Grocery shopping is in the middle of a fundamental shift from brick and mortar to e-commerce. Within the massive $680 billion grocery and supermarket industry in the United States, the grocery e-commerce market has expanded rapidly and is expected to balloon from $29 billion today to $60 billion by 2023. The e-commerce segment is expected to grow at a CAGR of 20%+ compared to a much slower growth rate of the overall grocery industry at 1% CAGR. By accessing online grocery services, customers have the freedom to avoid standing in queues before checking out, to pick products from easily accessible websites, and to get the items delivered to their doorsteps at a click of a button. As more and more time-strapped consumers look for new ways to receive groceries, the industry will continue to evolve and adapt to meet quickly changing consumer preferences.
The U.S. grocery industry has remained insulated from the shift to e-commerce that has dominated most other retail channels. As much as 70% of grocery stores don’t even have their own e-commerce platforms. In fact, the grocery industry has the lowest e-commerce penetration out of brick and mortar retail companies. Key reasons behind slower adoption include the fact that some consumers still prefer to choose their own food (especially meat, produce, and other perishable goods), product and SKU proliferation, delivery challenges, and the fact that few grocers have had the financial capacity to invest in the highly efficient, large-scale distribution and fulfillment capabilities that is required to generate a profit in an already razor-thin margin industry.
While online sales accounted for a meager 3 to 4% of grocery sales in 2019, some predict that the share of e-commerce in grocery sales could swell to more than 10% by the end of the year, as a growing number of grocery chains dive into e-commerce. More and more major grocery chains are investing in digitizing their businesses and have also started spending money in building automation and innovative fulfillment capabilities in an effort to establish a profitable e-commerce distribution channel. Even traditional supermarket chains have started developing advanced multi-channel concepts including click & collect or pre-ordering services through the help of third-party providers.
In the past few months, Covid-19 has also acted as a catalyst in accelerating the grocery stores’ transition into e-commerce platforms. As of May 2020, the online retail category with the largest year-over-year search lift was in categories such as grocery, food, and cooking as more consumers adjusted to cooking in their homes. Between March 14 and May 1, the search volume of these three categories increased by 53.8 percent year-over-year. With the sudden surge in online traffic, large-scale grocery e-commerce players such as Instacart are struggling to scale properly. In some cases, wait times for getting a slot for an order have exceeded four to five days, while order fulfillment rates have been dismal due to many grocery stores experiencing out-of-stock inventories and supply chain issues.
Kli Capital portfolio company, Self Point, is a leading provider of SaaS-based e-commerce platform for small to mid-sized supermarkets, specialty food retailers and consumer packaged goods brands. Self Point provides a white-label solution that is responsible for the full digitization of a customer’s business, ranging across a variety of services such as building an online inventory management system to developing a social media presence. The company’s technology allows for an easy transition for customers to integrate their point of sale and retail catalogs into a mobile-first custom-branded experience to manage ordering, fulfillment and delivery. The company also touts an advanced picking app that has shown to increase order fulfillment by 50% through capabilities such as single-step checkout, specialty department order splitting, and SMS and call substitutions. Self Point’s diverse set of solutions also has the capability to address customer needs in other areas such as marketing or customer service. Moreover, the company also works closely with leading robotic warehouse partners to provide robotic micro-fulfillment to provide customers with in-store automation and the ability to scale up fulfillment capacity efficiently and quickly.
Founded in 2012, Self Point has grown steadily through the continuous acquisition of strategic customers and partners, such as Toshiba, Unilever, and Fabric. The Company today partners with over 180 retailers and more than 90 brands across the U.S., Canada, Mexico, and Israel. Under the leadership of the CEO, Orlee Tal, who has extensive experience in product management and UX experience at innovative Israeli start-ups, the company has focused on upgrading their product interface as well as building out their sales team. The company differentiates itself from larger players such as Instacart by focusing on tier 2 and 3 grocery chains while also prioritizing giving access to shopper data to their customers so that the customers can form their own marketing and targeting strategies.
“Many small to mid-sized grocers are eager to shift their businesses online to capture the growing demand for e-commerce. Self Point is the ideal partner for these customers looking for end-to-end solutions for all of their e-commerce needs”, said Orlee Tal, Self Point CEO. “Our truly differentiated technology acts as a springboard for customers who are looking to build out a fully personalized online shopping experience for consumers while maintaining access to their own customer data.”
Self Point has recently seen tremendous growth during 2020, with MRR almost doubling in June compared to January. In order to continue the momentum, the company has hired seven additional employees across various functions including sales, and has plans to hire additional employees. The Company is looking to raise capital in the near future to capitalize on recent growth to develop more technological capabilities as well as to expand their sales team. The future looks bright for Self Point as it continues to equip small to mid-sized grocery chains with the latest e-commerce capabilities to meet the demands of consumers.
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