Competition is the Smaller Players

Yesterday when online grocery delivery service Good Eggs announced that it had raised a $50 million Series C round, much of the news coverage focused the looming threat of Amazon + Whole Foods. But I think the more interesting question to ask is how will Good Eggs fend off the smaller competition, including the small stores of Amazon Go.

To be sure, giants like Amazon, Walmart and Albertsons are threats to any startup in the grocery space. And in one sense, Good Eggs is taking them head-on. Good Eggs CEO Bentley Hall told me in an interview yesterday that he wants his company to be a “complete solution” for customers, offering everything from fresh produce to booze to meal kits, all delivered within a two-hour window.

But a broad selection and fast delivery are table stakes for an online grocer anymore. To set itself apart from its bigger competitors, Good Eggs has created a niche: focusing on locally sourced food, only carrying products that meet a strict set of quality and ethical criteria, employing its own drivers rather than contracting out, and growing slowly and only within California (for the foreseeable future).

This attention to sustainable and ethical detail will play well in lefty California locales like the Bay Area and Los Angeles, giving Good Eggs a sizeable customer base where its niche approach can differentiate against those bigger players. Perhaps even more so now that Amazon Fresh is no longer selling goods from local third-party vendors.

But it’s on the smaller end of the spectrum where I think Good Eggs will face its bigger challenge.

One startup that could give Good Eggs a run for its money is Farmstead. Also servicing the Bay Area, grocery delivery service Farmstead uses a combination of micro-hubs and artificial intelligence to heavily curate and optimize inventory management to reduce over-ordering. It’s almost like a mini version of Good Eggs, with a few key distinctions:

First, Farmstead’s micro-hub stores are small, so they can be set up in more residential neighborhoods — closer to the people they deliver to. Good Eggs is sticking with the bigger store strategy; they have one in the Bayview area of SF and, with their new funds, they’re building another big facility in West Oakland.

Farmstead’s micro-hubs also serve as pickup points. So rather than waiting at home for a delivery, customers can pull up to Farmstead location while they are already out and about and a Farmstead runner will load their grocery order directly into their trunk. Additionally, if Farmstead’s AI works as promised, it will help the company control inventory and costs by knowing what its customers want and sourcing the exact right amount to meet demand.

Hall brushed aside concerns, this saying that after being in groceries for six years, Good Eggs has the experience Farmstead, which only recently got its seed round, lacks. “You need to know a lot about the supply chain,” Hall said. And it’s not just supply chain knowledge; Hall went on to describe all the technology Good Eggs has built over the past six years, including its own demand forecasting, warehouse management, driver tools and website.

Good Eggs is also focused on being the “complete solution” for its customers. Farmstead, on the other hand, is splitting its attention between managing its own stores and licensing its inventory AI platform out to other restaurants and grocery stores.

But part of Good Eggs’ complete solution is in meal kits, which consumers want more of as part of their grocery store experience. It’s not in the meal kits themselves where Good Eggs will face competition, but in the convenience — namely, where and how meal kits are sold.

This is where Amazon comes in one of their potential competitors with its Amazon Go stores. The cashierless grab-and-go concept sets up in dense urban areas, which means that hungry city dwellers can literally walk into an Amazon Go on their way home from work and grab a meal kit to match their appetite. Granted, Amazon Go is only in Seattle now, but it’s expanding to San Francisco and Chicago, and you can bet it won’t stop there.

And if going to the Amazon corner store is too much of a hassle, Chef’d and Byte Foods announced a partnership today that will let workers grab and pay for a meal kit from a special fridge located inside office buildings on their way out the door. If that catches on, it will offer a convenience that’s hard to match.

My point isn’t that Good Eggs is doomed, or that it was a bad investment by Benchmark. Grocery is a big market that won’t be winner take all. But when looking at grocery competition, we shouldn’t let the shadows cast by Amazon and Walmart keep us in the dark about the smaller upstarts who could change the game.

Survey: People Don’t Grocery Shop Online (for now)

Do you buy your groceries online, or do you prefer roaming the aisles at your local supermarket in real life? According to a recent poll from Reuters/Ipsos, most people still shun online grocery shopping and head for the store.

From the Reuters article on the survey results:

Seventy-five percent of online shoppers said they rarely or never buy groceries online, according to the survey of nearly 8,600 adults from Aug. 12 to Sept. 1. Even among frequent online shoppers who make internet purchases at least weekly, almost 60 percent said they never buy groceries online or do so just a few times a year, according to the poll.

This actually makes sense given how so much of how we pick our food depends on the quality of the product — sorting through bunches of bananas to find the right bunch, getting the best cut of meat, etc.. Additionally, online groceries run into the same lack of spontaneity problem that prepared meal kits do. You don’t always know what you want until you roam the aisles, see all the options at once, and pick what you are in the mood for then.

The Reuters article uses this data as a backdrop to question Amazon’s purchase of Whole Foods. But we think this actually reaffirms why Amazon paid $13.7 billion for the high-end grocer.

Amazon has been trying to get into the grocery business forever. Buying online works for staples that you eat all the time, such as restocking your favorite yogurt and bread each week, and other pantry items. But when it comes to more perishable and fresh items, the company realized it needed an option for people to pick up in person.

Buying Whole Foods gave the company an instant country-wide, supply chain and delivery network built specifically for food that was already in the neighborhood. The bonus of buying a higher-end chain like Whole Foods is that people are more inclined to believe in the higher quality of its product.

Through a combination of what it knows about you already, connected devices like Alexa, machine learning and unparalleled expertise in delivering items to your home quickly, Amazon will get people to (slowly) migrate people to buying more groceries online.

Even Reuters points out that while people may not be buying their groceries online right now, that doesn’t mean they won’t in the future. Nielsen predicts online groceries will grow to a $100 billion business by 2025. A survey in that year will most likely have drastically different numbers.