An Open Letter to Grocery Retailers: The Online Grocery Shift Can Make or Break Your Business
Tim Madigan, Vice President eCommerce
Dear grocery retailers (large, small, regional, local and everything in between),
What if I told you 10 percent of your store shelf space is going away tomorrow? What would you do? What if I added that in three years, another 10 percent of your shelf space will disappear? How would that impact your business? How would you have to re-think your assortment? Would you still have a viable business model if 20 percent of your business no longer came in your doors?
That is the magnitude of the impact that is expected to be brought about by online grocery.
Over the past two years, we’ve seen an explosion in the number of stores offering grocery curbside pickup (also affectionately known as click and collect) and/or grocery delivery. What’s been astounding is the rapid adoption of this service by shoppers. In that short time, there are stores already doing 10 percent of their volume this way! It’s not unreasonable to expect some markets and stores will be doing 20 percent of their business through online grocery by the end of 2020. This is especially true in areas where shoppers are high-income, educated and short on time.
Yeah, but how incremental is it?
My favorite response to this question is: “just because shoppers can now buy chicken nuggets online, it doesn’t mean they’re going to buy a lot more chicken nuggets.” Net online grocery, at a macro level, is not going to make a huge impact on overall grocery categories. However, it will make a difference for certain retailers and brands.
Retailers that move first—and deliver a great user experience—are going to win new shoppers. In fact, retailers offering online grocery report that as much as 20 percent of their business is coming from shoppers who are new to their stores.
Similarly, brands focused on winning the digital shelf early will get both the first sale and earn a place on the shoppers’ “favorites” lists. This creates a new opening for brands to reset the category dynamics. Brands that didn’t necessarily inspire in-store shopper loyalty initially now have an opportunity to gain a critical future advantage by winning that first online purchase with a new online shopper and locking in future purchases.
Published November 26, 2018.
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