Industry Voices [1]
Online grocery: Strategies to win within and beyond the store

Online grocery: Strategies to win within and beyond the store

Sumit Chandra

A battle is brewing in the online grocery space between traditional retailers and online only retailers. Both are trying to expand their capabilities to offer a broader total solution to the customer. Those who win will innovate to cater to emerging customer needs and thus capture a disproportional share of wallet.

While books, electronics, and apparel have seen a large share of sales move online, adoption continues to be relatively slow in food, with fresh foods particularly lagging in the shift to online. A few key factors are likely to prevent grocery shoppers from transitioning online as quickly and dramatically. In a highly competitive and price sensitive market, paying delivery fees that amount to five percent or more of total basket price will be unpalatable to many customer segments. In addition, many shoppers will still place a high value on the in-store experience, and brick and mortar retailers will continue to focus on improving the shopping experience.

Finally, some trip types, including immediate need and fill-in, will not be as susceptible to the delayed gratification of online offerings. Brick and mortar food retailers who develop innovative delivery and/or pick-up models be well positioned to retain the majority of trips and share of wallet.

Harnessing the opportunity

Randy Burt

Food retailers must first determine categories and geographies to offer online based on customer, margin, and volume profiles. Home delivery does not have to be implemented across all geographic markets. Instead, food retailers need to identify higher population density markets, determine which customer segments within these markets represent the best opportunity, and tailor their offerings accordingly.

The right combination of home delivery and click-and-collect capabilities, paired with a differentiated in-store experience, will position traditional retailers for success. Home delivery offerings will likely be limited to select markets while the convenience represented by click and collect capabilities will have a much broader relevance. Offering convenient delivery and pick-up alternatives that integrate seamlessly with the in-store experience and customers’ lifestyles will help to enable this strategy.

Online only retailers, on the other hand, may need to develop “virtual stores” that mimic the in-store experience where possible (e.g., easy browsing of assortment). Additionally, a physical presence to offer at least click-and-collect options will be required to compete head-to-head with traditional food retailers for those customer segments, geographies, categories, and trip types that are unlikely to transition to home delivery.

Who is poised to win?

Traditional food retailers are well positioned to expand into online grocery if they can leverage existing assets, including physical distribution and store networks, strong shopper and supplier relationships, and deep grocery experience.

Avani Desai

Existing pure play online retailers have an edge with regards to greater organizational flexibility and speed to market. Technological and logistics capabilities are often also very robust; however, new methods to improve pricing and reach are necessary from an operational perspective. Furthermore, some form of physical asset base can be used to attract more trip missions and drive a better customer experience. These investments could be costly and take time and experimentation to implement successfully.


CONNECT WITH SN ON TWITTER [3]

Follow @SN_News [3] for updates throughout the day.


Clearly ecommerce will be important to long-term success in the North American food retail market. However, with adoption likely to be somewhat contained over the next 5-10 years, physical capabilities will remain highly relevant. It will be interesting to watch as traditional retailers further build-out omni-channel capabilities, while online retailers evolve their offerings to become more store-like. The players who are able to take this approach and inject innovation that resonates with the customer will be positioned to win the Online Grocery battle.

Sumit Chandra is a partner with A.T. Kearney and is based in Atlanta. He can be reached at [email protected] Randy Burt is a principal with A.T. Kearney and is based in Chicago. He can be reached at [email protected] Avani Desai is a consultant with A.T. Kearney and is based in New York.


Suggested Categories More from Supermarketnews
[14]