We received a Hello Fresh voucher from a friend and thought we would give it a try. Pick the meals of your choice, and all the ingredients along with instructions turn up in a box - all ready to be cooked. Knowing the weekly shopping/menu-planning process that goes on in our house every week I can see how this really solves a pain for many time-pressured working families who want to eat something home-cooked.
Founded in 2011, Hello Fresh is a German company and operates across Europe, Australia and is the second largest provider of meal kits in the USA.
The UK is a mature market for grocery delivery – we recently received a gift from Tesco after our 250th online grocery delivery and we were not early adopters. The grocers have been scrambling to keep up with consumer expectations around delivery and many question its overall profitability. KPMG estimates that picking and delivery costs are between £3 and £10 – barely covered by the delivery charge the customer is asked to pay.
So why we are not seeing grocers launch their own meal-kit programs? Perhaps they already are and I just have not noticed; it certainly has not come up in any retailer discussions I have had recently.
The reality is that grocers have their hands full trying to make delivery and pick up faster and more efficient – along with dozens of other projects focused around customers, efficiency and keeping Amazon at bay.
In short, consumer expectations outpace retailers’ ability to evolve or re-invent the overall experience.
A meal-kit offering is not a trivial exercise – kits require bills of material, customer’s desired meal choices then need to be gathered together, packaged and then shipped to the customer by a third party. There is no out-of-the-box software solution to manage this. Contrast a traditional retail business model where you have a pick of mature merchandise management systems, all from well-established vendors, to choose from.
To enable this, a retailer would need to build a specific solution that can orchestrate and automate processes associated with this new business model across the existing systems that sit within the business - while allowing new systems and technology to be incorporated as well. It would need to enable a real-time response to changing conditions.
As well as being agile to adapt as the business model evolves, this “system of differentiation” needs to be able to scale as customer take-up increases – I have seen too many great innovations that need to be “re-platformed” before they can be used by the number of customers who want to use them.
New business models are everywhere - for example Gartner predicts that “by 2020 half of everyday essential household consumable products will be available for auto-replenishment from the "connected home" via the Internet of Things (IoT).” Dealing with that challenge will be similar – connectivity and orchestration across existing and new systems and technology that needs to scale to enable a new business model.
This is what my customer conversations look like these days and exactly what the Digital Business Platform is designed for. Forrester said in their 2018 predictions – “Digital transformation is not elective surgery. It is the critical response needed to meet rising customer expectations, deliver individualized experiences at scale, and operate at the speed of the market”. My kitchen really brought this home to me last week.