Dive Brief:

• Albertsons announced it will launch a digital marketplace where shoppers can buy food and wellness products from small brands, according to a news release. The company is accepting vendor applications now and plans to launch the platform early this summer.
• Suppliers will ship products directly to shoppers and are responsible for providing customer service through the grocers’ platform. The marketplace will give suppliers a chance to interface with Albertsons, and potentially gain store distribution.
• The move comes just two months after Albertsons established its Performance Media platform, which worked with brands to place ads on platforms like Facebook then and track the store sales that resulted from those ads. “We can tell you how many people who saw the ad bought the product in our store,” said Narayan Iyengar, Albertsons senior vice president of digital, during a presentation at the Shoptalk conference in Las Vegas yesterday. “That’s one way to monetize the data we have.”

Dive Insight:

Albertsons is taking the fight to Amazon with this new marketplace. In addition to providing an “endless aisle” of products, the grocer aims to offer the sort of small-scale brands that are getting pushed out of Whole Foods stores as that company streamlines its business.

It brings to mind recent efforts by Kroger, including an online portal that allows cottage brands to apply directly to category buyers, and periodic local supplier summits. As Amazon and Walmart continue to evolve and threaten the industry, grocery companies are looking for ways to differentiate on assortment, customer service and store experience.

Albertsons is smart to target small brands that might otherwise get overlooked by its 19 retail chains. Brand loyalty is declining, and at the same time shoppers are looking for unique and interesting products that carry a story and compelling attributes. According to research firm Packaged Facts, local food sales grew from $5 billion in 2008 to $12 billion in 2014, and are expected to top $20 billion by 2019.

But how will Albertsons drive shoppers to this online marketplace, and will the assortment and pricing be attractive enough to make them want to buy? Despite having a growing online presence, including a chain-wide deal with Instacart as well as its own growing platform and delivery service, Albertsons is not thought of as an online grocer.

It faces stiff competition in the space, too, including a growing lineup of e-commerce startups like Thrive Market and Brandless. There’s also Amazon itself, which carries many small brands that ship directly to consumers.

In his presentation at Shoptalk on Tuesday, Iyengar said Albertsons does not want to "out-Amazon" Amazon. It’s a saying many companies have adopted, indicating many in the industry would rather play up their strengths than adjust to meet the online giant head-on. In Albertsons' case, the focus is on food, Iyengar said. This means offering recipes, in-store meal kits and other promotions that leverage its ingrained expertise and facilities.

Formerly the head of e-commerce at Disney, Iyengar said he came to Albertsons last year because the grocery industry "is where the action is.” He said the grocery industry will see more transformation in the next five years than it’s seen in the past 10 to 20 years, and stressed the importance of disrupting traditional ways of thinking in the industry.

“You need to think about the entire customer journey, not just the category-specific approach retailers have taken for so long,” he said.