In the U.S. grocery retail marketplace, fundamental assumptions are made about retailer segmentation.
For example, value retailers in grocery, dollar and mass typically win with lower-to-middle-income, middle-aged shoppers, while other retailers skew slightly younger and higher income. Right? These fundamental assumptions drive everything from product assortment to price and promotion structure to marketing strategies.
But what if the assumptions we make about shoppers who spend their grocery dollars at specific retailers are wrong?
Grocery shopping is undergoing a large-scale shift driven by the growth of online grocery sales, which is projected by the Food Marketing Institute to grow to $100 billion by 2022. It’s no secret the winners, so far, have been Walmart and Amazon, which together owned an estimated two-thirds of consumers’ “most recent online grocery purchases” as of the end of 2018, according to The Retail Feedback Group.
In response, grocery product manufacturers have been readying themselves for the growing use of click-and-collect and click-and-deliver retail options. They’re creating best-in-class content, investing in search optimization and preparing their supply chain through optimal assortment and shipping strategies. However, the one piece of the click-and-collect conversation that gets little attention is this: On which retail websites are new online grocery shoppers choosing to shop?
The Tale of the Online Shopper
Walmart, for example, has been open about its projections for online sales to account for a significant portion of its total growth. Financial services firm Cowen estimates that 40% to 60% of its buy-online, pick-up-curbside sales will be incremental, made by customers new to Walmart, many of whom will be next-generation shoppers.
In short, in many cases, incremental sales bought off the digital shelf will be made by shoppers who have rarely stepped inside the retailer’s brick-and-mortar stores. The shift to click-and-collect and click-and-deliver is fundamentally changing grocery retailers’ shopper profiles.
To validate the extent that online shoppers may differ from in-store shoppers, Atlas, an Advantage Digital Technology company, took to a look at sales and assortment data at a traditional value retailer. Leveraging our proprietary basket analysis tools, we looked at sales of selected clients’ products through click-and-collect versus in-store ring. In one case, we found online sales of a mainstream brand’s products labeled “natural” indexed two times higher than its in-store sales of those products. Another client’s coffee pod sales were 1.5 times higher as a share of their total sales, online versus in-store.
Brands and retailers are feeling the impact — good and bad — of the growth of online grocery sales. One consumer goods company came to us after experiencing considerable in-store out-of-stocks on a high-retail, single-serve item that over-indexes with health-conscious consumers. Analyzing their online versus offline sales trend data, we found nearly 20% of the item’s sales came through click-and-collect, compared to the brand average of 5%. Clearly, a new shopper had entered the picture.
As data confirms, new customers with new preferences are shopping online and it’s more critical than ever for retailers and consumer goods companies to mine — and share — data insights.
Here are three ways to reassess old assumptions about who is buying what, where.
- Rethink assortment and planogram strategies to reflect a new consumer shopping at each retail banner. Consider the need for assortments and planograms that satisfy multiple consumer bases and keep products in stock at click-and-collect store locations.
- Reassess pricing and promotion strategy. Brands and retailers should resist simply overlaying a chain’s in-store pricing and promotion strategy onto items sold online. Consider investing in search engine marketing and other online target marketing strategies rather than lower price points.
- Make investments to be the brand that is “first in the basket.” As consumers begin engaging with online shopping platforms, they’ll explore several sites before making a purchase. However, once an online platform becomes a part of their routine, shoppers are far more likely to repeat most of their basket purchase on that site, over and over again. Brands should consider investments in website content to drive SEO rankings, off-site couponing programs to drive brand awareness and traffic, and retailers’ online holiday and other themed campaigns to get noticed by online grocery novices.
Grocery shoppers are exploring digital shelves. It’s critical to understand who they are as they walk through the virtual doors.
Bethany Schwartz has 10 years of sales and digital technology experience in the consumer packaged goods industry. She now leads Canopy, Atlas’ e-commerce analytics tool.