guidance for 2016: time to put online grocery into context

Guidancefor2016

TimetoPutOnlineGroceryintoContextEmbraceablendedbusinessopportunityandlistentoshoppers

March2016ByBillBishop,ChiefArchitectBrickMeetsClick

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www.brickmeetsclick.com©2016BrickMeetsClick

Overview

Movingforward,itwillbecrucialtoreinventthegroceryretailmodelbyleveragingallassets–digitalandphysical–andthismeansputtingonlinegrocerywithinthecontextofthetotalbusiness.

“Thewinnerswillbethosewhounderstandthattheirsuccessdependsontheblendedperformanceoftheironlineandofflineofferings,notonevs.theother.”BillBishopChiefArchitect,BrickMeetsClick

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ContentsTHEVIRTUOUSCYCLE>PAGE4

ThevirtuouscycleforonlinegroceryisinfulleffectConsumerengagementandretailerinvestment

WHAT’SNEXT>PAGE6

Whatcomesnextforonlinegrocery?Increasedspendingandfragmentation

WHATTODO>PAGE8

Strategicguidancefor2016Embracetheblendedexperienceandlistentoshoppers

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Thevirtuouscycleforonlinegroceryisinfulleffect.

Shopperexposureandinterestaredrivingretailerinvestmentandretailerinvestmentinturnisdrivingshopperengagementandadoption.

Part1:SHOPPERENGAGEMENT

>Onlinegroceryisnolongeranichebehavior.Morethan40%ofUShouseholdshavenowboughtgroceriesonline,1andtheseexperiencesarechangingthewayconsumersshop.Accesstoinformationandnewchoicesmakesthepathtopurchasemorepersonalandthetraditional“consumerdecisiontree”amuchlessusefulguideforpresentingproducts.

>Shopperneedsarebeingreshapedbydigitaloptions.Theneedsthatdrivegrocerytripmissionshaveevolvedasdigitalcapabilitieshavebecomeubiquitous.Today,meetingthoseshopperneedsandwinningthetripincreasinglyinvolvesofferingonlinetoolsthatmakethetripmoreefficientandletthecustomerstarttheirshopping/orderoutsideofthephysicalstore.12015BMCresearch,seeHowConsumersAreUsingOnlineGroceryandWhatItMeansforRetailersin2016

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Part2:RETAILERINVESTMENT

>Increasedinvestmentistakingplaceacrosstheboard.

TRADITIONALBIGPLAYERS

...likeKroger,Ahold,WholeFoodsandWalmartseeonlineservicesasincreasinglyessentialtoservingtheircustomers–andasoneofthekeystodrivingincreasedsales.

BIGDIGITALPLAYERS

...likeAmazonandGooglearedisruptingthemarketbyapproachingonlinegroceryasabuildingblockintheirbroaderbusinessstrategiesratherthanasabusinessthatmustbeprofitableonitsown.

REGIONALCHAINS&INDEPENDENTS

...likeHyVee,Weis,Woodman’sandDashesareusingonlineservicestoincreasetheirshareofcustomerspending.

SPECIALTYONLINERETAILERS

...likeDoor-to-DoorOrganicsarebringingmoreservicevaluetoconsumersbyaggregatingdesirableproducts.MealkitproviderslikeHelloFreshcompeteinthemealsolutionsniche,ofteninnewwayssuchaspartneringwithotherdisruptiveserviceslikeUber.

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Whatcomesnextforonlinegrocery?Theamountofonlinegroceryspendingwillincreasesignificantly,andthegrowinguseofdigitalshoppingtoolswillfurtherfragmentthemarket.

>Bigonlinespendingincreases.We’reapproachinganinflectionpointthatwillrapidlydriveuptheshareofonlinegroceryspending,asshoppersincreasetheiruseofdigital/onlinetoolsforfull-basketshoppingtrips.

• Marketaftermarketwillreachthatinflectionpointaslargetraditionalretailersrolloutonlineshoppingoptionsthatmakeitaloteasierforconsumerstogettheirbroadgroceryshoppingdoneatoneonlinelocation–especiallytoservethe“shopwhenIwant”and“sticktomylist/budget”tripmissions.

• Manyoftoday’s$25to$35,three-to-fiveitemordersforspecializeditemswillgrowtolarger$140to$170ringsashouseholdsexperiencetheconvenienceofshoppingmorebroadlyforgroceriesonline.

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>Morefragmentationandtouchpoints.Newplatforms,thegrowinguseofonlineshoppingtools,andincreasedcompetitiontoservethedigitalneedsexpressedintheupdatedtripmissionswillincreasecustomersatisfaction–butwillalsofurtherfragmentthemarketandacceleratechangesinhowpeopleshopforgroceries.

Newonlineplatformswilloffernewtouchpointsandimpacthowpurchasedecisionsaremade.• Amazon’sAskAlexa(viaEcho)andother

evolvingcommunicationchannelswilloffershoppingshortcutsforfindingandreplenishingproducts.

• Existingonlineplatformswillcontinuetomakeiteasierforshopperstomovedirectlyfrom,forexample,arecipetoanecommerceplatform.

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Strategicguidancefor2016

1.Putonlinegrocerywithinthecontextofthetotalbusiness.

Traditionalretailerswillrealizethatwhileit’scriticaltooffertheircustomersanonlineshoppingoption,theirultimatesuccesswillbedeterminedbythecombinedperformanceoftheironlineandofflineofferings,notoneortheother.Thismeansleveragingallassets–digitalandphysical(includingstores)–tocomeupwithmoremeaningfulanddifferentiatedwaysto:

• Becomethedestinationofchoicefortripmissionsthatareimportanttocorecustomers.• Createfunandengagingshopping(onlineandoffline)thatappealstofeelingsandemotions

inadditiontoprovidingaccesstoproducts.(Thisisn’tanewidea,butit’snowbecomemuchmoreimportant.)

• Fulfillordersinwaysthatfitcomfortablyintohowconsumerswanttolivetheirlives–withoutabigupchargeforthisservice.

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2.Listentolocalshoppers:Theywilltellyoualot2.aboutwhatyoushouldbedoing.

Headsup!Theapproachinginflectionpointthatwilldriveuptheshareofonlinespendingandtheincreasingmarketfragmentationwon'thappenuniformlyacrossthecountry.Itwilltakeplacemarketbymarket,drivenbythetoolsandservicesthatareavailableandinuse.Thislocaldynamicmakesitessentialforaretailertounderstandwhat’sgoingonamongtheshoppersintheirarea.Inotherwords,youcanlearnalotaboutwhatyouneedtobedoingbydevelopingagoodunderstandingofhowyourcustomersareusingthenewdigitalshoppingtools(particularlythoseofferedbythecompetition)andwheretheyareheadedintermsofmoreconvenientshopping.

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BrickMeetsClick

Wemakesenseoutofwhat'shappeningingroceryretail,andprovideguidanceonhowtomoveforward.Useourexpertiseto

>gainclarityaboutwhat’shappeninginyourmarket.>identifykeychangesandanticipatewhat’scoming.>evaluateyourcustomers’behavioronkeybenchmarks.

CheckoutourOfferingsatbrickmeetsclick.comorcontact:

SteveBishop,[email protected]

Findinggrowthopportunities

intoday’schangingretailenvironment.