Insights into Grocery eCommerce

2016

R E P O R T

Insights into Grocery eCommerce 2016 identifies critical trends, reveals key findings about consumer preference and highlights next steps for today’s retailers.

Executive Summary 03

Methodology 05

Adoption and Activity: Key Findings 06

Grocer Spotlight: Price Chopper 18

Transitioning to Digital Checklist 23

Conclusion 24

T A B L E O F C O N T E N T S

Imagine walking into your local grocery store and receiving personalized offers and recommendations the moment you step inside. Imagine checking out in seconds, and paying for your groceries without even having to pull out your wallet. Imagine buying your grocery staples—from fresh produce to prepared foods, and even items that aren’t available in your local store—all from the comfort of your own home with a single click of the mouse. These things might seem far out for the average grocery retailer, but we’re edging closer to this redefined vision of the grocery experience than you might think.

Technology has revolutionized the way in which consumers purchase goods and services, and it’s fundamentally transformed the way businesses operate. Companies like Amazon and Netflix offer shoppers access to an extensive catalogue of products, user reviews and personalized suggestions based on search and purchase history, and as consumers become more accustomed to these benefits in other digital settings, they’re beginning to expect them to be incorporated into the grocery experience as well. To meet this growing demand, savvy retailers are leveraging technology to enhance the shopping experience and meet modern consumers’ evolving needs.

This study is designed to assess how retailers can serve the growing demands of today’s shoppers while reaching larger and more diverse markets online. The findings have been summarized to offer insights into how businesses can leverage digital technologies to improve their customers’ shopping experiences, increase store visitation, boost sales across all channels, and become market-leaders in grocery e-commerce.

Digital is redefining the grocery experience

E X E C U T I V E S U M M A R Y 03

1. Females remain the primary shopper for the majority of U.S. households.2. There is significant shopper interest in home delivery for online grocery orders.

Key findings in this report include:

E X E C U T I V E S U M M A R Y 04

3. Your customers, regardless of age, are online, consider themselves to be technologically savvy, and are making more digital purchases than ever before.

4. There is considerable consumer demand for grocery chains that can provide personal shopping and packing services, along with direct-to-vehicle delivery.

5. Consumers are willing to order groceries from locations other than their favorite store for the convenience of click-and-collect shopping.

The research on which this study is based was conducted in the first quarter of 2016, and involved surveys of 1197 female shoppers across the United States. This provides interesting context, and opens up more opportunities for future research into the growing role of the male shopper and the rise of the shared shopper.

The purpose of this report is to explore exactly how female shoppers are using digital connections in 2016, and the questions within it have been formulated to offer grocers unique insights into how they can better connect with their female shoppers in a rapidly evolving retail landscape.

M E T H O D O L O G Y 05

of those surveyed in this study shop at their favorite grocery store once per week or more, while almost all (89%) reported shopping at their favorite store at least once every two weeks.

The process of how shoppers buy their food is being reshaped by modern lifestyles, changing family dynamics, and the advancement of digital technologies. With fewer traditional rules to control consumer choices and purchasing habits, shoppers are shifting their buying criteria to demand more value, better service, and greater convenience. As a consequence, grocers are being forced to adapt their products and services to meet these evolving consumer desires and encourage brand loyalty.

70DID YOU KNOW?

%

E-Commerce Appetite and Adoption in 2016

06

For decades, the primary grocery shopper has typically been the female head of the household, and our research indicates that the same still holds true today. In this study of female consumers, the overwhelming majority of those surveyed (93%) still claim to be the primary shopper for their household.

While this finding is in keeping with traditional household dynamics, the results also indicate that many of today’s households differ significantly from the idealized image of the “nuclear family”. One of the key changes is the rise in single-person households—the number of adult females living alone.

When asked how many people reside in their household (including themselves), nearly one fifth (19%) of respondents claimed to live in a single-person household. This can likely be attributed to changing lifestyle trends and shifting attitudes to marriage. However, the notion of the “traditional” household, consisting of two or more individuals, is still alive and well. In fact, 80% of households in 2016 are comprised of between two to six people.

The American Household in 2016

While they may only account for 20% of all households surveyed in this study, the single-person household trend is one that is only predicted to grow, and is likely to have interesting and profound implications for many businesses—including grocery retailers.

Research suggests that it costs a business as much as 5-10 times more to acquire a new customer than it does to sell to an existing one. It is also estimated that current customers spend 67% more than new customers.

In light of these statistics, loyalty programs that reward buyers for sticking with brands have grown in popularity, and the findings of this survey suggest that respondents are reaping the benefits by becoming members of such programs.

In this study, 72% of those surveyed belong to some form of grocery rewards program. These findings suggest that if grocers can meet consumer demands by offering incentives and better value for shoppers, they will ultimately be rewarded with greater customer allegiance.

39%2 PEOPLE 14%

4 PEOPLE

6%5 PEOPLE

3%6 PEOPLE

1%7 PEOPLE +

18%3 PEOPLE

19%SINGLE PERSON

Customers Seek Rewards for Brand Loyalty

07

How many people reside in your household, including yourself?

A growing number of retailers are introducing e-commerce models to make it easier for the tech-savvy, time-crunched consumers of today to buy the things they need. For these consumers, online shopping has become a deeply ingrained behaviour due to an unprecedented enthusiasm for technology and adeptness in using it.

In all, 97% of respondents have made online purchases, and most of those individuals (89%) buy products and/or services online at least once per month.

More interesting still is the fact that, of the 97% of respondents who have purchased online, 69% are between the ages of 40 and 60 years old, or 60 and above. This suggests that the lion’s share of today’s e-commerce adopters are from Generation X.

Surging Online Retail Adoption

08

Of the 97% of respondents who have purchased online, 69% are between the ages of 40 to 60 years old, or 60 and above. This suggests that the majority of today’s e-commerce adopters are from Generation X.

97HIGHLIGHT

%

Have you ever made any purchases online?

How often do you buy products or services online?

Yes97%

3%No

How interested in online grocery shopping are you?

SHOW INTEREST

Approx.

49%

VERY INTERESTED

20%

SOMEWHAT INTERESTED

29%

ARE NEUTRAL

23%

NOT INTERESTED

16%

NOT AT ALL INTERESTED

12%

In the era of connected commerce, consumers no longer wish to shop for the items they need entirely offline. Instead, they prefer a blended approach where they can utilize whichever channel best suits their unique needs at that precise moment.

When asked to state their interest in online grocery shopping, nearly half of those surveyed (49%) expressed an interest, while 23% remained neutral on the subject.

These findings indicate that in order to generate more interest in online grocery shopping in the neutral cohort, it’s important for grocers to place a focus on the features and functionalities of their offerings.

If grocery retailers can provide a service that is in line with what shoppers experience in-store but with the benefit of added conveniences, many of those in the neutral camp are likely to express interest in the future.

Growing Appetite for Grocery E-Commerce

When considering the potential features and functionalities of online grocery shopping, respondents ranked content navigation—the ability to quickly search for products, and browse products by department, category, brand and price—as most important.

Features that enable shoppers to order fresh produce (like fruit and vegetables) by quantity and weight with accurate pricing was also considered important, as were similarities between online and in-store product pricing.

When considering the potential features and functionalities of online grocery shopping, respondents ranked content navigation—the ability to quickly search for products, and browse products by department, category, brand and price—as most important.

Functionality is Key

The ability to quickly search for products

The ability to browse products by department, category, brand and price

The ability to order fresh produce by quantity and weight with accurate pricing

Online product pricing similar to items currently available in store

The option to be able to pay for an order online

Ability to add items from a list to a shopping cart

When considering the potential features and functionalities of online grocery shopping, rank the following by order of importance.

Based on these findings, the features ranked above—along with others, such

as convenient collection options once items have

been ordered—can offer online grocery retailers a

competitive advantage.11

12

Home Delivery Gives Grocers an Edge

Of the 70% of respondents who expressed an interest in home delivery, 63% would be willing to pay for the convenience of having their order delivered to an address of their choice.

Going forward, the most successful retailers will be those that sit at the crossroads of the physical and virtual worlds and leverage technology to satisfy their shoppers however and whenever they choose to buy—and receive—their groceries. When asked how interested respondents were in having orders delivered to an address of their choice, more than 70% expressed interest.

Of the 70% of respondents who expressed an interest in home delivery, 63% would be willing to pay for the convenience of having their order delivered to an address of their choice. Price was a particularly important motivator, with the top two groups (90%) stating that they would prefer to pay a delivery fee of between $0 and $15.

27%$10-$15

8%$15-$20

63%$0-$10

How much would you be willing to pay to have your groceries delivered to you?

When considering submitting an online grocery order, the segment with the highest percentage of respondents (45%) would expect their groceries to be ready for pick-up or delivery the same day the order was placed. Just over 39% said they would expect pick-up or delivery the next day, and the remainder said they would expect their order to be ready within two days or the same week of placing the order.

How quickly would you expect to have your groceries ready for pick-up or delivered to an address of your choice?

Another important motivator behind interest in home delivery was timeliness: 85% of those who expressed interest would expect to receive their delivery within a day or two. The same expectations were also true for click-and-collect shopping services.

SAME DAY

46%

NEXT DAY

39%

TWO DAYS

5%

NOT SURE

6%

SAME WEEK

4%

7%$10-$12

28%$5-$7

25%$7-$10

4%$12-$15

5%$12-$15

As shoppers’ purchasing habits continue to evolve, they expect to be given the option to shop online when they crave convenience, in-store when they want immediate gratification, and sometimes even a combination of the two.

Click-and-collect services, in which groceries are ordered online for pickup at a store or other location, are becoming increasingly popular in many retail verticals—including grocery. Of those surveyed in this study, nearly 60% of respondents expressed an interest in having the ability to order online and pick up their order from their favorite store location.

But much like grocery e-commerce delivery, cost is an important factor when it comes to consumer interest in click-and-collect services. Almost a third of respondents (33%) would be willing to pay for the convenience of having their grocery order picked and packed by a personal shopper, ready for pick-up at their favorite store location. When asked how much they would consider paying for this service, nearly 70% would pay at least $5.

An interesting finding is that less people are willing to pay for click-and-collect services than they are for home delivery. 63% would be willing to pay for the delivery of their online grocery order, versus 33% who would be prepared to pay for click-and-collect.

How much would you consider paying to have your order picked and packed by a personal shopper, ready for pick up at your favorite store?

Consumers Call for Click-and-Collect Shopping

SHOP

31%$0-$10

How much would you be willing to pay to have your order picked and packed and brought out to your vehicle by a personal shopper?

These numbers suggest that today’s consumers seek comfort, convenience and control.

$0-$541%

$5-$7

21%

$7-$10

22%

$10-$12

7%

$12-$15

5%

OVER $15

4%

When presented with the option to have their entire order picked and packed by a personal shopper and then collected from a pre-determined location that wasn’t their favorite grocery store location, 31% expressed an interest, indicating that almost one third of respondents would be open to switching stores. What’s more, at least 63% of those who showed interest were willing pay for the convenience.

These results indicate that, with busier schedules and growing comfort with e-commerce, today’s consumers are choosing brands that provide the most convenience, and they are willing to switch from their regular grocery provider to an alternate one for a more user-oriented experience.

These numbers suggest that today’s consumers seek comfort, convenience and control. It comes as no surprise, then, that when picking up groceries from their local store as part of a click-and-collect shopping experience, more than half of those surveyed (54%) would appreciate the convenience of having their groceries brought out to their vehicle.

For direct-to-vehicle, click-and-collect shopping services, the largest proportion (41%) of respondents in this survey stated that they would be prepared to pay between $0 to $5 for the service. Approximately 55% would pay between $5 and $15, and the remainder would be willing to pay $15 and above.

Shoppers Willing to Switch Stores for Convenience

When picking up groceries from their local store as part of a click-and-collect shopping experience, more than half of those surveyed (54%) would appreciate the convenience of having their groceries brought out to their vehicle.

How much would you consider paying to have your order picked and packed by a personal shopper,ready for pick-up at a pre-determined location that is not your favorite store?

$0-$537%

$5-$7

25%

$7-$10

22%

$10-$12

9%

$12-$15

3%

OVER $15

4%

Find out how Price Chopper, a chain of 130-plus stores in the Northeast, embarked on a process that led to a new digital strategy for the grocery chain. The strategy included the implementation of a digital platform that would allow for new mobile applications and a new website, among other features.

G R O C E R S P O T L I G H T

Price Chopper’s transition to digital wasn’t done just for the sake of using advanced tech-nologies, but instead to better connect with shoppers to deliver what they want, allowing the company to make the shift from its position as a primarily value-driven grocer to an experience-driven one.

The changing retail landscape has shifted priorities and created the need for regional grocers to embrace digital maturity. “Price Chopper knows that the digital space is where our customers are trending towards for convenience and value. Therefore, we are working to transform our commerce, merchandising and advertising platforms to support a ubiquitous digital experience for our customers,” explains Thom Riley, senior applications architect and digital strategist for Price Chopper. “It’s no longer a matter of if, but rather how quickly, we can deliver a relevant, comprehensive digital experience that our customers deserve.”

“It’s no longer a matter of if, but rather how quickly, we can deliver a relevant, comprehensive digital experience that our customers deserve.”

Price Chopper’s Digital Journey

19

Glen Bradley, VP of marketing analytics at Price Chopper, agrees that digital technologies provide an effective means to deliver to increasingly discerning, tech-savvy shoppers and reap the benefits. But Price Chopper had its sights set on taking its digital strategy beyond e-commerce—the company was also looking for a solution that would enable it to create personalized content tailored to shoppers at an individual level.

“We believe personalization is important today and will be even more so in the future,” he says. “Younger generations have come of age experiencing and expecting personalization in the digital world, and they extend that expectation to other facets of life. While digital is not the only area in which we use personalization, it is the fastest growing in usage and capabilities.”

Looking Beyond E-Commerce to Personalization

Price Chopper’s journey to digitization consisted of three distinct phases, affecting various elements of the company’s online shopping experience:

The Journey to Digital

PHASE ONE: Price Chopper launched a personalized email newsletter, featuring offers tailored to individual shoppers based on their shopping history. This personalized shopping experience would then be carried across all digital touch points.

1

PHASE TWO: Other features implemented included the digital availability of weekly flyers, recipes, store locators, and the ability to create shopping lists online.

2

PHASE THREE: The final phase in the process was bolstering the grocery chain’s e-commerce capabilities, such as the online ordering system for custom prepared foods.

3

Through these channels, shoppers receive useful tools to make their shopping experience easier and more relevant, allowing them to place online orders for food items, receive tailored email offers and digital coupons based on purchasing history, and then redeem those coupons online.

S T R A T E G I C R E S U L T

By overhauling its digital properties, Price Chopper was able to offer a compelling digital experience through its website and mobile applications, increasing the reach, quality and convenience of its offering.

Key Takeaways

Through these channels, shoppers receive useful tools to make their shopping experience easier and more relevant, allowing them to place online orders for food items, receive tailored email offers and digital coupons based on purchasing history, and then redeem those coupons online.

Grocers can learn from Price Chopper’s team effort to take its digital capabilities to new levels. Beyond challenges like the centralization of data and adjusting expectations about digital versus brick-and-mortar, there are many opportunities that supermarkets can take to build profitability and loyalty by enhancing their digital offerings.

In the digital age, shoppers will use whatever channel best suits their needs for convenience, choice and value, which means it’s critical that retailers leverage both physical and digital assets to optimize online and in-store customer experiences. But bridging the gap between the online and brick-and-mortar worlds is no easy feat. Here are some ideas to help link the two, designed to put retailers in a stronger position to succeed in today’s digital environment:

• Value across channels: Regardless of channel, key drivers behind consumer purchases remain the same: price, quality, convenience and product selection. Retailers must demonstrate their ability to deliver these values in every interaction—whether it takes place online or in-store.

• Consider channels holistically: Online and in-store are inherently different formats, with unique uses, expectations, challenges and economics. When developing a strategy, retailers must consider the entire retail landscape and appreciate the differences between channels. Online and offline tactics should complement one another to drive increased engagement and sales across all channels.

Understanding consumers’ wants and needs is crucial when developing an omni-channel strategy and experience. However, while today’s consumers demand a more personalized shopping experience, retailers need to prioritize which initiatives they wish to execute and determine how much of an investment they’re willing to make. This requires a deep understanding of the decisions that shoppers make along the path to purchase, the types of information they seek to inform those decisions, and where and how they choose to make their purchases. Once grocers are armed with this knowledge, they can use it to personalize and align content to meet shoppers’ unique needs.

23

Linking Bricks to Clicks

T R A N S I T I O N I N G T O D I G I T A L

EVALUATE THE LANDSCAPEConsider your regional retail landscape, taking potential trends, challenges and opportunities into consideration. Then, identify what stage of maturation you’re at with your current digital initiatives.

ASSESS YOUR OPTIONSConsider the complexity of the project and identify potential tools and solutions that will meet your needs and can help bring your digital strategy to life.

IMPLEMENT YOUR STRATEGYIdentify your goals, create a roadmap, and take decisive action. Leverage any existing data you may have.

MEASURE AND ADJUSTTake a data-driven approach to your digital efforts and analyze exactly what’s working, what isn’t, and adjust your initiatives accoedingly.

Ready to embrace e-commerce or enhance your existing offering? See where you’re at and what needs to be done by completing the checklist below:

Checklist

While brick-and-mortar stores dominate the grocery shopping experience, e-commerce is a growing business that is still in its emergent stage in many parts of the world. Success in e-commerce might not come easy to some retailers, but early movers often gain considerable competitive advantage and establish themselves as forerunners in the industry.

The findings in this study clearly indicate that:

• Single-person households account for one fifth of all households surveyed in this research study, representing a new demographic grocers should be engaging with

• Today’s shoppers see value in loyalty programs, with as much as 72% of consumers currently participating in such programs

• Appetite and adoption for grocery e-commerce is at an all-time high• There is significant demand for home delivery as consumers demand greater

conveniences from their providers• Consumers are willing to switch from their primary grocer for the convenience of online

grocery services

Each of these conclusions clearly indicates that consumers are primed and ready to embrace the world of online grocery retail. Which begs the question: how can retailers capitalize on this opportunity?

• Demonstrate credibilityConsumers are often reluctant to try online shopping, so it’s crucial that retailers establish trust, credibility and exceed customers’ expectation during every interaction. To allay concerns about product quality and service levels, retailers should consider offering quality assurance programs that provide recourse for items that are damaged or don’t

A New Norm

C O N C L U S I O N 24

meet the customers’ expectations. To gain consumers’ trust, the necessary infrastructure must be in place to facilitate orders being ready for delivery or pick-up within the specified time period, and if an order cannot be fulfilled as expected, the customer must be notified immediately.

• Ease of useFunctionality and ease of use should be a top concern in website and mobile app design. Assistance should be readily available, and the checkout process should be straightforward and secure. If the website or app is slow to load or difficult to use, retailers risk customers abandoning their digital carts before purchase.

• Market awarenessFrom demographics to operating costs and even consumer preferences, there are several factors that can vary significantly from market to market. There is no “one-size-fits-all” approach—retailers must know their market and specifically tailor their digital strategies to suit it.

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