Printer Friendly

Turn Threat into Opportunity.

Byline: Michal Christine Escobar

Retailers that understand which consumers are shopping online and why they are doing so will be better prepared to adapt to this new way of shopping.

Forrester Research Inc., a global research and advisory firm based in Cambridge, Mass., predicts that direct e-commerce sales will top $370 billion by 2017 in the United States. Meanwhile, total retail sales in the United States will reach $3.6 trillion by 2017, with 60 percent of those sales either transacted directly on PCs, phones or tablets, or influenced by research on those devices.

While clothing, electronic and sporting equipment retailers -- among others -- have been dealing with the online shopping phenomenon for decades, grocery retailers have remained relatively immune to threats here. However, recent developments have shown that online grocery shopping is making its way into the mainstream.

Understanding what type of consumer is driving the online grocery shopping trend and what he or she is buying will help retailers with primarily brick-and-mortar operations to successfully adjust for the future.

Online shoppers seek convenience

As retailers look to understand who is shopping online and why they're doing it, they face two distinctly different ways of looking at the consumer. The most common view defines this consumer as one who places a premium on convenience, is technologically savvy and is less price-sensitive than the average shopper. This consumer has a busy work schedule and an active family, says Steve Cole, CMO for Lisle, Ill.-based Gladson, so the ability to easily purchase groceries online when she has a free moment and then have someone else pick those products off the shelf is a huge draw.

"For brick-and-mortar retailers that also have online operations, their online shoppers tend to be among their best shoppers in-store as well," says Jim Hertel, managing partner with the Barrington, Ill.-based Willard Bishop retail consultancy.

David Wright, senior manager, marketing for the Hartman Group Inc., Bellevue, Wash., agrees. A Feb. 2013 study by the Hartman Group titled "The Online Grocery Shopper" found that online grocery shopping currently appears to be accretive, and not a detriment, to in-store shopping. Consumers who shop online for groceries spend more and shop more frequently than those who do not use the online channel, he says.

The stock-up trip goes online

But almost all consumers are starved for time, says Nicholas Hodson, a partner with Booz & Co., San Francisco. So instead of divvying up shoppers based on their age, tax bracket or family life situation, it could be much more beneficial to divvy them up based on why they're shopping. Citing a December 2012 article from the Harvard Business Review titled "Surviving Disruption," Hodson states that shoppers tend to fall into two trip categories: stock-up trips and fill-in trips. Stock-up trips typically involve non-perishable groceries, while fill-in trips typically involve perishables.

Currently, 40 percent of the total grocery market consists of non-perishable items bought during stock-up trips, Hodson says, but this type of shopping also lends itself incredibly well to online shopping. Consumers are already used to preplanning and making a list for this type of shopping trip, and the need for a precise delivery window is greatly reduced since consumers don't need the items right away and the items are non-perishable. In fact, Booz & Co. estimates that 10 percent of all grocery sales could be online by 2025. And of those online sales, 80 percent will come from this non-perishable stock-up shopping occasion, Hodson adds.

Richard George, Ph.D., professor emeritus of food marketing for Saint Joseph's University, Philadelphia, also believes that households seeking convenient replenishment options are likely to pursue online grocery shopping. And some companies are already picking up on this.

For example, Amazon offers its "Subscribe and Save" program, which allows consumers to set a recurring schedule that will automatically order certain low-involvement products such as toilet paper or laundry detergent, removing the burden of having to remember to buy such grocery staples, Cole says.

Amazon is also rumored to be taking this concept one step further with a program called Amazon Pantry, Hodson says. The consumer is given a virtual box and a list of non-perishable items that can be placed in it. After "placing" the items he or she wants in the box, Amazon ships the filled box to the consumer either for free or for a small fee. If online shopping moves in this direction, then the retailers likely to suffer the most are supercenters that cater to and are supported by large non-perishable stock-up trips, he adds.

Alexander Rink, CEO of 360pi, Ottawa, Ontario, believes such programs could cause more than just "suffering" for supercenters.

"Online grocery means the death of the hypermarket store format, and club stores will likely be among the first to be adversely impacted," he says.

New conveniences for consumers

But how is online grocery retailing currently affecting retailers? George compares it to a paper cut.

"No one dies from a paper cut, but if you get enough of them, you begin to feel the pain," he says.

And although its effect is "barely noticeable," online grocery retailing is beginning to chip away at retailer profits, Hodson says.

"The problem is, it's very hard to measure just how much it's chipping away, making it rather insidious because then the [retailer] won't really notice until it "wakes up' one day and realizes online shopping has taken 15 percent of the business away," he says.

Doorstep delivery and in-store pickup services are just one way some traditional brick-and-mortar retailers seem to be responding to the trend of online grocery shopping, Cole says. By adding this extra convenience for consumers, retailers are able to reinforce their relationships with their base of loyal customers.

But even without a delivery option, retailers can use online statistics, information and promotions to retain and build customer loyalty, states Suley Muratoglu, vice president of marketing and product development for Vernon Hills, Ill.-based Tetra Pak Inc. Plus, consumers can find additional product information -- such as nutritional information and recipes -- that might not fit on labels, creating a space to provide sustainability, traceability and environmental impact information.

Additionally, a retailer could direct in-store shoppers to its website for out-of-stock products and hard-to-find items not carried in its stores. Hard-to-find items, in particular, present a unique and "considerable opportunity" for retailers and store brands, Wright says. The Hartman Group found that grocery shoppers are already more likely to be shopping for such items online. Therefore, retailers could take advantage of this by offering hard-to-find items online under the store brand. This could not only create repeat purchases, but also draw in new consumers by fostering exploration, surprise and delight.

Rethink online versus in-store

As with most changes, retailers will need to find a way to adjust to this online shopping phenomenon. To do so, they should rethink the role of online shopping versus in-store shopping and reimagine how their strategic interplay might capture greater engagement and purchases, Wright says. For example: Instead of creating online and in-store experiences that mirror each other, why not create experiences that complement each other and guide shoppers to patronize the retailer both online and in-store?

Additionally, retailers might want to consider shifting to smaller-format stores with a greater focus on perishables and the in-store experience, which customers can't get at home, Rink says. Make a visit to the grocery store entertaining with cooking classes or chef competitions.

This theatrical-like quality to shopping could become very enticing to consumers, George says.

"The one remaining advantage of brick-and-mortar retailers over online is the sensory experience," he says. "This could be a significant point of difference going forward. If brick-and-mortar retailers could offer the proximity and convenience of Amazon, in conjunction with a dynamic store visit, the pendulum could definitely swing back in favor of brick-and-mortar retailers."

But there is definitely another advantage retailers have when it comes to online shopping, Jim Wisner, president of Wisner Marketing Group, Libertyville, Ill., says. And it has to do with information flow.

"For generations, communication to the consumer has been controlled by national brands through mainstream media outlets such as TV, radio and newspaper," he says. "But those outlets are no longer as effective as they once were, and consumers can't and won't keep up with hundreds of different national brands on social media each week, but they can keep up with their favorite retailer. So now, the retailer can decide who is going to be the star of the show in their social media posts and on their websites: store brand or national brand."

Cole singles out Target Corp., Minneapolis, as a noteworthy example of a retailer that is showcasing its store brands online. It's Up & Up brand has been positioned as a national brand that "happens to be available only at Target stores." Target consistently presents its private labels as being on par with national brands on its website and mobile apps, he says.

Consumers who shop online for groceries spend more and shop more frequently than those who do not use the online channel.

Booz & Co. estimates that 10 percent of all grocery sales could be online by 2025.

Hard-to-find items, in particular, present a unique and "considerable opportunity" for retailers and store brands.
COPYRIGHT 2014 Stagnito Media
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2014 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Author:Escobar, Michal Christine
Publication:Progressive Grocer's Store Brands
Date:Apr 1, 2014
Previous Article:Spotlight on Laundry and Household Cleaning Supplies.
Next Article:Speak to Your Shoppers.

Terms of use | Privacy policy | Copyright © 2019 Farlex, Inc. | Feedback | For webmasters