EXPERT ANALYSIS
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Online Grocery Sales on Pace for Strong Growth
Researchers and technologists believe grocery represents one of the largest untapped markets for
e-commerce, as less than 1% of the industry’s $600 billion in sales takes place online. Research from
BI Intelligence indicates that online grocery sales could grow by 21% annually through 2018. Competition
is heating up between pure plays and supermarket retailers entering this space.
DISCUSSION QUESTIONS:
Which demographic group is most likely to use online grocery shopping the most? How can grocers best meet the expectations of these shoppers? What process should grocers use in determining which online grocery service to deploy, and what attributes are most important?
EXPERT ANALYSIS:
My recent national research on Millennials (18-34), underscores the sense of urgency for traditional bricks & mortar retailers to enter the online space. According to my research only 56% of Millennials have shopped for groceries in the past 30 days in a regular or full service supermarket. Conversely, my research indicated that 24% of Millennials shopped for online groceries in the past 30 days. The Millennials shop online 4.5 times per month versus 3.9 times per month at a regular or full service supermarket.
Relative to Millennials and traditional supermarkets I concluded: The Millennials may eventually behave like their parents and older consumers. However, at this stage of their life cycle their attitudes, lifestyles, and behaviors are sufficiently unique to suggest the development of specific marketing strategies and tactics by food marketers that will capture a greater share of their total food needs. Traditional food retailers need to develop a strategy makes online shopping a capstone of their organization efforts and investment, rather than simply an add-on form of distribution.
Richard J. George, Ph.D., Professor Emeritus, Food Marketing, Haub School of Business, St. Joseph’s University
To get started on meeting shoppers’ online expectations, grocers need to begin with a foundation of digital product content to power their online strategies and e-commerce engines. This includes a consolidated resource of product images and comprehensive product details, ranging from ingredients and marketing claims to nutrition facts and package size to give buyers a true “digital representation” of each product.
The accuracy and availability of this product information is the first step in giving shoppers the confidence they need to buy groceries online, and a pivotal first step as grocers’ e-commerce strategies evolve.
The ability to support shoppers’ digitally driven habits, including grocery e-commerce, is critical now and even more imperative in the future as millennials - a demographic 80 million strong that checks smartphones on average 43 times per day - becomes a primary grocery buyer. Sue Sentell, President and CEO, Gladson
Beyond ease and speed, customization is a game-changer. Online is different than in-store, you have the capacity to welcome back loyal shoppers, make it easy for them to re-order favorites, you can make recommendations on products they might like.
Studies have shown that online shoppers also use do a lot of product research online.2 This is invaluable to CPG and private label. You can offer special deals and product information to a very eager and open audience. This is especially true when you link it to a recipe: 22% have reported to looking up a recipe online3. You can help shoppers plan their menu as well as marry that to their list for the week. You are providing an invaluable resource to them and if they earn points or a loyalty perk, there’s even more value as you build their basket.
To do it well, everything about the communication (the creative, the copy, the products, the discounts, the spend-stretch levels, the combination of offer types) is completely personalized. You can expect your marketing to drive higher response rates and incremental sales. As long as retailers make their communications more personalized, including online, then consumers will respond positively and these approaches will continue to gain traction within the overall marketing mix.
Again, data plays a critical role in designing your offering. A recent LoyaltyOne survey found 27% of Americans surveyed said that an additional fee is worth the convenience of having the grocery products they need ready for pickup upon my arrival, and 21% said an additional fee is worth the convenience of same-day-delivery for their online purchases. Retailers can use the loyalty program and strategy to uncover what matters most to their best customers and build a successful strategy that drives ROI and positioning.
Graeme McVie, Vice President of Business Development, Precima, a leading retail analytics solution owned by LoyaltyOne
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