Friday, April 17, 2015

Facing the Challenges and Opportunities of Online Grocery

It has been estimated that in the U.S. 10% of grocery sales will be online by 2025. The reality is online is a growing marketplace. 
But there are challenges and opportunities. Both are inherently tied to the online program’s design and its ability to meet both what shoppers want and what retailers need to make it an effective part of their growth and loyalty strategy.  

A fundamental challenge is the retailer’s operational structure: how do you revamp management and backend systems that span a vast array of business-critical logistics; do you have the same price online and in-store?; how do you manage inventory and the supply chain to minimize out of stocks; how do you manage images and product information; how do you manage the picking/delivery workforce; where do you do the picking (in current stores during slow hours; at “dark” stores or at warehouses?); how do you manage the delivery fleet and plan delivery routes.  These are critical operational decisions that must be well thought through and effectively managed.

This of course requires considerable IT investment. Notwithstanding the user interface, operations must also take into account the ability to fulfill the orders accurately and based on the desired retailer positioning, which may be anchored in a service that is grounded in flexibility (“We deliver within a window that works for you”) or based on speed (“We get it there the fastest.”).  For example, a new service in downtown Toronto, Canada (which has yet to partner with any one retailer) is now piloting a service that promises to have groceries to your doorstep in 3 hours.  

Beyond the IT, supply chain, marketing and CRM integration on the back end, you have to put considerable time and effort into the user experience. Shoppers want an easy to use service that can be accessed by a mobile device, so they can shop on the go, as well as tablet or desktop.  So out of the gate it’s critical you make sure you have platforms for all devices: navigation is also key.  Are specials easily featured?  This is an important consideration for manufacturers when it comes to the allocation of trade dollars.  Will your platform greet you by name?  Will it remember items you have ordered in the past and might be inclined to order again? Designing the service must take into account all facets of the transaction so you can present an environment where the customer feels inclined to shop and add to their basket size – largely driven by experience on what is often a 10 x 7 inch screen or smaller.

Once you’ve taken care of the user experience from end to end, you then need to consider what you need to track on the backend so you can assess the sites’ effectiveness in capturing basket size and building loyalty. What are customers browsing? What made it into the basket vs. what did not?  Is the shopper inclined to come back and how would they rank their experience? Online gives a unique data set in terms of what a consumer considered, whether they clicked past an item or clicked on. You can also get a sense of how you did, and offer perks for the data.

As grocery spend migrates online, there will also be a big uptick in the unstructured social data. Another challenge is having the right filters to be able to discern what social data is of value and what is not. You must also plan for opportunities around engagement such as sharing recipes and products in their circles. Online offers tremendous opportunity for two-way dialogue and learning for an industry that’s historically been driven by push marketing and reliant on spend data, focus groups, and surveys. The challenge will be to resource accordingly so that you are nimble enough to be in a position to capitalize on a highly engaged audience that clearly values time and convenience.

Last but not least, let’s not forget the delivery experience. Were items grouped in a seemingly logical fashion? For example, meat 
with meat, household with household and bread with bread, and eggs in a stand-alone package, seemingly packed with due care. Consumers will have an expectation that you are paying attention to this level of detail and that they can count on you to not only get them what they need with the push of a button, but that it will land at their door packed as though they packed it themselves. The challenge on that front is on the ability to knit online with delivery.

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