Monday, March 30, 2015

Are Coupons Being Cut Out of the Online Grocery Business

Consumer packages goods (CPG)) manufacturers currently distribute more than $300 billion in paper coupons with more than $3 billion of those coupons being redeemed in physical stores. Hardly any of these coupons are redeemed online, even though consumer shopping behavior continues to shift to digital channels. This is especially true for online and mobile grocery commerce. While these platforms are gaining in popularity among consumers looking for convenience and assortment, coupon and promotion efforts have been slow to adapt to this space. As a result, many retailers and manufacturers are overlooking an opportunity to market to this growing category.

The two key limitations facing food retailers and manufacturers when it comes to promotions and coupons for online ordering are technology and process. Currently, the coupons offered by online grocers are limited to two primary formats (if coupons are accepted at all):

  • Retailer-issued coupons, such as a Fresh Direct coupon, “clipped” for a specific deal
  • Paper-based manufacturer coupons exchanged manually with the driver at the point of delivery.

As you can imagine, both formats pose a number of challenges and inefficiencies. To successfully transition coupon and promotions efforts to the online space, food retailers and manufacturers will have to embrace new ways of issuing and redeeming manufacturer’s coupons online.

For example, a manufacturer could issue a traditional coupon and convert it using software into one million unique single-use coupon codes. These codes could be distributed by marketers via email or other digital communication channels and consumers could redeem the unique code at any participating online grocery retailer. On the back end, the retailer would receive reimbursement from the manufacturer for the coupon value, and the manufacturer would receive confirmation that the unique redemption took place.

For consumers, this familiar coupon experience would be similar to coupon codes offered by other online retailers. For food retailers and manufacturers, the use of online coupon codes could reduce the timeframe for the coupon and promotions clearing process, allow for increased consumer targeting and provide additional marketing data on the efficacy of these programs.

As online and mobile grocery commerce continues to grow, retailers and CPG manufacturers will have trouble meeting consumer expectations unless they are willing to embrace new technologies and processes for promotions and coupons. These new technologies will not only allow them to meet their customer’s needs in these growing formats, but could have implications for improved targeting and results reporting as well.


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