Grocery’s last stand
Retailers who are blazing the way forward for grocery-as-service are winning the e-commerce battle.
The grocery game is not for the faint of heart. It’s a crowded, complicated category, with players ranging from multi-national supermarket kings to ever-present local mom-and-pop markets. Operational nightmares include supplier management and famously miniscule margins. But it’s grocery’s unique complexities that have protected it from e-commerce.
Until now.
Digital solutions to these intricacies are challenging the historic grocery paradigm. To stay relevant, grocers are stepping increasingly out of their traditional retail segment and playing squarely in the mobile space, adapting to the shifting demands from shoppers who want on-the-go options that don’t require them to visit a physical location.
Welcome to groceries as a service — and grocers as service providers.
Disruption of the grocery space has been arguably slower than other industries. While fashion has been upended by segments as varied as daily deal purveyors and the luxury-minded Gilt Groupes of the world, grocers have seen limited technology applied to their age-old approach of competing on quality, price and customer service.
Outside of some early adopters, grocers have been a bastion of brick-and-mortar retail and the torchbearers for the in-store experience. Investments have been made in physical store locations, traditional advertising and expansion plans.
But change has been brewing, and exciting early-adopter consumers for years, making future growth of online grocery services certain. In fact, online grocery shopping is expected to grow at an average rate of 12.9% per year until 2018.
The catalyst for this disruption has been the intersection of two critical forces: consumers’ increasingly busy lives and mobile technology’s enabling of personalization.
In a world where being busy is a status symbol — or what the Harvard Business Review calls “The More Bubble” — taking time out to get groceries is a luxury for both full-time workers and full-time moms. For retailers, this means the new consumer expectation is short shopping trips that are as easy and simple as possible. It’s not surprising that, according to Kantar Retail, 51% of casual online grocery shoppers prefer shopping online because it is more convenient and 54% of dedicated online grocery shoppers shop online to save time.
At the same time, marketers’ ability to gather deep insights about their consumers has helped drive a rise in personalization opportunities — which mobile escalates. Rebecca Kane, VP of Customer Specific Marketing and Digital for international grocery retailer Ahold, recently spoke about the importance of mobile in the company’s initiatives:
“In the past, we were very focused on product-based promotions, and I think mobile has really started to change loyalty programs in that it’s allowing us to provide services and better experiences — and ones that are about more than just products.”
By delivering targeted content and loyalty programs straight to the consumer, mobile has given retailers the ability to sell more of their products by engaging shoppers with content that goes beyond products. Essentially, grocery shopping is no longer just about groceries. In fact, as noted earlier by Ad Age, the ideal grocery shopping experience of the future may not be one we recognize as “grocery shopping” at all.
Several retailers — both pure-play and brick-and-mortar — that have been blazing the way forward for groceries as a service include:
Early disruptor: Fresh Direct
Founded in 2002, FreshDirect was one of the first movers in the online grocery shopping and delivery space. Whether online or through the FreshDirect mobile app, members can create and pay for their basket, then have it delivered by refrigerated truck to their home or office or pick it up themselves at a warehouse. The service has expanded from New York to areas of Pennsylvania, New Jersey, Connecticut and Delaware. FreshDirect created a disruptive model that has spawned many similar companies mostly serving hyper-local neighborhoods.
In-store to in-hand: Safeway
Safeway has long recognized the importance of digital tools for their consumers, and its e-commerce presence has raised the bar for the industry. Whether on Safeway.com or via mobile shopping apps, Safeway lets shoppers search for, order and have their groceries delivered right to their door. Safeway also architected the shopping process to be as natural as possible — allowing shoppers to search by item, browse by aisle, or re-buy based on purchase history — to capture consumers however they want to shop.
Mobile game-changer: Instacart
Founded in July 2012, Instacart is a service that lets people shop and check out on their desktop or mobile devices and have their baskets filled by any combination of local stores and then delivered to their door in as little as one hour. Essentially, Instacart is putting the power for shoppers to accomplish their stock-up, fill-in or impulse trips in the palm of their hands. Having just received $44 million in Series B funding, Instacart has captured both users’ and investors’ attention.
What this means for you
Through our work with several clients across grocers and suppliers, Rockfish has developed a simple framework for online grocery success. We work with the most successful companies in this early space using the following principles:
The way forward
What should grocery retailers and suppliers consider today to determine how to incorporate mobile and online shopping into their plans? They should ask themselves these key questions:
1. Who are your consumers and what do they need?
Without knowing everything about your consumers, you can never know digital tools and features they most desire. This starts with getting past demographics and looking at a holistic picture of who they are. Kane, in speaking about Ahold’s digital strategy, said the tools and value they create are defined by what their customers need, not by Ahold’s business goals.
By understanding a shopper’s truest need states — from convenience, to assortment, to money saving — retailers can position themselves as an ally and create services and experiences tailored to meet them.
2. What are your capabilities?
Once the shoppers’ need states have been identified, retailers need to prioritize what to create based on what the organization can sustain. For example, Harris Teeter realized early on that their shoppers were likely to be attracted to online shopping because of the time-savings, but also understood that home delivery was a challenge it was not prepared to conquer. Instead, Harris Teeter created the Express Lane program that lets shoppers create, order and pay for a basket online and then pick it up at a local store without ever having to get out of their cars.
Instead of trying to do something that would be prohibitively difficult to execute well, Harris Teeter focused on the service that was fully ownable while still serving the needs of its shoppers.
3. What is your right to win?
Having a defined shopper need to solve and an on-brand potential solution, the last step is to understa