Grocers grappling with the digital order economy

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The majority of consumers may still prefer shopping in stores to shopping online, but those who have embraced eGrocery options are integrating the channel into their regular routines and shopping more often.

This change poses challenges for grocers, with smaller purchases leading to a more delicate unit economy, but it also creates an opportunity to build deeper and longer-lasting relationships with customers as their overall online grocery spend increases. .

“We are now starting to see people moving from their traditional weekly store to a periodic store. …. Smaller baskets more frequently is the fundamental change we are seeing within eGrocery,” Kevin Price, senior consultant at multinational logistics automation company Swisslog, told PYMNTS in an interview. “It makes [the economics] a little more difficult for [grocers] really. The scale and preparation of an order is always an advantage for a retailer – the more you do, the bigger you get. … This makes it more difficult for a retailer to be able to deliver multiple small units to a customer.

He added that as consumers shift to smaller, more frequent trips, they spend about 10% more on average overall.

Store Shelves

Consumers’ shift to more frequent purchases is increasing labor requirements for grocers, especially when it comes to delivery orders, leading to increased demand for automated solutions. Price noted that automation plays a key role in improving the efficiency of pick and pack processes, especially when retailers complete the process in fulfillment centers outside of the store.

Additionally, the grocery delivery economy has been tough from the start. Even the brick-and-mortar grocery store is a business with notoriously tight margins. Adding the cost of labor and the logistical challenges of delivery exacerbates the problem, increasing grocers’ desire for robotic alternatives.

Additionally, Price said automating e-commerce processes behind the scenes allows retailers to communicate better with their customers.

“Integrating technology into automation systems gives you greater visibility into inventory, control, you don’t have the external influences of customers coming in,” he said. “That way you’re able to give your customers a lot more visibility and a lot more confidence in product availability.”

In fact, inventory is a key consideration for more than half of all grocery shoppers, according to data from Decoding Customer Affinity: The Customer Loyalty to Merchants Survey 2022, a PYMNTS study created in collaboration with Toshiba Global Commerce Solutions. . The report, which presented the results of a late fall survey of a balanced panel of more than 2,000 U.S. consumers, noted that 51% of consumers say that if a merchant ensures that products groceries are in stock and available to buy, this improves their loyalty to that grocer.

Get the full report: Decoding Consumer Affinity: The 2022 Merchant Customer Loyalty Survey

Additionally, about 1 in 6 consumers (18%) now buy groceries online more frequently than they buy in-store, according to the study and that digital features can build customer loyalty. Twenty-three percent of shoppers said the ability to shop online would make them more loyal to their grocers, and 20% said the same about product delivery.

The price is right

Going forward, Price believes that in markets where online grocery adoption is higher than in the U.S., grocers need to make better use of underfilled delivery slots, incentivizing deliveries to off-peak hours with discounts or with flexible windows.

“There are usually a lot of slots that aren’t filled, and [there’s] opportunity to entice people to use these spaces away from prime locations,” he said.

Such initiatives would allow grocers to extract more value from their existing distribution networks and meet greater demand.

Financial incentives could go a long way. The Decoding Consumer Affinity study found that price is the number one factor cited by grocery shoppers as the top factor influencing their choice of merchant. Additionally, 77% of consumers said low prices would improve shopper loyalty to their grocery margins, and 52% said the same about promotions and discounts.

Brick-and-mortar innovation in digital stores

As online grocery continues to take hold, Price expects grocers to increasingly integrate the channel into their operations, treating it as a core part of the business rather than just an add-on to brick and mortar.

“At the moment, eGrocery is really the little brother or little sister, and I think we will quickly get closer to a point of parity,” he said. “People are talking [eGrocery accounting for] 50% [of all grocery] in 10 years. »

He predicted that the digital and physical channels will “become twins” rather than remaining “younger and older siblings.” Additionally, as this shift occurs, he expects grocers to begin treating their online presences with the creativity seen in physical stores.

Online grocery “is going to be where most of the innovation happens, and the principles of surprise and delight for customers and everything that we’ve seen happen in retail stores – that’s going to drive a lot of innovation,” did he declare. Grocers will reflect on “how you can bring product closer to customer in a virtual world…bringing the virtual experience closer to the traditional retail experience that we envision in the future”.

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NEW PYMNTS DATA: ACCOUNT OPENING AND LOAN SERVICE IN THE DIGITAL ENVIRONMENT

On: Forty-two percent of US consumers are more likely to open accounts with financial institutions that facilitate automatic sharing of their bank details upon sign-up. The PYMNTS study Account opening and loan management in the digital environmentsurveyed 2,300 consumers to explore how FIs can leverage open banking to engage customers and create a better account opening experience.

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