Published on AMA.org.
The grocery landscape is undergoing major changes as the multichannel movement becomes one of the biggest game-changers in the industry. According to our recent research, which analyzed the online and in-store shopping behavior of 7 million shoppers in 14 different countries around the globe, remarkable shifts in shopping will continue to impact brands and retailers, prompting change in both digital and bricks-and-mortar environments. Long gone are the days when brands and retailers had a singular in-store marketing strategy. Brands and retailers seeking to stay ahead of the online grocery channel will need to adapt to a “blended world” where consumers will be buying their groceries using both physical and digital shopping carts. Learning how to communicate with these multichannel customers is key, and shoppers are seeking greater flexibility and convenience now more than ever.
The concept of online shopping isn’t new, yet it’s experiencing significant growth, particularly in key categories of grocery retail. People around the world are increasingly turning to the Internet for their groceries. Online sales penetration is highest in the established markets and lowest in the nascent markets, according to our research. However, across all levels of market maturity, there is rapid growth in online grocery sales, with established market growth exceeding 30%, and around 90% growth in emerging and nascent markets.
The strongest factor impacting multichannel shopping is the continuing evolution of the Internet and logistics. Despite significant growth globally, the U.S. still lags behind markets such as France, South Korea and the U.K., which are more established in online grocery shopping. With broadband speed in South Korea and Europe being significantly faster, and condensed population in such areas, it is much easier for customers to order groceries online and have them delivered to their homes relatively quickly. In the U.S., the sheer size of the country makes delivery logistics much more challenging than other, more dense locations around the globe. Physical stores in the U.S. still are important when it comes to gaining acceptance for product trial. U.S. shoppers consider 26% of household items as an important online category, but only 8% would consider buying a new product for the first time online. In comparison, 36% of consumers in China would be likely to buy a new household product online, our research shows.
Multichannel shoppers purchase a wide array of products online that can be conveniently picked up at their local retailer or delivered to their door. Bulky, shelf-stable and frozen foods are categories that retailers sell high quantities of in the online channel. These categories also tend to serve as an entry point for customers new to online shopping. Categories with the highest shares of sales—frozen meat, baby care and canned foods—have an average annual growth rate of 21% online.
In terms of demographics, multichannel shoppers tend to be younger and more affluent consumers with children. In contrast, those who choose to continue shopping in-store tend to be older and more price sensitive, preferring to shop around for the best deal. Life events such as the birth of a baby tend to be a primary driver of an increased propensity to buy online. Young couples with children already are familiar with the online experience and appreciate the convenience that online shopping offers. They appreciate the freedom of being able to place an order for diapers and detergent from a mobile app at 2 a.m. while in their pajamas soothing a baby.
To see how this trend impacts brands, dunnhumby’s research looked at online performance in relation to how well a brand’s audience matches the online shopper, as well as a brand’s understanding and response to shoppers’ path-to-purchase behavior. Brands have typically followed the standard guidelines of in-store merchandising to increase sales in the physical environment. Efforts such as eye level product placement, end of aisle support and in-store promotions obviously won’t work online. With the lack of in-store stimulus, consumers need to be marketed to in a way that follows their new path-to-purchase behavior. In response, brands are trying to redefine their online strategy with consumer’s new buying habits in mind.
Looking at these specific shopping habits, consumers select 53% of products that they have purchased previously online or in-store, acting on brand loyalty and experience. This path-to-purchase behavior is ideal for favorite brands where shoppers will continue to buy, but this makes it difficult for new brands trying to gain consideration for online purchases. Factors such as customer favorites, specific search terms, and special offers all play a role in the selection of products added to customer carts online. Based on customer behavior, promotions work very differently online vs. in-store; The end of aisle display is a staple of trade promotions in the physical world while the online equivalent only contributes to 6% of online purchases. The “in aisle” equivalents being far more important online. If brands can learn what specific search terms are being used online to find products they can utilize search terms that will result in their products being considered and ultimately purchased.
There has also been a significant impact on retailers as shoppers seek the “click and collect” experience. Traditional brick-and-mortar retailers have recognized the need to develop an online presence or risk losing their market share. With companies like Amazon, Target and Wal-Mart offering online ordering, delivery and in-store pick-up, the convenience of online shopping may trump hunting in-store for the lowest price. To compare the shift in experience, brick-and-mortar locations allow customers to engage with employees, ask questions, soak in visual merchandising and be persuaded to try new things. Retailers and brands are trying to replicate that experience with online promotions, live chat to answer questions and helpful tips or tricks in the form of blogs, newsletters and social media. If retailers and brands can create a compelling online offer, equivalent to in-store offers, customers new to multichannel will embrace the shift to buy online.
Take the scenario of a busy working mom who spends a majority of her time in the office or at home taking care of the kids, with little time to make trips to the grocery store. If she can easily search for specific food and baby care products, order online, have the order delivered or pick up her selected items in-store, the retailer has saved her a significant amount of time and effort. For consumers to embrace the online channel, retailers will need to ensure the quality of products sold online and create an easy experience for grocery delivery or pick-up.
Multichannel shopping will continue to shape the future of the retail industry, as grocery and health & beauty brands are seeing 20% to 50% of sales through online shopping. Retailers and brands that develop a winning online strategy will be positioned to capitalize on future growth. Though there’s no formula for how to create the perfect online approach, strategically utilizing data and forward-looking strategies will ensure brand marketers and retailers stay one step ahead of the multichannel trend. As multichannel shopper data is incorporated into marketing plans, brands and retailers will be well on their way to embracing a new revenue stream and increasing brand loyalty in online grocery shopping.