Amazon gets plenty of press, but Kroger and Walmart have made big strides in enabling shoppers to buy online and pick up in store, McKeska tells audience at Marquette University real estate conference.
Traditional chains are positioning themselves to capture a significant majority of online grocery sales over the next decade or so, said Joe McKeska, President of Elkhorn Real Estate Partners,during a panel discussion at Marquette University’s annual commercial real estate conference.
“The prediction is for a significant portion of grocery sales to move online—from roughly 2% today to upwards of 20% by 2025,” McKeska noted during “The Last Mile and Urbanization,” a panel discussion at the Milwaukee university’s Real Estate Strategies Conference on Sept. 18. “The ready assumption is that Amazon or other e-commerce players will take the lead, but this assessment may fail to weigh the significant progress U.S. chains have already made in developing their e-commerce capabilities, including bringing click-and-collect to their stores.”
A 25-year grocery industry veteran who previously headed real estate operations for Southeastern Grocers, LLC and Supervalu, Inc., McKeska formed Elkhorn earlier this year in partnership with Melville, N.Y.-based real estate firm A&G Realty Partners. Elkhorn focuses on helping retailers and investors maximize their real estate portfolio performance in alignment with their broader business strategies.
Before an audience of approximately 400 executives hailing from all sectors of commercial real estate, McKeska noted that click-and-collect programs, which allow shoppers to order products online and then pick them up at the store, tend to be relatively affordable investments for traditional grocers. “This is not the same thing as retailers having to spend significant capital to build a competitive e-commerce platform from scratch, or having to rely heavily on uneconomical home delivery services for the majority of their e-commerce sales,” he said. “In other words, traditional grocers have begun to identify ways to leverage their brick-and-mortar stores. They are rolling out more rational e-commerce business models as a bulwark against Amazon and other online companies.”
McKeska was joined on the panel by Rob Bass, senior vice president of supply chain at Best Buy, and Dan Letter, managing director of Capital Deployment, NW Region, at Prologis. During the discussion, McKeska cited the impressive progress at both Walmart and Kroger, in particular, in rolling out click-and-collect programs.
“Walmart announced earlier this month that it rolled out click-and-collect to its 1,000th store,” McKeska told the audience. “That is out of roughly 4,200 stores if you factor in Walmart’s Supercenter and Neighborhood Market formats.” For its part, Kroger aims to bring click-and-collect capability to its 1,000th store, out of approximately 2,800 in total, by the end of this year.
These strides show a real commitment to making grocery shopping easier and more efficient for wired consumers, McKeska said. “In the short or intermediate term, these strategic investments, as is typical of such efforts, could be accompanied by some short-term challenges with respect to margins,” he said. “However, not many pure online retailers are profitable, which underscores that brick-and-mortar grocers really do stand a fighting chance to compete effectively in the long game.”
The panelists also talked at length about how ecommerce is changing the global supply chain and how the future configuration of supply chain networks is likely to change significantly, even affecting the design of individual stores as e-commerce and omnichannel retailing continues to evolve.
Led by Dr. Mark Eppi, Marquette University’s undergraduate real estate program was recently ranked in the Top Ten by U.S. News and World Report. Dr. Doug Fischer, professor and director of the Center for Supply Chain Management at Marquette, moderated the panel.