Online grocery seen gaining traction in 2017

Looking back to this year’s National Retail Federation’s Big Show in New York City and the key learnings from our successful grocery symposium.

This year’s National Retail Federation’s Big Show in New York City took place January 15-17, and we were happy to be part of it. Before the show, we hosted a first-of-a-kind international grocery symposium, gathering together a roomful of some of the most distinguished retail experts and industry leaders. The symposium included presentations from retail guru Bill Bishop; SVP of the Finnish multi-banner giant S Group Ilkka Alarotu; EKN research analyst Gaurav Pant; retail expert & chief merchant Robin Michel, and IGA’s VP of brand development Jim Walz.

WE PICKED 5 KEY OBSERVATIONS FROM SUPERMARKET NEWS’ ARTICLE OF THE EVENT BY MARK HAMSTRA

1. Online grocery to boom in 2017
Both consumers and food retailers are becoming more comfortable with online grocery ordering, which could be poised for significant gains in 2017. “The rate of acceleration of change is increasing drastically,” said Bill Bishop, chief architect of Brick Meets Click, who led the session. “We sense 2017 is going to be a year of major change.”

2. Main drivers for growth
The factors driving the growth include the increasing availability of the offering and the diversity of features available as new players enter the market with a range of alternatives for consumers, such as click-and-collect delivery options and a variety of product assortments. Online grocery might also be getting more affordable for consumers, said Bishop, as increasing competition helps to moderate prices, and as consumers themselves learn how to better use these services to maximize their own efficiency as grocery buyers.

3. Choosing the right partner
Many retailers, particularly independent and mid-sized operators, continue to resist entering the online grocery fray, however, as they fret about the costs, the potential return on their investment, and impact it might have on their store operations. Jim Walz, VP of brand development at IGA, said many independents are concerned about how to integrate a new online grocery offering with their existing POS technology.

“The POS integration is always the big elephant in the room,” he said. “That triggers everything in the business.” Walz said he is confident that Digital Foodie, which offers a cloud-based technology, will be able to integrate with IGA retailers’ POS systems as they roll out IGA Groceries Online, or “IGA GO.” While some independents have partnered with Instacart or other third-party delivery services to launch online grocery services, Walz said he is encouraging members to adopt solutions that allow them to preserve their brand identity and maintain control of the process. “It’s our view that you are taking the customer experience and handing it off to someone else” when retailers partner with third-party delivery services, he said.

4. Driving increased profitability with online
Robin Michel, a veteran retail executive with HEB, Ahold and other operators, described a model in which operators could theoretically drive increased profitability with online grocery, in part by selling a higher ratio of high-profit products. Online grocery shoppers tend to buy a higher percentage of produce, deli and meat items, she said, which can yield higher gross margins than other categories.

Online shopping baskets ordered from food retailers tend to have a lower percentage of general merchandise, health and beauty care and pharmacy items, she explained. In addition, online baskets tend to be much larger overall — Michel cited Peapod’s recent disclosure that online orders average $175, which Michel compared with typical industrywide in-store baskets of $35.

5. Leveraging data for customer-centricity
One of the most important aspects of online grocery, the panelists said, will be leveraging customer data. Ilkka Alarotu, SVP of retail business for S-Group — which operates multiple retail formats across Finland and also owns its own bank — said the company’s goal is to have such a detailed picture of its customers that a shopping list is automatically created the first time a customer logs into the online ordering system or mobile app. Each shopper has an individualized view of the store based on their purchase history every time they log into the website or mobile app.

S Group’s on-demand grocery solution is enabled by Digital Foodie’s platform, including a personalized store front, one-click-to-cart recipes, and product recommendations based on user preferences and settings.

“It is not about segments any more — it is about individualized services,” he said, noting that the company eventually hopes to expand its offering to include more customized content, such as recipes and nutritional information tailored to individual shoppers. The goal is to make the experience so valuable to the consumer that they would see it as a cost to shop at a different retailer.

Also Bill Bishop stated that the industry seems to be moving toward a higher degree of customization and customer-centricity, which could be a key to the success of online grocery retailing.

Digital Foodie’s platform provides retailers of all shapes and sizes the chance to offer their customers fully customizable and personalized experiences, while including all other aspects of modern online operations: online payments; branded storefront and mobile apps; efficient fulfilment tools as well as optimized in-store picking solution for click & collect and home deliveries with minimal integration.

Online grocery seen gaining traction in 2017

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