Americans are crossing the eGrocery chasm, purchasing more and more groceries online. Though initially met with pushback – particularly in the US – where we were taught at a generational level how to pick produce and check expirations, shoppers are now buying groceries online in a trend that gains significant momentum every quarter.
Even conservative predications put grocer’s online revenue at 15-25% of overall revenue within the next decade.
2013: The gig economy aligns with grocery retailers
As recently as five years ago, grocery CIO’s did their homework and found few commercially viable eGrocery turnkey platforms in the marketplace. The available software packages were brittle, expensive, had very little adoption, and even less customer success.
This was also at a time when nobody was sure if or when eGrocery would take off in America.
Most CIO’s took the safe bet, turning their eGrocery business over to gig economy players who provided a shared online marketplace, outsourced in-store labor to handle the fulfillment process, and offered outsourced pickup and delivery options.
The prevailing wisdom was, “Hey, it works for Uber and AirBnb! Besides, nobody ever got fired for launching an eGrocery line of business inside of two months for free.”
The great reckoning: Amazon bought Whole Foods
One morning during the spring of 2017, the American Grocer woke up, realizing that the giants wanted to enter their space and thought, “The barbarians are coming to the gate.”
On that morning the entire grocery industry had an awakening in which it collectively realized that in order to survive, online grocery must become a core business process.
In a rapid amount of time, Walmart and Target went all-in on eGrocery and paid half a billion for their own gig economy player.
Most valuable asset: It’s all about the eGrocery brand experience
At the end of the day, much of the grocery business is about selling commodities. The difference is the brand. People shop at their store because they trust the brand; therefore a grocer’s brand is its most important asset.
Since the brand is a grocer’s most valuable asset, why would a grocer’s online experience be any different than the in-store experience?
Put another way: In a commoditized business, why would a grocer outsource its primary competitive differentiator – its brand?
At a recent online grocery conference, the CIO of perhaps the largest gig economy eGrocery provider (recently valued at $8 Billion USD) in effect thanked the grocers and expressed his wishes for them to continue to act as useful warehouses for his business during his keynote.
“Warehouses?” people whispered. “Did that guy just say we’re warehouses?”
“WAREHOUSES?!” they bellowed that evening as the message sunk in, “HE THINKS MY STORES ARE HIS WAREHOUSES?!”
Yes. That’s what he thinks. (That’s what YOU are training your customer to think as well.)
Commoditized versus brand experience
Here is the math when it comes to grocery retail today:
Sell your product (groceries) on someone else’s online marketplace
Empower strangers to come into your store and fulfill the order (shop) for your guest
Empower strangers to communicate with your guest of your behalf
Empower strangers to bring your product to your guest
= Commoditized experience
The grocer just sacrificed marketing dollars, subscription and delivery streams of revenue, and CPG dollars. These are all legitimate sources of revenue and real dollars.
When CIO’s are asked why they made this choice, the response is muddled, and that’s just the beginning.
What’s really happening in the commoditized model is the sacrifice of the grocer’s brand.
In this model the grocer “conditions” the existing guest to TRUST (big word, with massive implications in the grocery business) what is effectively a faceless, non-branded, warehoused experience.
In this model the experience is commoditized, and when the dust settles, the only thing that matters to the guest is price.
Put another way: In the long run, this model is a bridge to customers switching to Amazon, Walmart, or Target.
Here’s how the math should be done:
Grocer controls everything online
(and perhaps even leverages some gig economy marketplaces)
Grocer controls everything in the store
(particularly guest communications)
Grocer leverages on-demand gig economy labor where it makes sense for in-store fulfillment
Grocer controls all communications – true CRM (Fulfillment agent, store level, and corporate level)
Grocer leverages the gig economy where it makes sense for delivery
= Branded Experience / Loyal Customers / Long Term Win
This is a scenario where the grocer owns the online storefront, in-store fulfillment technology and process, customer communication, and pickup/delivery process. The grocer also realizes all revenue from subscriptions, delivery, marketing, CPG, basket size increase, and reduction in labor costs.
This also means that the grocer owns the entire technology stack.
This does not have to mean that grocery employees are doing the work every step of the way – it’s likely that the grocer is using on-demand gig economy labor and gig economy / outsourced delivery providers where it makes economic sense. However, the grocer is managing the experience from beginning to end.
The key to this model is extending the grocer’s brand through the online shopping experience. By controlling the technology, process, and labor the grocer can own the conversation with the guest from the time they start the order until the shopping bags are in the guest’s hands.
A branded fulfillment experience drives profits
In-store fulfillment technology empowers grocers to communicate with their online guests while they are shopping. Templated, A/B tested direct-to-guest communication comes from the in-store fulfillment agent, team lead, store management, and even corporate offices.
Grocery management and marketing teams can leverage technology to craft an overall online shopping experience that mimics the in-store brand experience, and in some cases even surpasses it.
Returns show that creating a branded fulfillment experience where the online guest feels as though they are in the store increases the average online basket size by 4 – 6% when there is direct communication with the guest WHILE the online order is being fulfilled. This level of communication is still nascent and double digit increases in basket size seem achievable with a grocer-owned, fulfillment-focused CRM implementation.
Final takeaway: Trust is the highest competitive barrier
By taking ownership of the online experience and leveraging gig economy labor and delivery where it makes economic sense, today’s grocer can shift their online world from an outsourced center of risk to a foundational part of their overall business.
At the same time, they can add more bottom line revenue through reduction in labor costs, increased basket sizes, and new streams of revenue such as marketing, subscription, delivery, and CPG dollars.
Ready to take back your online brand experience? Learn more here.