For the past few weeks, I've been publishing The Marketplace Trap, a 10-part series on one idea: mid-tier grocers are losing ownership of their customers to platforms, and most of them don't realize it yet. This is the final post, and here’s the first.
The grocery industry has a slow-moving crisis on its hands. And most mid-tier CEOs either don't see it yet, or see it and don't know where to start.
Not Amazon. Not AI. Not even price.
The real concern is quieter and far more structural. Control of the customer relationship is slowly migrating away from the grocer. And once that shift compounds, it’s nearly impossible to reverse.
Here’s the uncomfortable truth: most of the trade-offs that created this situation were completely reasonable at the time.
Third-party marketplaces accelerated e-commerce adoption. Delivery networks filled a logistics gap. White-label platforms from those same marketplaces got them online fast.
Each decision solved a real near-term problem. But taken together, they’ve introduced a strategic risk most boards are only beginning to understand.
Platform dependency compounds. Slowly. Then suddenly.
The Customer Relationship Is Fragmenting
When digital orders flow through marketplaces, the grocer increasingly becomes a supplier inside someone else’s ecosystem. The marketplace owns discovery, the transaction environment, and increasingly, the data layer. Even when loyalty programs are technically integrated, the behavioral signal sits outside the retailer’s system of record.
This matters enormously. Because whoever owns the customer relationship ultimately owns merchandising influence, pricing power, retail media revenue, and the long-term data advantage. Right now, mid-tier grocers are quietly ceding all four.
Ecommerce Economics Are Still Fragile
Online grocery penetration in the U.S. remains a minority of total sales, even after the pandemic bump. It represented roughly 14-15% of U.S. grocery spending in 20251. Yet most mid-tier grocers, too capital-constrained to build their own infrastructure, plugged into third-party platforms instead. Fast, cheap, and convenient. Also how you end up renting your own customers.
Grocery margins are already razor-thin. Layering third-party economics on top makes the math genuinely brutal.
Loyalty Is Becoming Harder to Defend
Historically, grocery loyalty came from three things: proximity, price perception, and habit. Digital marketplaces disrupt all three simultaneously. Search results flatten store differentiation. Algorithms rank options based on availability and promotions. And once a customer gets comfortable shopping inside a marketplace interface, the interface itself becomes the habit. Not the store. That’s the subtle but devastating part.
Retail Media Is the New Battleground
Retail media is quietly becoming one of the most important margin levers in grocery. But for mid-tier grocers, most of that opportunity is leaking out before it ever gets captured. But capturing that revenue depends entirely on first-party shopper data. The more customer interaction that happens outside the grocer’s owned ecosystem, the harder it becomes to monetize those signals.
That’s not just a marketing problem. It’s a future margin problem.
If that still feels abstract, the math makes it uncomfortably real. A single high-value household routed through a marketplace instead of an owned app generates roughly $1,000 less in profit over five years.
Across hundreds of thousands of customers, that’s not a rounding error. That’s tens of millions shifted away from the grocer, quietly, order by order. (Read the full breakdown here.)
So What Should Mid-Tier Grocery CEOs Actually Do?
The answer isn’t to abandon marketplaces. For many grocers they remain a genuinely important acquisition channel. But they should be treated as distribution infrastructure, not the foundation of a digital strategy.
The hole is real. But it's not too late.
Here are six things I’d prioritize if I were running a mid-tier grocery chain today:
🤝 Reassert ownership of the customer relationship.
Every digital interaction should point back to a first-party account ecosystem owned by the retailer. Loyalty, identity, and personalization need to live inside the grocer’s platform, even when transactions occasionally happen elsewhere.
📱 Build a direct digital channel that’s meaningfully better.
If your loyalty app is just a worse version of the marketplace experience, customers will default to the marketplace every time. If you don’t have a loyalty app at all, that’s where to start, full stop. Personalized deals, real loyalty rewards, a one-tap shopping list that already knows what you need. Your app should feel like a smart local butcher. The marketplace never will.
🛒 Don’t touch e-commerce until your loyalty foundation is proven.
Mid-tier grocers have burned enormous capital chasing Instacart and Amazon Fresh before they even knew who their best customers were. First, get enrollment up. Get engagement frequency up. Get to the point where your loyalty members are genuinely sticky. Then e-commerce makes sense. Before that, it’s just an expensive distraction.
🗄️ Invest in first-party data infrastructure.
Retail media, AI personalization, merchandising optimization, all of it depends on clean, unified shopper data. That means taking identity resolution, customer data platforms, and what’s happening at checkout seriously. Without this foundation, you’re just renting your own customers back from someone else.
🏗️ Stop letting IT own the loyalty program.
In most mid-tier grocers, the app lives on a technology roadmap, not a commercial one. Feature decisions get made by people optimizing for system stability, not customer retention. Whoever owns customer lifetime value should own the loyalty program. Until that changes, everything else on this list is harder than it needs to be.
Mid-tier grocers still hold enormous advantages. Physical density. Deep brand trust in local markets. Daily engagement with millions of households. Those aren’t small things.
The threat isn’t coming. It’s already here. Your customers aren’t leaving, they’re just slowly forgetting you exist. Every order that flows through a marketplace instead of your own app is a small bet that your brand doesn’t matter. Enough small bets and they’re right.
You still have the stores, the trust, and the daily foot traffic. That's more than most industries get to work with. The only way you lose is by waiting.
The Marketplace Trap is a 10-part series on why mid-tier grocers are handing customer ownership to platforms, and what they can do to take it back.
The full series:
“How Brands Can Grow Digital Grocery Sales in 5 Charts.” eMarketer: https://www.emarketer.com/content/how-brands-grow-digital-grocery-sales-5-charts.