© IGD 2012
IGD – Consumer Goods Experts
• Insight and training, with a total supply chain perspective– Retail, supply chain, shoppers, category management, in‐store excellence
– Focus on food and grocery retailing
– Online services, customised projects, training
• Focus on primary research, local store visits– Unique relationships with leading retailers and suppliers
• Internationally connected– Central role in ECR Europe, a member of the Consumer Goods Forum
• A team of 100+ with practical industry experience
“IGD gave us the confidence that we had the best insights on food retailing in Europe. Retail Analysis proved to be a very valuable tool, saving us time and money and helped us in developing the best store concept for the customer.”
Nico Meyer, Format Director, Albert Heijn
© IGD 2012
Sources of this presentation
• ShopperVista www.shoppervista.igd.com
• Retail Analysis www.retailanalysis.igd.com
• IGD conferences www.igd.com/conferences
© IGD 2012
Agenda
• The online grocery shopper
• Case studies – Tesco and others
• Online grocery in context
• Opportunities for suppliers
• The future
© IGD 2012Images: Waitrose.com, Supermercadoelcorteingles.es, Genghisgrill.com, Mydish.co.uk, Asda.com/symtv
How are retailers engaging with shoppers digitally?
© IGD 2012
The development of apps in grocery retailing
Images: Ah.nl, Coopathome.ch, Supermercadoelcorteingles.es, Ocado.com
© IGD 2012Source: Office for National Statistics, 2011 base: All UK adults accessing the internet in last three months
Frequency of using internet
Boxes denote significant differences between years
Method of internet access away from home/work
Frequency and method of online access is changing
© IGD 2012
One in ten online shoppers already use smartphones
Source: IGD Online Shopping Behaviour, Sept'11 Q16, Base: all online grocery shoppers purchasing in last three months
Users = 10%
Interested = 56%
Interested – no smartphone
Interested – have smartphone
Use sometimes
Use regularly
How many use/are interested in using smartphones for online grocery shopping?
© IGD 2012Source: IGD ShopperTrack, March‐May 2011.
Arrows denote significant differences between groups
Online grocery shopping appeals to young families
© IGD 2012
Variations by category
Other toiletries
Ambient slimming products
Bathroom toiletries
Haircare
Frozen poultry and game
Take home soft drinks
Household and cleaning products
Savoury carbohydrates and snacks
Packet breakfast
Savoury home cooking
Top 10 online Bottom 10 online
*Index = Share of total online sales/ share of total in‐store sales Source: TNS, 52 week ending 4th October 2009
Take home confectionery
Chilled bakery products
Ambient bakery products
Alcohol
Fresh fish
Fresh meat
Chilled convenience
Fruit, vegetables and salad
Hot beverages
Dairy products
© IGD 2012
Category insight from Sainsbury’s
Source : cat growth FYTD P1‐10 proportion of sales week 44, Sainsbury’s trade briefing
Online is a big proportion of some categories overall sales
Baby9.9%
FrozenMeat8.4%
Inspire to Cook7.2%
Still Drinks8.2%
Detergents8.3%
© IGD 2012
Online shoppers are quite promiscuous
• Two in three (64%) use multiple online retailers
• Furthermore, 47% of online shoppers say they intend to, or would like to, try another online retailer
Source: IGD Online Shopping Behaviour Sept’11
More promiscuous than anticipated?
© IGD 2012Source: IGD Online Shopping Behaviour, Sept'11 Q14, Base: all online grocery shoppers purchasing in last three months
More in‐store = 57%More online = 17%
Do online shoppers impulse purchase more online or in‐store?
Online shoppers are less impulsive when online
© IGD 2012
Online is not all about stocking up
Source: IGD Online Shopping Behaviour, Sept'11 , Q5, Base: all online grocery shoppers purchasing in last three months
What are the top shopping missions?
Main shop Stock‐up shopMain ambient
shopTop‐up shop Special occasion
© IGD 2012
It’s not just about favourites lists
All mentions
Source: IGD Online Shopping Behaviour Sept’11 Q13, Base: all online grocery shoppers purchasing in last three months
1 Special offers section
2 Favourites/usuals
3 Keyword search
4 Categorymenus
5 Express shopping list
6 Recipes/meal suggestions
7 Scanning products by smartphone
8 Other
Main approach
What approaches are used to shop online for food and groceries (e.g. to find products)?
© IGD 2012
Delivery discounts
Promotions section
Favourite reminders
Promotions on homepage
Suggested alternatives
IGD ShopperTrack, Sep’11
1
2
3
4
5
Drivers of impulse purchasing online
Intelligent interruptions encourages online impulse
© IGD 2012
What would drive greater online shopping?
Source: IGD Online Shopping Behaviour, Sept'11
Top six factors
1 No delivery charge 56%
2 Long best before/use‐by dates 39%
3E‐mail offers e.g. money off, cash back
33%
4= Illness or infirmity 31%
4=Always have the right products delivered
31%
6Same or better promotionsthan stores
28%
© IGD 2012
Only a 50% retention rate for online grocery shopping
Source: IGD Online Shopping Behaviour, Sept'11, Q2a, Base: all adults
When did shoppers last shop online for food and groceries?
“Despite telling them not to come up the
drive because the gate is narrow, I stopped
shopping online after the driver hit my
gates for the third time.”
“I ordered Jaffa Cakes and as a
substitute I got coleslaw!”
© IGD 2012
Boredom a key reason for lapsingAll mentions
Source: IGD Online Shopping Behaviour, Sept'11 Q11, Base: all lapsed online grocery shoppers
1 Delivery charges
2 Not enjoyable e.g. a bit boring
3 Length of time to shop
4 Use by/best before dates
5 Quality of products delivered
6 Choice of substitutions
7 Difficulty in finding suitable delivery slots
8 Too many substitutions
First mention
Arrows denote ranking two or more places higher/lower than dislikes of online shopping
Why do shoppers stop online grocery shopping?
© IGD 2012
Initiatives to drive existing customer spend
Images: Waitrose.com, Sainsburys.co.uk, Ocado.com
© IGD 2012
Initiatives to drive new customer spend online
Images: IGD, Ocado.com, Asda.com, Tesco.com, Marksandspencer.com
© IGD 2012
Tesco’s strategy is to extend the brand into new channels and new areas
Growth of online sales in 2011, taking into account both grocery and Tesco Direct, in all markets
Contribution of iPhone grocery app to customer traffic to the tesco.com website
Growth of Tesco direct sales including clothing in the UK
15%
12%
30%
Source: IGD Research, Tesco, 2012
© IGD 2012
Online store in the Czech republic
• Tesco recently launched its online store in Prague to extend its consumer reach, marking the retailer's first online presence in Central Europe and the only retailer to offer such a service in the market.
• The online store allows Czech customers to browse and purchase more than 20,000 lines of food and groceries, as well as non‐food items such as toys and accessories.
• Tesco is working towards becoming a dominant multi‐channel retailer in the international market through an online platform that can be used in multiple countries.
• Three of the supermarket's Prague stores ‐ Zličínský, Letňany and Rock, will service online orders initially, though an expansion of the service is planned.
Source: IGD Research, Tesco
© IGD 2012
Developments in Asia showing the way.......
Source: IGD Research, Cheil Worldwide, cnngo
•Tesco opened a virtual store in the subway in Seoul, South Korea
•The concept featured over 500 popular products, complete with QR codes which can be scanned using the Homeplus app
•Products range from daily essentials such as milk and fresh produce, to pet foods
•Orders placed before 13:00 will be delivered to home the same day•A three month trial store
© IGD 2012
Appealing to the multi‐channel shopper
Apply a joined‐up approach across offline and online ranging and merchandising to support retailers as they promote access to an online catalogue of products in‐store.
Customers at Tesco Extra Dudley, UK, can use interactive kiosks to browse 40,000 non‐food lines and order for next day delivery.
The area is staffed at all times and additional pods are positioned around the store.
© IGD 2012
Evolving the wider proposition in convenienceInnovative ways of promoting non‐food ranges in convenience formats – these solutions have
potential of driving additional traffic to convenience stores.
Tesco Express (Leavesden, UK) ‐ newly introduced collection point allows collection of pre‐ordered non‐
food products from Tesco Direct.
Sainsbury’s have started to introduce ‘Click and Collect’ to its local stores ‐ 300 stores are expected to
have the facility by Christmas 2011.
Sainsbury’s Local, Euston
Tesco Express, Leavesden
© IGD 2012
Order processing for the online channel
• Initial strategy: – To pick orders from stores, not the distribution network
• This strategy has evolved, and now:– In UK, Tesco operates dedicated “dark stores” in areas of high demand
– These are laid out and replenished as stores with products on shelves, but only service on‐line orders.
– There are currently three such dark stores operating, with one more nearing completion and another one planned
Source: IGD Research, 2012
© IGD 2012
Dark stores: anticipated to contribute to 15% of online turnover by 2014
Source: IGD Research, 2012; www.maps.google.com
Dark store 1 Croydon
Dark store 2 Aylesford
Dark store 3 Greenford
Dark store 5 Crawley
Dark store 4 Enfield
© IGD 2012
How do “dark stores” operate?
Products stocked in the same way as a regular store, except that 'customers' are replaced by order picking staff. Staff pick from shelving into order crates; up to six customers orders can be picked simultaneously, spread across van routes.
Source: IGD Research, Vanderlande Industries, 2012
Orders are brought to a manually loaded line, which takes the crates to a consolidation buffer mounted on a platform. This buffer consists of a three‐aisle Quickstore Highly Dynamic System (HDS) Automated Storage and Retrieval System.
Order crates are spread throughout the consolidation buffer and held until a predefined release time of complete delivery van loads.
When empty vans are assigned and directed to a loading bay, the driver will indicate the van's presence to the to initiate release of all ambient orders destined for that van. On exit from the DCOS site, the van is scanned and that load is deleted from the system.
© IGD 2012
Amazon’s online grocery business
Source: IGD Research Images: Amazon.co.uk
Global sales of $34.2bn in 2010, up 40% on the previous year
4 = Number of countries where Amazon has built a consumables business to date
22,000 = Number of grocery SKUs sold at launch in the UK
One of the fastest growing online food retailers in the USA
Key developments
Focus on dry grocery, but experimenting with fresh / chilled
Strong coverage of specialist and niche products
Branded lines sold in bulk packs
Focus on brands, not private label
© IGD 2012
‘Click & Collect’ – France driving the model
Source: IGD Research
Saves timeFill basket when chooseLess tempting
Who’s leading the way?
Systeme U = 334 sitesCasino = Over 100 sitesLeclerc = 100 sites
Auchan/ChronoDrive = 80 sites ITM = 25 sites
Carrefour = 20 sites Cora = 4 sites
© IGD 2012
Other ‘innovators’ internationally
E‐grocer Based Why ‘Ten to watch’
NL Award winning smartphone app and a first for the Dutch market. Functionality also in place to build a basket which includes items from Albert Heijn’s three separate web portals
FR Continues to adapt and develop its drive‐through concept in France and beyond. Also one of the few retailers which has a dedicated online marketing strategy in place
FR Leading e‐commerce operator in France, with learnings for many on how to integrate a non‐food and food online service. Also offers online pick‐up across certain Petit Casino c‐stores
SP Focus on engaging and building a dialogue with shoppers around food. Functionality also in place to build your own food menu which is based on your personal food preferences
US Example of how fresh food can work in an online environment. Pure play grocer which operates out of a state‐of‐the‐art site facility which includes onsite production
JP Concept born out of Japan’s rapidly growing and diversifying e‐commerce market. Specialises in out of season grocery products at discounted prices. Part of the Nissen Group
SZ Another pure play operator which pioneered online retailing in the Swiss market. Strategic sourcing agreement in place with Migros, leading supermarket operator in Switzerland
US Leading online grocer which operates out of a series of specially designed spaces in existing supermarkets (known internally as ‘warerooms’)
JP Portal which provides selling space to small, medium and large size food and non‐food merchants, trading in Japan, Taiwan, Thailand and now China
US One of the fastest growing businesses in US e‐tailing at the current time, with ambitious growth plans for its international operations going forward. Now selling groceries in the US
Source: IGD Research
© IGD 2012
Grocery demand is flat, at best
Source: Eurostat, December 2011
All data is seasonally adjusted
There has been little or no change in grocery retail volumes
in Europe since 2008
© IGD 2012
Volumes flat, but space increasing
Source: Retail Analysis, IGD Research, December 2011
This chart shows grocery store numbers and sales space for the four largest supermarket
operators in the UK
All have invested heavily in the scale and quality of their
portfolios over recent years
If volumes remain flat or even decline, portfolio efficiency will be affected, unless share is taken from smaller operators
The development of online retail further aggravates this
problem
© IGD 2011Source: IGD’s Online Grocery Retailing Survey, July 2010 and January 2011 – Supplier responses only
How do suppliers manage the online channel?
© IGD 2011
Promotions online versus in‐store
Results from the supplier survey show that promotional participation is typically higher online versus in‐store, although this varies significantly by category. Multi‐buys and BOGOF remain the
two most effective promotional mechanics compared to in‐store according to suppliers
Source: IGD’s Online Grocery Retailing Survey, January 2011 – Supplier responses only Images: Asda.com
© IGD 2011
Ways to promote your brand online
Source: IGD’s Online Grocery Retailing Survey, January 2011 – Supplier responses only Images: Tesco.com
© IGD 2012
Digital revolution removing the ‘middle man’
"The digital revolution that has turbo‐charged globalisation is transforming how consumers and companies behave. This revolution is boosting competition, lowering prices, creating
new virtual companies, allowing people to sell goods to each other without a middle man.”
Philip Clarke, CEO, Tesco
© IGD 2011
Challenges of trading online
Although suppliers highlighted a number of different challenges associated with trading online, responses to the survey were heavily skewed towards issues relating to data availability and the
level of internal focus within their business
Source: IGD’s Online Grocery Retailing Survey, January 2011 – Supplier responses only
Data considerations
Internal focus
© IGD 2012
Apps viewed as the biggest game changer
Source: IGD’s Online Grocery Retailing Outlook Survey ‐ September 2011
© IGD 2012
Smart phone a “remote control” for consumption
QR barcodes promotions
Product traceability information
Shopping list and product rating capability
Link between loyalty cards, online promotions and the storeIn‐store scanning device and
payment tool (contactless payment)
Source: IGD Research
© IGD 2012
Final thoughts
• Image recognition
• Voice activation – E.g. Locating stores, shopping lists
• Search engines becoming eCommerce sites– Product availability and price data
© IGD 2012
For a free copy of our new report on online retailing, please email me at