The Future of Grocery Retail
For the a large span of time, Grocery e-commerce was estimated a laggard with only 3–4% penetration in comparison to that of fashion and electronics with more than 20%. And for a notable reasons — low margin, highly perishable, variable quality, and high last-mile cost as a % of order values, made grocery delivery a potentially large but economically unattractive business. Thus, retailers other than global players such as Amazon and Bigbasket didn’t make serious investments in this sector.
But the onset of Covid-19 has turbo-charged the demand for grocery delivery and thus, overnight, created the potential economies of scale that should have taken a decade. With the total market of grocery delivery service expected booming in recent years, the stakes are high and the consumers are intended, for more variety, faster delivery, and more convenient experiences.
While the present and would be service-innovations such as within an hour deliveries, buy-online-pick-up in-store or curbside, autonomous/drone deliveries will help to accelerate the progress, I would say that the future of online grocery delivery demands a much higher bar. But, before we proceed what retailers can innovate the next-gen experiences, let’s aim at the consumers and know the reason of people buy groceries.
Know Your Customers: The Why, What and How
The intents and purposes, I’ll conclude grocery shopping as “food” related items for household consumption and focus on grocery delivery service.
The Why: Grocery buying is a means with a purpose. And the purpose has different use in modern time. For instance, groceries make foods which are a source of energy, health, happiness, social status, and connection. Then, the retailers still selling groceries just as food ingredients, they should think of focusing on the value they create?
The What: Grocery purchase is one of the most repeatable and predictable processes. Most people think it a disgusting repeated task. With at least 50M people shopping, that’s 3 billion hours/year of collective human life spent on buying groceries like bread, eggs, pulses, potatoes, sugar, cheese, etc. every week. This can be on autopilot together with the Grocery catalog be more like Spotify.
The How: Before we buy groceries, we think of the meals required to cook on the attributes as follows— 1) Time of meal — breakfast, lunch, dinner, snacks 2) Diet — Vegan, Keto, high protein, etc. 3) Health concern — Diabetes, high blood pressure, Gluten, etc. 4) Age/life-stage of sonsumers— kid-friendly, elderly-tolerant, pregnancy, surgery, etc. 5) Risks factors — high sodium, mercury, GMOs, etc. 6) Variety of groceries — Organic, Kosher, Frozen, Fresh 7) Convenience — Ready to heat, ready to eat, etc. 8) Health requirements — anti-inflammatory, muscle building, immunity-boosting, etc.
The grocery catalog need to be tagged with such attributes and the customer can match these attributes in searching for products. As of now it seems really hard to do.
Here are 5 ways retailers can build a more convenient and delightful future:
1.Focus on Elements of Value
Bain and Co. has created 30 elements of value framework. For instance, urban and rural consumers may value different elements; hence the strategy needs to be framed with the target consumers.
Here is an example of one element in each category:
a. FUNCTIONAL — Reduces costs: by auto-applying coupons and exclusive offers
b. EMOTIONAL —If you shop at Whole Foods, it says that you seek premium and high-quality products, and are willing to pay a premium for them. It is a matter of positioning and the corresponding value proposition that creates an emotional value for the consumers.
c. LIFE CHANGING — Motivation: dedicated section, for sports-persons, athletes and fitness conscious people that re-enforces healthy choices through tracking of macros.
d. SOCIAL IMPACT — Self Transcendence: According to a recent survey report, 60% of the Millenials were acquainted with the implications of their food selection on the environment, and 50% of them considered factors such as packaging while making purchases. So awareness about farming practices, waste reduction initiatives, and local sourcing, grocers can appeal to the customers’ desire to be more socially responsible.
2. Make it Personal
People have their clearly defined preferences, restrictions, and affinities that don’t often change, so it is difficult to capture these attributes and personalize the offering. For instance, What has a vegan to do with meat and dairy products.
Assume if your grocery shopping app could connect to your Apple Health app and detect that you take exercise daily and recommend “a half kg chicken” as a “source of required protein after your workout” in your personalized feed. These sounds amazing but wait a little, it’s coming soon.
3. Simplify and Automate
It is the most typical step to enhance the consumer experience. The new gen of shoppers, especially those who are not digital-natives migrate to online grocery delivery, the shopping experience needs to be simplified — right from discovery to checkout.
Automation of the customer’s experience can be achieved through lists and auto-replenishment services such as the “Reserved” service. Using the Reserved service, your customers receive a regular delivery day and time on a weekly or monthly basis, with a virtual basket of grocery delivery that can be amended, arriving automatically.
4. First Inspire, then bridge the gap between Inspiration and Purchase
People get inspired through articles, blogs, videos on youtube, posts on Instagram, but that inspiration rarely happens into a purchase at the Grocery store. Grocery delivery service can produce inspirational content such as recipes/ideas, and promote them into a shopping list, offering an easy path to buy.
5. Food as a Service
As food cooking getting outsourced day by day, given the rapid rise of food delivery services, the online grocery delivery already moved up the value chain through “meal-kit” and “pre-cooked meal” services. Since a large amount of the costs of such services is the raw ingredients, the global players of Grocery retail have significant economies of scale. Besides, they have a physical presence in most cities, which can be leveraged to create dark kitchens that service local consumers. Moreover, delivery costs can also be reduced through the existing network for Grocery delivery service.
Even though online grocery delivery is incredibly intricate and poses various challenges to its owners that the sectors like fashion and electronics don’t do, the size of the market, mobility in consumer interest, and the opportunity to influence our lives, make this sector crucial. The retailers are looking to evolve by re-inventing their operations to deliver luxury, joy and not just groceries.
Articles from Shagufta SiddiqueView blog
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