As grocery technology companies look to hold their own against industry giants, some are left with no choice but to join forces, as a new merger between Mercatus and Stor.ai shows.
Digital retail platform Relationshop, which acquired eGrocery solution provider Stor.ai a year ago, announced in a Tuesday (Jan. 9) news release that it is merging the company with Mercatus Technologies, which similarly provides end-to-end eCommerce solutions for grocers, in a bid to form a “connected commerce ecosystem for grocery retailers of all sizes.” The merged company will operate under Mercatus’ existing name.
Relationshop highlighted in the release the “stiff headwinds” grocers face in competing with mega-retailers “such as Walmart,” in addition to the challenges grocers’ direct eCommerce platforms face in a landscape crowded with third-party aggregators.
“Grocery retailers need flexible, automated solutions capable of addressing the competitive threat posed by national chains and the loss of control that comes from relying on third-party delivery providers,” Galen Walters, founder and CEO of Relationshop and new CEO of Mercatus, said in the release.
Aggregators’ steep commissions can prove a challenge for grocers fulfilling digital orders, eating into their already narrow margins, and the way that these third-party players own the transaction can compromise merchants’ ability to build relationships with their customers.
As Stor.ai’s then-CEO Orlee Tal told PYMNTS in a 2021 interview, “Many grocers today are considering a switching from Instacart and starting to build their own solution … Providing these tools to the grocers is … another step on the way to gaining back control of their eCommerce business.”
Relationshop’s merged company is not the only eGrocery platform touting its ability to arm grocers to better compete with third-party players. Grocerist, which last year launched a solution for grocers on Shopify, has a similar goal.
“In online grocery today, the biggest shift is from independent retailers relying on others in a way that is not sustainable and not profitable to independent retailers, taking the reins and taking control and investing in this channel because of all the value that it can create,” Jeff Anders, co-founder and CEO of the company, told PYMNTS in an interview at the time.
Yet this may not be entirely true, as many grocers find that the complexities and high costs of in-house eGrocery lead many to make difficult decisions about whether they want to work with an aggregator such as Instacart or find alternative tech partners.
Grocery is becoming increasingly digital, as eCommerce takes over all of consumers’ purchasing routines. The PYMNTS Intelligence study “How the World Does Digital: Daily Digital Engagement Hits New Heights,” which drew from a survey of more than 17,500 consumers in 11 markets that account for 50% of the world’s gross domestic product (GDP), found that a 10% rise in digital shopping activities is linked to a 6.9% increase in digital grocery orders. Plus, the same study noted a 1.7% year-over-year increase in grocery’s digital transformation.
Moreover, the PYMNTS Intelligence report “Consumer Interest in an Everyday App,” which was based on responses from more than 2,200 U.S. consumers, revealed that 61% of those who shopped for groceries in the previous month did so via connected devices at least some of the time.
Still, for now, most grocery transactions occur in physical stores. The PYMNTS Intelligence study “Tracking the Digital Payments Takeover: Catching the Coming eCommerce Wave,” which drew from a survey of nearly 2,700 U.S. consumers, revealed that 87% of grocery transactions are carried out in stores and 12% occur online.
eGrocery is growing both through direct platforms and third parties.
“As consumers continue to expect personalization, look to save money, and also discover new products, an evolved digital presence helps grocers meet customer demands alongside their brick-and-mortar stores,” Rob Hill, general manager of order ahead at Instacart, told PYMNTS in an interview posted in July.
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