Dive Brief:
- Albertsons has partnered with Instacart to launch an online market focused on the grocer’s natural and organic store brands, according to a company release. O Organics Market is available to customers in Washington, D.C. and San Francisco, with plans to eventually expand to other cities.
- The e-store offers 3,800 specialty items, including store lines O Organics and Open Nature, along with natural brands like Annie’s and Dave’s Killer Bread. Instacart will fulfill orders from 16 Safeway stores in San Francisco and 12 Safeway stores in Washington, D.C., an Albertsons spokeswoman told Food Dive.
- According to the release, “O Organics Market caters to an important segment of Instacart shoppers seeking organic and natural products, and deepens Albertsons Cos.’ commitment to expanding its digital footprint.”
Dive Insight:
Albertson’s new e-store is yet another testament to the power of private label in today’s hyper-competitive market. Retailers sold $138 billion in store brands last year, according to new data from IRI and the Food Marketing Institute, which also found 69% of consumers saying they want stores to have a good assortment of private label products. Continuing store brands’ success will require building online as well as in-store sales.
Albertsons has put a lot of muscle behind O Organics to capitalize on this opportunity. The line just hit $1 billion in annual sales, and the grocer announced it would grow new product releases this year by 50%, bringing the total to around 1,500. The promotional push behind the brand coupled with its long history — it was one of the first organic private labels — bodes well for its online spotlight.
It’s also true that consumers are increasingly focused on health and wellness, and that these concerns are translating to the online channel. The growth of Thrive Market, Good Eggs and other natural and organic e-markets, as well as growing sales at mainstream grocers, are a prime example of this shifting behavior. Online sales of natural and organic products increased 12.6% last year, according to Nutrition Business Journal.
O Organics Market could also signal a potential new direction for retailers in e-commerce. As Amazon threatens supermarkets with a multi-pronged approach to food retailing, grocers may need to do the same. Albertsons certainly seems to subscribe to this line of thinking, having also recently announced it will launch an online marketplace dedicated to small brands.
Breaking out a separate online platform like O Organics Market may seem like a new concept, but grocers are becoming experts in high-growth categories and for years have offered dedicated natural and organic sections, wine and beer departments, floral and catering and other specialties within their stores.
Translating one or more of these services to separate online platforms may be worthwhile for retailers. Just over a week ago, H-E-B rolled out on-demand alcohol delivery in 30 Texas cities.
The main challenge will be driving traffic to the site. An Albertsons spokeswoman declined to comment on how the grocer will promote O Organics Market, but it’s safe to assume some combination of digital ads, in-store marketing and circulars will drum up awareness. The company will have to convince shoppers to make an extra trip, so to speak, which could prove tough for all but the most dedicated O Organics users. The company, along with Instacart, is offering free delivery on the first order, which should help.
Ultimately, this is an interesting test coming from a retailer that’s shown it isn’t afraid to make big bets. For Instacart, meanwhile, this could be an interesting new service model that, if successful, enhances its value for retailers.
