Competing with online grocery retailers: Five ways grocers can win more sales

The growth of online grocery shopping options that are vying for shoppers attention and spending has many grocers worried about competition from online grocery providers.

The key to competing in this landscape full of new players is to have a framework for understanding what’s happening – and then understanding what you can do to win more omnichannel sales by leveraging the strengthens of your stores, your proximity to shoppers, and the growing influence of digital on in-store purchases.

Here's a look at how digital is impacting shopping trips, a realistic assessment of online grocery's share of wallet, and five things that traditional brick and mortar grocers should focus on to better meet their shoppers' needs.

What's happening

Digitally-enabled trip missions

Trip missions are the concept that the same shopper will have different reasons and therefore different types of shopping trips on any given day depending on what is going on in their lives. The arrival of online grocery shopping and digital tools has caused trip missions to evolve and expand into new territory.

Here are six that have clearly been impacted by digital.

• Shop when I want/can
• Stick to my budget
• Take my order
• Need it "just in time"
• Help me host
• Help me find better options

These trip missions are being served by new grocery eCommerce players like Boxed, Blue Apron, Jet.com and the expansion of otherplayers such as Amazon – but they can most certainly be served by more traditional grocers who are willing to adjust and refine their strategies.

Changing expectations

Shopper expectations have changed for good because of digital resources. Today shoppers– including grocery shoppers – expect to be able to shop when they want to and how they want to. To be competitive, you need to offer your customers blended physical and digital options that fit their lives and meet their needs (hence those trip missions listed above). If you don’t, they’ll go elsewhere.

NOW FOR THE GOOD NEWS: If you are grocery retailer, customers want to shop with you online!At Amazon.com and its subsidiaries,shoppers place an average of 1.5 online grocery orders per month with an average basket size of $42 ($63 per month). In contrast, supermarket customers place 2.2 online grocery orders per month at an average basket size of $128 ($281per month).

Being a trusted, familiar grocery retailer is a major advantage,and supermarkets can and should work hard to preserve this advantage in the face of increasing competition from Amazon and other online-only retailers. Acting now to develop your omnichannel sales offering is critical because competition will only become more intense as online providers look to increase their physical footprint to improve their omnichannel offering.

What retailers can to do compete better

Traditionally,brick and mortar grocery retailers have tended to think about online vs.in-store grocery shopping as an either/or proposition with separate sales streams, but the two are deeply connected. Recognizing the value of this connection – and using it to win more sales – is key to competing in today’s integrated retail environment.

Here are five ways grocers can leverage the connection between digital and physical retail.

#1 Increase share of mind by maximizing your digital connections.

Digital connections with customers impact your entire store sales, not just your online sales. When we analyzed the impact of the six primary digital connections on shoppers – email, websites, texting, social networks, mobile apps, and online shopping – we learned two important things.

• First, the more digital connections a customer had with the store, the greater their satisfaction with the store.
• Second, the more digital connections the shopper had with the store, the more likely they were to be among the store’s core primary shoppers.

One of the best things you can do to win more sales is to maximize your digital connections by pushing out relevant information – information that makes shopping easier – through these six platforms.

#2 Improve seamless shopping - it’s not just for the big guys.  

The investments that Kroger, Walmart, and Target are making in improving their mobile apps and other technologies has attracted a lot of attention, but they don’t own the market on delivering a seamless experience. Several regional and smaller operators are offering great experiences.

The ease of shopping is hugely important to today’s time-stressed grocery customers who are deciding between time with their family and going to the supermarket. The easier and quicker you make it for them to shop – both in-store and online –the better you’ll be able to compete. Anything you can do to reduce friction points for shoppers will help you win customers.

Recognize that shoppers use online or mobile tools even when they intend to shop in-store. How’s your search? Can your shoppers easily find the following online while they are in your store?

• relevant product information
• information on out of stocks
• the aisle location of items

#3 Give shoppers options for getting their online orders.

This means offering pickup and delivery for online orders. Some customers prefer delivery while others prefer pickup. Retailers won’t be serving their entire addressable market if they offer just one option. The good news is that pickup costs retailers less to provide, maintains the personal relationship with customers, and allows customers to also shop in-store when they come for a pickup.

#4 Differentiate your in-store experience.

This is all about making sure you maximize the advantage of the store and your physical proximity to shoppers.

UP YOUR LEVEL OF CUSTOMER SERVICE . Store associates are one of the supermarket’s most underutilized assets – and one of the biggest advantages that supermarkets have over digital-only retailers.Train your staff on both product knowledge and the store’s digital tools so they become store ambassadors, and incent/reward them to help shoppers understand and use those tools. It’s one of the best investments you can make in building customer loyalty and trust and maximizing the return on your investment in digital tools.

LOCAL PRODUCTS & DISCOVERY . Offering a unique assortment of local and/or niche products – and merchandising them in-store with both traditional and technology-enhanced techniques that deliver information like that found online. Use these techniques/tactics to highlight specific trip missions – like “help me find what I’m looking for” or “help me discover a new product that I might try.”

EXCEL IN PERISHABLES . The number one driver for store visits is the meat department, followed closely by the produce department. Supermarkets thrive in these areas. Use this advantage –and make sure your online orders deliver the same quality product that your store does. This is where online-only providers have traditionally struggled to meet shopper expectations.

#5 Scale for profitable growth.

There’s no getting around the fact that online grocery costs more than in-store grocery,so profitability is challenging. The key is to focus on the customer (not channel) profitability.

Your most profitable customers will likely use both – and growing your base of profitable shoppers will produce far more gains over the long term than focusing on the channel only. This means focusing on

• Acquisition
• Retention
• Basket size

This involves developing a solid understanding of your baseline operating cost and then identifying and implementing systematic improvements.

Bottom Line

We expect that online grocery will continue to grow, and this makes integrated retail even more critical for traditional brick and mortar retail operators, but one approach won’t fit all.

This is where leveraging outside perspectives and expertise can speed up the process and help evaluate better alternatives. Digital is causing the current wave of disruption in grocery. Traditional retailers can and will survive, but the landscape will look very different five years out.

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