The grocery retail vertical is in the midst of disruption — and we’re not just talking about Amazon Go. New research from Criteo goes so far as to say that 2017 will be the “Year of e-Grocery.”
Consumers have shown their interest in, and demand for, e-Grocery. The latest research reveals that:
- E-Grocery adoption more than doubled in 2016;
- 31% will order groceries online in 2017;
- If a grocer doesn’t have an e-Commerce option, one out of three shoppers will spend their online dollars with another grocer in 2017; and
- 40% of e-Grocery purchases are made on mobile phones.
So what has led to this disruptive adoption of e-Grocery, even though it’s hardly a new concept? (The Peapod grocery delivery service, for example, was founded in 1989.) Consumers’ demand for convenience seems to be one valid explanation. The convenience factor may also explain the rise of meal delivery subscription services such as Blue Apron and Hello Fresh.
Large grocery retailers such as Walmart, Kroger and Meijer are even expanding their offerings to include grocery delivery and curbside pickup, an effort that could potentially help them compete against e-Commerce giants such as AmazonFresh or FreshDirect.
While e-Grocery still represents only a small fraction of all dollars spent in this category, it’s on a fast track for growth. “Both [e-Grocery] and meal kit subscription services are still relatively small in the grand scheme of things,” said David Portalatin, VP and Industry Analyst, Food Consumption at NPD Group, a market research company, in an interview with Retail TouchPoints. “We have to allow for the fact that they’re creating disruption in the retail marketplace that could escalate pretty rapidly.”
As more grocery retailers expand to home delivery, it’s crucial they offer a seamless experience in order to differentiate themselves from competitors. To better compete, retailers should consider features such as:
- Offering delivery time specifications;
- Sending text notifications about the status of deliveries; and
- Loading the items either right into the customer’s car or kitchen.
Customer service is key, so improving communication between the shopper who is picking out the items and the consumer could make an e-Grocery offering stand out. Portalatin suggests providing consumers with the option of receiving photos via text message of items like produce, to ensure they’re getting quality foods — as well as the right ripeness level for bananas and avocados.
It’s also proving important to make traditional grocery shopping as convenient as possible. Target, for example, will launch a new store prototype this fall that offers a separate entrance to the grocery pickup section, as well as self-checkout lanes, designated parking spaces for online order pickups and a mobile POS system for employees.
Read on to learn what makes the e-Grocery segment tick, why retailers such as Meijer are reaping the benefits of home delivery and click-and-collect, and how retailers can compete with effective omnichannel strategies.
Meijer Reacts To Customer Demands, Expands To Home Delivery
In an effort to deliver convenience and provide customers with multiple ways to shop its offerings, Michigan-based supercenter chain Meijer partnered with Shipt to expand its services to include home delivery. The company launched the service in the Detroit area in September 2016, and was surprised at the immediate customer demand.
In the Detroit area alone, Meijer has already delivered more than 65,000 orders with Shipt. Art Sebastian, Meijer’s Director of Digital Shopping, told Retail TouchPoints that Shipt had to add an additional 100 to 200 shoppers to meet the demand. Shipt partners with local grocery stores for grocery delivery services, using vetted personal shoppers to shop the online orders and bring them to customers’ homes.
“When you think about the convenience of ordering on a mobile device and having the ability to shop in a digital way at any time, anywhere, and order fresh groceries and have them delivered same day in as little as one hour, the real metric is our customers are happy, said Sebastian in an interview with Retail TouchPoints. “We’re saving them time and that is a very important thing to us.”
Meijer will continue to expand home delivery across its six-state footprint, starting with Grand Rapids, Mich., Fort Wayne, Ind. and Indianapolis, and will follow with other major markets in Michigan, Illinois, Indiana, Ohio, Kentucky and Wisconsin.
Home delivery was a natural move for the retailer, as it already offered a curbside pickup program. “We received a lot of positive customer feedback around time savings, convenience and the ability to pick up groceries without stepping out of the car,” said Sebastian. “That is a strong level of convenience, so adding home delivery simply builds on that.”
‘Click-And-Collect’ Is Not Dead
While grocery delivery services are gaining traction, ‘click-and-collect’ is still an important offering in the grocery segment. Even Amazon, the king of delivery, is moving into click-and-collect with two AmazonFresh Pickup locations in Seattle.
Fast Company reported that the drive-up grocery store concept will feature a designated parking area where the items will be delivered to customers’ cars.
This move from Amazon signals the retailer’s efforts to provide customers with a complete omnichannel experience. But competitors beware: this means Amazon is making an effort to have a leg up on brands that have differentiated themselves solely with the fact that they have a brick-and-mortar presence.
“Amazon’s continued expansion into brick-and-mortar reinforces the need for traditional grocery retailers to offer a full omnichannel experience that allows customers to shop any way they want,” said Alexis Clarfield-Henry, Director of Marketing at Unata in a statement. “Amazon has cracked the code on a convenient shopping experience and they’re quickly extending this into grocery. The result will be a redefined set of consumer expectations around how quickly and easily they can get their groceries.”
Challenge: Promoting Products On Small Screens
Both click-and-collect and grocery delivery bring up another issue for retailers and even CPG brands. Since 40% of e-Grocery purchases are made on mobile phones with limited screen sizes, how can brands make sure their products get a prominent position?
Brands already pay for prime shelf space in physical stores. Similar deals can be struck for mobile shopping, according to John Roswech, EVP of Brand Solutions at Criteo, a performance marketing technology company. The company offers sponsored listings to enable brands to create and increase their digital shelf space.
“If you think about the physical store, there’s a reason why items are placed [in specific locations],” said Roswech. “From a mobile perspective, it’s a lot harder to do because of the screen size. So it’s really about making sure they are cross-selling for impulse purchasing, because you want to make sure your products are in front of the shopper when they’re in market [for the product].”
E-Grocery And Brick-And-Mortar Should Coexist
Expanding into e-Grocery doesn’t mean neglecting the brick-and-mortar store, said Portalatin. Enhancing the shopping experience in stores needs to be top of mind, and experiential retail could be the answer. Who’s to say that you can’t have convenience in stores either?
“Brick-and-mortar retailers that want to survive are moving to an experiential type of occasion, and we’re starting to see it in the grocery world too — with prepared foods, cooking demonstrations and sampling in stores,” said Portalatin. “It’s not an either/or for retailers, it’s absolutely both.”
E-Grocery is scaling at a rapid pace, and retailers that don’t offer grocery delivery or curbside pickup can potentially lose customers to competitors who do.
“E-Grocery is here to stay, and the majority of consumers (64%) are willing to switch to grocers that offer a better digital experience,” said Unata’s Clarfield-Henry. “First-mover advantage would allow retailers to tap into the huge number of customers looking for this, and specifically those who would switch for it.”