The Digital Imperative for Grocery Retailers

Fully embracing digital commerce is essential to survive and strive in today’s and tomorrow’s retail environment. The numbers prove it. U.S. online grocery sales amounted to about 14.2 billion U.S. dollars in 2017 and are expected to rise to nearly 30 billion U.S. dollars by 2021 (Statista 2018).

Just like other retail verticals, the grocery industry is feeling the pressures of the Amazon Effect; increased fierce competition from traditional grocers, mass merchants and other channel disruptors; advanced technologies; and changing consumer food preferences and the need for convenience. Today’s consumers are digitally-connected and informed, using multiple channels simultaneously. They expect a consistent experience, and are in the driver seat as to how, when, where, and whom they shop with. If their needs and shopping experiences are not met, they will shop elsewhere.

The grocery industry has been slower-moving and more risk-averse than other retailers in testing and implementing omnichannel and technology solutions to drive efficiency, loyalty, and customer lifetime value.

Typically, when Grocers are faced with consistent negative comparable sales, lower earnings than forecast, and high customer attrition rates, they shift into a “reaction mode” and unfortunately often the results fall short of shopper expectation.

Why consumers love online grocery shopping:

  • Online grocery shopping is super convenient – you can browse the virtual shopping aisles 24/7 without leaving the comfort of your home.
  • Ability to save My Recurring Order, My Lists, My Favorite Recipes, etc. to my account; and the ability to add items to the shopping list throughout the week.
  • Gives shoppers the option of having their order either home-delivered or store-collected (pickup); today, most grocers give a two-hour time slot for grocery delivery or collection; and some may narrow it down to just one hour.
  • Allows consumers who are not situated in major urban areas access to stores located remotely.
  • Less hassle – no need to drive endlessly searching for a parking space, no queuing at long checkout lines, especially at peak times and holidays, no navigating in-store crowds while shopping at peak times, and no more dragging kids through the grocery store!
  • Save money – on gas…Easy access to weekly circulars, where key product features and promotions are advertise…Easy access to digital coupons.

Why you should embrace digital commerce

  • You’ll be open for business 24/7
  • Online grocery has significantly higher AOV than offline grocery. The average order value at online retailer Peapod amounted to $166.83 U.S. dollars (Feb. 2015 – Statista 2018), versus offline grocery from $42.18 – $52.32 (source: Grocery is Dead. Long Live Grocery | Ian Sigalow | March 22, 2015)
  • Eliminates geographical boundaries, therefore, opens new markets beyond the physical store
  • Could eliminates the need for a physical store, therefore, your business can save money on rent, upkeep (like utilities and maintenance), store labor, etc.
  • Retailers gain access to more, real-time customer data that can be leveraged to personalize experiences and optimize business performance
  • Since ecommerce transactions capture customer email information, sending out automated and customized emails is quite easy
  • Allows retail business to scale up easier than physical retailers as they are not bound by physical limitations like inventory storage space
  • Allows retail businesses to track logistics, which is key to a successful ecommerce company

Common pitfalls and best practices

  • Avoid organization structure duplication and silos (digital commerce vs. brick-and-mortar business units). Collaboration and clear communication of responsibilities and accountability are required to succeed.
  • Avoid storing multiple sources of data from varies channels (consumer touchpoints) in multiple databases. A Master Data Repository, where multiple sources of data converge, that everyone in the organization can access and view data in alignment, is critical to obtain a “single version of the truth,” and a “360° view of the customer.”
  • Avoid fragmented shopping experiences between the virtual store and the physical store. Deliver a consistent and complete view of the Brand and the products and services, prices, promotions, etc., regardless of whether the customer interacts and transacts online or in a physical store. You need to replicate the virtual store to the physical in-store shopping experience.
  • Evolving to “hyper-personalized” marketing vs. strictly mass marketing is paramount. Customers have different preferences and shopping behaviors and should not be treated as one group. Know your customer segments, preferences, and behaviors; and shift the ratio of traditional product trade promotion spending to shopper specific trade promotions.
  • Do not take Order Fulfillment lightly…make it a priority. Ensure product freshness and quality when fulfilling customer’s online grocery orders. Again, shoppers are picky about their produce, and other fresh products, as they prefer to see, touch and/or smell before purchasing. Your ecommerce solution must allow for notes per fresh item to the order selector; and order selectors must be properly trained to ensure consistent quality control in order gain shopper’s trust and confidence.
  • The Last Mile – it’s OK to test and learn. Explore options to fulfill the “last mile.” Grocers can leverage their physical store locations to fulfill customer orders, and fulfill the “last mile” with delivery and pick-up (click-and-collect) services. These services are also provided by 3rd party companies, which allow Grocers to quickly test the waters, with minimum upfront investment.

 To learn more about digital commerce for grocery, contact us!

Written by: Don Yee, Sr. Consultant