Perishables and e-commerce: Is the real promise in B2B?

Perishables continue to spur the growth of global logistics. With Fruit Logistica in Berlin this week, we look at how e-commerce is factoring into the perishables industry. Driver or disruptor: the views are not clear-cut, and business-to-business (B2B) might turn out to be the big winner.

We look forward to welcoming you at the Panalpina booth in Berlin, and continuing those conversations about all that’s fresh and happening.

Meet us at Fruit Logistica from February 6 to 8, 2019 in Berlin.

In the meantime, here’s a snapshot of the current discussion about the role of e-commerce in perishables.

E-commerce as driver

One view is that e-commerce is ramping up demand for perishables. Digital-savvy consumers used to purchasing fashionwear, books and electronics online are now buying fresh fruit and vegetables online as well. China and the United States head this trend. In Spain, a leading exporter of perishables, online food sales of fruit and vegetables grew by 32.2 percent and 27.7 percent respectively in just one year (article citing figures from the Spanish Ministry of Agriculture and Fisheries, Food and Environment).

From the Spanish retailer El Corte Inglés to the French chain Carrefour, most agree that fresh products are eating up a larger share of the B2C e-commerce basket. Supermarket websites are shoppers’ preferred place for placing orders (77 percent), followed to a lesser extent (34 percent) by global shopping sites such as Amazon.

Caution ahead

The other view is more sober. Amazon’s grocery sales in 2018 show that the online giant registered strong growth in categories such as beverages and snacks, but struggled to gain consumer buy in fresh food and perishables. Despite Amazon’s success in other categories, perishables are not gaining much consumer traction, holding “an extremely small portion” of grocery sales (article citing global information specialists Edge by Ascential).

Almost 96 percent of U.S. adults shop online, but only 46 percent buy groceries online and just 27 percent buy produce online (Freshspective blog).

Even Amazon has shifted its strategy to enlarge its physical footprint, with plans to add more stores across the U.S., as many consumers still prefer to buy fresh items in person rather than online.

The real promise might be in B2B e-commerce. As Edge by Ascential notes, “Out-of-stocks are one of the biggest issues for grocery brands on both the physical and digital shelves. Suppliers will need hyper local analytics capable of monitoring regional pricing and accurately forecasting inventory needs.”

Opportunities abound in the B2B perishables sector. Platforms that sell perishable products online, such as Alibaba, Tmall Fresh and Mr. Fresh, aimed only at large importers and distributors and big brands based in China, are expanding their reach, opening to foreign fruit and vegetable exporters and pushing sales.

The B2B model is pointing to “direct, immediate online circuits, open to operators from different geographical areas”, writes Agrifood journalist Miriam Rubio.

The availability of warehouses for distribution and specialized fleets, as well as the ability to manage perishable products, provide optimum temperature-controlled transport conditions and package to preserve quality, will determine who wins.

E-commerce as disruptor

Enter digital transformation and the changing role of logistics providers. Gartner analysts predict that by 2020, 50 percent of all manufacturing supply chains will have the ability to enable direct-to-consumer shipments. The lines will be blurred as both manufacturers and retailers take the direct route to consumers. Think of how Coca-Cola now ships out of its own warehouse to save Amazon having to deal with logistics and shipping.

Jim Lemke, president of Robinson Fresh, believes that: “This overlap will result in greater supply chain complexity, but with technology advancements, specifically machine learning, advanced analytics, and API, connectivity enables all of us to evolve.”

The growing demand for perishables has led to a 20 percent increase globally in fresh categories over the last decade (Rabobank World Produce Maps). For retailers in North America for instance, perishables has grown from 20 to 40 percent of total store sales over the last 10 years. Retailers have to move quickly on trends, while still having regular items in stock. Supply chains and inventories have to become more robust to cope with highly fragmented and ever-changing seasonal factors.

“Consumers in today’s digital world are increasingly diverse and demanding,” says Colin Wells, global head industry vertical Perishables at Panalpina. “They want quality, safe food, more fresh produce year-round and more visibility on where all that is coming from. Our job is to make that happen logistically, whether with food producers, manufacturers, distributors or retailers. Traditional models are being disrupted and logistics providers have to be agile enough to ride out the changes.”

Meet us at Fruit Logistica and find out how the Panalpina Perishables Network is extending its reach and driving solutions from field to shelf worldwide.