GrocerGram will compete directly with Instacart and others in the grocery delivery business. Successful competition for the existing pool of subscription-based grocery delivery service users is fierce. Why order groceries through GrocerGram instead of the other guys? The path of least resistance wins the consumer competition. Whatever service is the most convenient to use with the best service and lowest cost wins right?
Lowering grocery costs:
Retailers’ abuse of bargaining power - Over the last 50 years, retail chains have acquired a very high share of grocery revenue and increased influence over suppliers, causing deep impacts on consumers worldwide. Bargaining power has tilted in favour of retailers who dictate what food is grown and how it is processed, packaged, priced and promoted.
As an example, in the UK, four retailers serve as the slim conduit for 7,000 manufactures to sell their products to 25 million households, which demonstrates how the existence of retailer abuse in the grocery industry has not only been allowed to develop but also to thrive.
Offline shopping obsolescence has given way to new delivery models - Over the past decade, online grocery shopping has quietly closed in on the traditional industry. When designed well, online shopping offers a simpler, quicker and more price-competitive services in comparison with those of brick-and-mortar stores. But online groceries still do not address the rampant abuses in the industry by the retailers.
A BOLD VISION AND NEW HOPE FOR AN AGE-OLD CHALLENGE
Insidious retailer misconduct calls for a bold vision - the GrocerGram team believes that a decentralized blockchain-powered facilitation consumer-to-manufacturer interaction will allow for a more personalized and trustworthy grocery shopping experience while offering significantly lower prices for grocery goods. Blockchain offers unparalleled opportunities - GrocerGram believes Bitcoin, Ethereum and other blockchain ecosystems will usurp traditional industries, including retail. Blockchain offers a compelling solution to the problem of combining accessibility with privacy and security.
GrocerGrams’s INNOVATIVE SOLUTION AND DISRUPTIVE BUSINESS MODEL
the ecosystem enables direct interaction - Through GrocerGram, consumers will buy grocery goods directly from manufacturers, saving up to 30% on purchases. Manufacturers will be able to offer easily custom promotion and loyalty programs and receive direct feedback from consumers.
GrocerGram tokens facilitate transactions - Ecosystem participants will use the GrocerGram token to transact, eliminating costly retail chains, reducing prices, enhancing security and privacy, and greatly improving user experience.
How GrocerGram will make money - The revenues of the GrocerGram Foundation will come from the following 2 sources: (1) a small transaction fee as a reward for maintenance of the GrocerGram's own blockchain and creating smart contracts, and (2) a distribution centre fee in the cities where the GrocerGram Foundation will establish the physical infrastructure (we plan to put distributions centre into operation on our own in the first 10 cities and then search for independent distribution centre operators to expand the ecosystem in other cities).
ABUSES OF RETAIL BUYER POWER
The global grocery industry is dominated by mass-market retail chains. At the national level in many countries, a large share of the grocery market is frequently in the hands of few retailers.
While some amounts of buyer power are understandable and simply desirable for competitive advantage, the high level of concentration causes a growing imbalance of buyer power within the grocery supply chain, as discussed below.
Exerting buyer power is natural when not abused - Buyer power is essentially the ability of a buyer to obtain more favourable buying terms than would be possible in a fully competitive market. It is understandable that any industry participant would seek bigger volumes as a tool for negotiating better prices. But retailers push the limits of what is fair. Grocery retailers are perpetually and aggressively extracting better terms from already squeezed suppliers, going far beyond the benefits a player should receive for attaining economies of scale.
Large or small, no supplier has enough power - Global constituents, such as Procter &Gamble, Nestle, and Unilever do play a role in the industry and have more negotiating power than small suppliers.
Still, these companies simply are no match for the extensive control retailers have on end-customers power throughout the supply chain. For example, Wal-Mart’s sales are approximately 4.5 times greater than those of its largest supplier, Procter & Gamble.2 Wal-Mart accounted for 16% of Procter & Gamble sales in 2016.3 Producers of non-branded goods, most notably agricultural producers, have even less access and bargaining power.
Retailer buyer abuse extends beyond normal pressure - The explanation of this pressure is abuse of buyer power. Such power allows retailers to determine what will and will not be stocked, and on what terms, such as sources, quantity, quality, delivery schedules, packaging, returns policy, and above all, price and payment conditions. Indeed, a supermarket company wields an important bargaining chip, namely the threat to stop selling one or more products. When large food retailers purchase at unit prices that are lower than those available to small retailers, the resulting price variances may or may not match differences in the unit costs of supply.
Evidence of retail power abuse - The Competition Commission in the UK, for example, did find that major retailers enjoy a price advantage that exceeds the cost difference.
Additional departures from proper retail conduct included: delaying payments to suppliers beyond the terms in the contracts, and changing quantities or product-quality specifications at less than three days’ notice, and without paying compensation to the supplier. When suppliers are characteristically numbered in the thousands, supermarkets on the fingers of one hand, and consumers in the millions, the imbalance of bargaining power is certainly striking.
RISE OF RETAILERS’ OWN BRANDS AND THE LOSS OF INDEPENDENT BRANDS
As retailers acquired an increasing presence in the minds of consumers and economic power in grocery markets, it is unsurprising that they have developed their own brands to bolster market share and profits.
Retailers now directly compete with their supply chain - As if the significant imbalance in retail control and power over manufacturers and consumers was not enough, the the retailer has a new role. In addition to their traditional role as purchaser, with the the proliferation of private label strategies, retailers have become direct competitors of product companies.
Private labels becoming more prominent and sustained - For instance, in Australia, the share of supermarket food sales occupied by retailers’ own brands is now estimated at 25%. In the UK, it is estimated by the British Brands Group to be double that. Manufacturers are in constant need to develop differentiated products to attract customers, an intense challenge when retailers often launch copycat store-brand products at the same time as the national brand.
Retail profit and cost savings win over supplier relationships - Although shelf space is finite, branded goods are being increasingly squeezed out by retailers’ own brands. It is twice as profitable for retailers to do this. The promotion of their own branded products can be carried as part of their corporate promotional overhead, which implies substantial savings of indirect cost. In addition, the closer control that supermarkets have over their own brand suppliers means that they often achieve lower direct product costs too, and in most cases compromising the quality to increase profits.
Yet store brands often command similar prices as national ones - Retailers’ own brands have moved upmarket into premium and prepared foods and the prices they can command are often not far below those of independent, established brand owners.
Effective measures to prevent unfair commercial practices in the grocery retail industry and the resulting detriments to both consumers and small and mid-scale manufacturers are urgently needed. Remedies should be based on a fundamental principle of fair dealing and should be enforceable and binding.
MAJOR SUPPLY CHAIN INEFFICIENCIES ABOUND
While smaller producers across the world are being displaced from the store shelves by a relatively small group of large retailers, significant inefficiencies exist in the supply chain.
High distances between manufacture and consumption - It is estimated that the average American meal travels about 1,500 miles to get from farm to plate.7 This problem is relevant for the world’s many countries and might lead to acute financial, ecological and health-related consequences with significant adverse impacts in the long term. Food miles, the distance food travels from the place it has been grown to where it is ultimately consumed or purchased, increase significantly when buyers import food from other parts of the country, region or world.
Waste in various areas of the supply chain - In distribution centres and on grocery store shelves, food is being wasted. Every night, some perishable items such as bread must be thrown out. According to a recent survey, 400 million pounds of food is served by supermarkets, yet nearly a third of it is wasted annually.9 In addition to the sheer lack of responsibility, especially when hunger continues to be such a global issue, is the loss of profitability due to the power of retailers’ dominating the supply chain simply because they control negotiation discussions.
Unfortunately, current retail systems are designed to reduce stock-outs rather than measure and manage food waste. Therefore, managers optimize to ensure food is leftover on the shelf. The time has come for connecting consumers directly with grocery manufacturers via a decentralized consumer ecosystem.
MISSION & VISION
“Our mission is to build an accessible ecosystem enabling consumers to buy directly from high-quality grocery manufacturers at lower prices.”
The GrocerGram ecosystem will be a scale able platform that enables consumers to buy best-quality groceries directly from manufacturers at lower prices with convenience.
The GrocerGram team shares a common vision of the future of the grocery industry: Groceries are overpriced. We know how to make a positive impact in the lives of people across the world, given that groceries account for up to 50% of a consumer’s wallet.
Manufacturers are struggling to get direct access to consumers and can't shelf product in retail stores, despite excellent products that would have received strong demand from consumers.
The supply chain in grocery retail is obsolete. Wholesalers and retailers developed in the second half of the 19th century should be replaced with technology in the 21st century. We believe in the power of decentralization. Consumers and manufacturers deserve the a free choice that is not influenced by retailers and the way they conduct business.
Disrupting with blockchain is the paradigm shift. While the idea of disintermediating the retailers are not new, the advent of smart contracts and blockchain will help us make it a reality.
GLOBAL GROCERY MARKET
The grocery market is one of the largest consumer markets in the world: it is expected to reach $8.5 trillion by 2020 with up to 50% share of a customer’s wallet.
Grocery retailers have acquired a dominant market share and high concentration: up to 90% of the market in many countries is controlled by a handful of retailers The grocery industry is reaching a digital tipping point, with much of its growth expected to come from online.
A VERY LARGE MARKET WITH EXTENSIVE IMPACT
The global grocery industry was valued at $5.6 trillion in 2013 and forecasted to grow at a CAGR of 6.1% from 2016 to 2020, reaching an estimated $8.5 trillion in 2020.11 The grocery market is a defensive one which means that it tends to stay stable in good and bad economic times, given there will always be a demand for food.
One of the biggest segments of retail and comprising a significant share of the consumer’s wallet, the industry has a deep impact on grocery sector stakeholders, particularly manufacturers and consumers. As an example of the consumer impact, the figure below shows the portion of consumers’ household spending that food comprises in a variety of countries.