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Flexibility, personalization drive online grocery growth

5 min read

Restaurant and Foodservice

(Photo: Flickr user Dan4th Nicholas)

Consumers who think nothing of ordering their books, clothes and shoes online still often balk when it comes to buying their groceries anywhere but the store. The costs and the logistics involved in delivering perishable consumables has kept the food and beverage sector lagging other e-commerce efforts, but flexibility, personalization and omnichannel strategies are helping grocers catch up.

Only about 1% of all U.S. consumers do their grocery shopping online, but online grocery sales are forecast to grow at a 21.1% compound annual growth rate between 2013 and 2018, to nearly $18 billion, while traditional grocery sales are expected to grow only 3.1% annually during the same period, according to Business Insider Intelligence.

In the U.S., grocery e-commerce is working best in high-density urban areas where it’s more cost-effective than in sprawling suburbs or sparsely populated rural areas, said Rahul Bindish, vice president of sales for Grid Dynamics.

“A lot of it is trial and error,” he said.

One thing grocers are discovering is that, unlike traditional e-commerce, there need to be more flexible options when it comes to food sales, including click-and-collect programs.

“Omnichannel initiatives, where you can actually have a consistent experience across channels, are changing the game for grocers in the U.S.,” he said.

In-store pickup can eliminate the need to wait around for deliveries during a specific pickup window or the risk of having fresh food sitting outside the front door waiting for the customer to get home, he said.

That kind of flexibility is key in today’s competitive grocery landscape, said Unata CEO Chris Bryson.

“The modern consumer expects that today they can shop in the store, tomorrow they can shop online, then they can order online and pick up in the store. There’s a huge move in the direction of flexibility. The shopping experience of the future is allowing shoppers to shop any way they want,” Bryson said.

Bindish agrees.

“Grocers are saying ‘How can I extend the shopping experience beyond my store, to online and mobile, so my customers have a consistent experience across these channels,” Bindish said.

Another difference when it comes to groceries is that consumers buy many of the same items on a regular basis, a challenge that’s also an opportunity for retailers looking to personalize the experience based on the customer’s shopping history, Bryson said.

“I think the retailers that are seeing the most success in the category are making sure the experience is rooted in personalization. They’re leveraging the data to make the checkout process easier, and more and more they’re putting a premium on the user experience and high-quality design,” he said.

Design and organization is especially key in food retail, where stores typically stock between 50,000 and 100,000 different items, Bryson said, and it takes on even more significance as consumers do more and more of their shopping on smaller screens.

“The modern consumer is so time-starved and has such high expectations for mobile, they expect it to be fluid and easy to use,” he said.

Mobile also offers more opportunities for personalization, including creating digital shopping lists that consumers can take to the store, and using those lists to target coupons and promotions, said Grid Dynamics’ Bindish. “For example, if you know I buy 2% organic milk every week and you have a special on that, that should be on top of the list,” he said.

Retailers can also recommend new products based on the purchases of other shoppers with similar lists, he said.

The demand for an omnichannel experience gives brick-and-mortar supermarket chains an advantage over pure-play online retailers and marketplaces breaking into the grocery business.

“If you see some of the new entrants into this marketplace, like Google and Amazon, they’ve not expanded significantly beyond the pilot areas they’ve selected,” Bindish said. “Instacart and Amazon Fresh, they do fresh produce delivery. For them, the model works in urban areas. Markets like San Francisco can be very successful, there’s a high concentration of people who order small basket sizes and get one or two deliveries a week.”

Amazon has been a leader in developing the technology that’s fueling growth in grocery e-commerce, and newer players like Instacart take a new tack when it comes to flexibilty — with an Uber-like business model, Instacart sends shoppers out to participating local grocery stores, filling and delivering orders within an hour in some markets.

It’s too soon to know how big Instacart will grow, Bryson said.

“It’s early days so it’s hard for us to say,” he said. “We haven’t seen any public results. It offers more choice to the consumer. It’s funny how some retailers will have an Instacart experience and also support their own e-commerce experience, or a click-and-collect program. There’s more options, more choice for the consumer.”


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