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How To Improve Online Grocery: Learning From Kroger, Walmart

Photo: Associated Press

Photo: Associated Press

 

We can’t squeeze a digital lemon, can’t smell a two-dimensional baguette and, no matter how hard we might try, can’t sample a cyber-smoked ham. Buy should that mean online grocery delivery is dead in the water?

I suspect not. But recent figures are not encouraging. Online grocery shopping, what one would consider the height of convenience for time-starved consumers, is sinking. Shopper penetration among major supermarket brands declined to 11% in 2016 from 16% in 2015, according to the 2016 Food and Beverage Study from TAB Analytics, which serves the consumer packaged goods industry.

This is despite increased investments in grocery delivery, from Walmart’s click-and-collect service to Amazon’s next-day grocery delivery to Kroger’s curbside pickup. The reasons, according to the 1,000 consumers surveyed for the report, are logical and confounding:

  • A desire to see the food, especially perishables and other fresh items.
  • Higher prices for most online groceries.
  • No delivery service or slow delivery time.
  • Lots of people actually like the brick-and-mortar shopping experience.

All of which translates to a woeful loyalty rate of just 15%, the report states. That compares with a loyalty rate of 75% for brick-and-mortar supermarkets.

“The major stumbling block (to online grocery) is (retailers’) failure to understand that weakness in online grocery is a demand problem, not a supply issue,” TAB CEO Kurt Jetta told Retail Leader. “No amount of drones, curbside pickup expansion, Uber alliances and new warehouses can fix the fundamental issue that consumers currently don’t like to shop online for grocery.”

It’s worth noting that online grocery shopping figures are sharply different elsewhere in the world. About one-quarter of consumers worldwide shop for groceries online, according to a 2015 Nielsen study. In Europe, nearly one in six shoppers (16%) purchased groceries online in 2014, up from 13% in 2013, according to the research firm Sydney. That’s a reversal of what is happening in the states.

For U.S. supermarkets, it comes down to two choices: Cut bait or right their ships. Fortunately, the report includes a few bright spots to guide them.

Four Tips For Grocery Delivery

In the TAB study, 31% of the respondents said they had purchased consumables at an online outlet at least once, down from 34% in 2015. For those that want to stay the course, a few fundamental rules should be followed.

Integrate rewards programs: While consumer loyalty to online grocery shopping is just 15%, it is actually higher than in 2015, when it was 11%. This is all the encouragement I’d need to invest more in integrating my rewards program into online services. Starbucks offers a range of great examples: surprise double-point days, bonus points for purchasing a certain number of items within given dates and extra points for combo purchases. Supermarkets could, for instance, offer double points on all online orders placed on the three Fridays leading up to Thanksgiving.

Keep the store in the mix: Despite an overall decline in online grocery shopping, the option to shop online and pick up at the store has grown slightly, the study found. This has led to a small increase in the number of those who shop online six times or more a year (4.5% from 3.9%). The bump may result from Walmart’s and Kroger’s recent entry into online ordering. Yet at the same time, the report warns, Target abandoned its effort. This may have been a timing decision, or a choice to seek better execution. As Kroger CEO W. Rodney McMullen explained to analysts in a fourth-quarter earnings call, customers do want to shop in multiple ways, they just want to do so seamlessly.

Know your customer: Of all the online grocery sellers, only Amazon saw an increase in its grocery sales, to 16% from 14%. Walmart, which offers free pickup service, was flat at 12%, according to the TAB report. Ravi Jariwala, senior director of Wal-Mart e-commerce,  disputes the 12%  figure, stating that Walmart has extended its online grocery efforts from five markets in the fall of 2015 to more than 100 markets today. He declined to provide sales for e-commerce. Amazon has mastered the art of online product promotion, matching specific consumers with products they would likely want based on previous purchasing behavior. It also reminds shoppers of items they have purchased that likely will need to be replenished, such as detergent or shampoo. Through reward programs, supermarket companies can use unique identifiers to track shopper purchases and similarly alert them, through an online ordering service, of pending product needs.

Don’t lose site of the aisles: No retailer should ever compromise its foundation in favor of an add-on. Brick-and-mortar supermarkets ranked as the most popular venues for grocery purchases by a landslide in the TAB report, accounting for 78% of sales in 2016. So in addition to keeping the store in the online-ordering mix, it is advisable to maintain investments in in-store technology, staff and appearance. It also is essential to ensure the customer experience in the stores is smooth and pleasurable. Chances are if she likes being in the store, she is more likely to stop by – even if she also orders online.

This may especially be the case if the store offers free samples of smoked ham. Until online ordering can offer that, the store will have that edge.

This article originally appeared on Forbes.com, where Bryan serves as a retail contributor. You can view the original story here

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