As the 2016 holiday period ramps up, e-commerce in the grocery and specialty food sector has never been stronger, leading specialty retailers with brick-and-mortar entities to take notice of the impact, both positive and negative. 

“This year, purchasing for Thanksgiving meal really started to shift to online as a way to save time and energy – and avoid long lines in stores,” says Jonathan Asher, executive vice president at PRS IN VIVO, a leader in packaging and shopper research. “And as millennials begin to pick up the mantle of hosting these holiday events, their natural tendencies to purchase online is also being applied in this situation. In addition, some grocers offer prepared meals and specialty foods—such as vegan-friendly options—that are only available online, further spurring the use of this alternative channel.”

According to Internet Retailer’s recent report, purchasing food online has gone mainstream with online grocery sales expecting to increase 157% this year. The impact of large retailers like Walmart and Kroger aggressively expanding their online footprint is driving much of this growth, as well as delivery services like Amazon expanding into grocery and fresh items. 

The Impact on Brick and Mortar

What does this trend in the e-commerce grocery landscape—especially as it relates to specialty holiday menu items—mean for specialty food retailers with physical outlets? 

“Our customers—while shopping online makes sense for them—are actually excited about shopping ‘old-fashioned style’ in our store,” says Patrick Crowl, owner of Woodstock Farmers' Market in Woodstock, VT. “People come down to rub elbows in the aisles, chat it up at the coffee bar or to just grab the local paper.  The need for community will never get lost in the shuffle as I believe our human nature relies on a sense of balance."

Many of Crowl’s customers rely on the store’s sense of judgment about specialty products.“They come down to our store to get things that are difficult to get online, like sandwiches or hot case entrée items for dinner,” Crowl says. 

Although online holiday specialty food sales are on the rise, many retailers, including Jon Pruden, co-owner of Taste Unlimited has not seen a noticeable decline of in-store retail sales as a result. 

“Taste Unlimited is fortunate to have a diverse mix of offerings in our seven stores that may serve to insulate us from this trend,” Pruden says. “Our product mix includes specialty foods, wine, beer, cheese and catering, but perhaps most important of all is a robust cafe and prepared foods business that accounts for a majority of our sales.  So our retail sales benefit from a steady stream of folks coming in the door to eat.”

And while Taste Unlimited has had an e-commerce website for over 10 years, online sales remain a relatively small portion of their overall revenue.  

Michael Volpatt, owner of Big Bottom Market, an artisanal market in Guerneville, CA., says that more and more consumers are looking for specialty, artisan goods and seek these out beyond brick and mortar stores. And that’s good for business—especially when you embrace what the online avenue has to offer.

“Google makes it easy not only for people to find online businesses dedicated to merchandising these types of products for consumers, they’ve also built out the Ad Words and shopping platforms so that specialty retailers can easily advertise and have customers ready to purchase their goods online,” Volpatt says. 

Big Bottom Market had been dabbling into the world of e-commerce for about a year and was forced— in a very positive way— to quickly ramp their production and fulfillment when their biscuit mix and honey gift set was designated as one of Oprah’s Favorite Things for this holiday season.  In addition to the tremendous online sales, the in-store sales also surprised Volpatt and his team, and demonstrated than e-commerce can bolster in-store purchases, rather than detract from them. 

“In the first weekend alone we sold about 500 bags of mix. We typically sold 50 bags a month before we made it onto the list.”

Volpatt also is seeing general online holiday gourmet and specialty food sales on the upswing. “We work with a number of small producers of specialty foods and everyone we work with is reporting that orders have started to skyrocket,” Volpatt says. “This includes everything from gourmet chocolates, local honey and jam to organic pastas, cheeses and olive oils.”

The Holidays and Beyond

Crowl says there’s place for brick and mortar retailers that give great service and make people feel good—two attributes that are key during the hustle and bustle of the holiday season.

“You can press a button and feel good it but I think it's different when you are face-to-face with great service and great products that jazz your inner spirit and connect you with where your food is coming from,” Crowl says. “I think that people are more demanding—in a good way—and we need to keep our ear to the ground of what our guests want.  And as long we and other retailers stay relevant to that, there's room for all facets to coexist whether online or in a physical storefront.”

When it comes to holiday entertaining and meal prep, the ability to shop online gives everybody the ability to source world-class items regardless of their geographic location or proximity to a specialty food retailer.  

But Pruden stresses that access is a double-edged sword because the dollars are floating off elsewhere and not supporting a vibrant specialty retailing community at home.  

“In my mind, brick and mortar specialty retailers need to double down on what makes them uniquely great in the first place, offer a compelling product mix, and provide an unmatched guest experience along the way,” Pruden says. “All that will beat paying for shipping and getting your food from a guy in a brown shirt any day of the week.”

Related: Consumers Open to Meal Kits for the Holidays; Online Snack Purchases Increasing with Shift in Consumer Tastes