Filling the virtual shopping cart
As consumers spend more time online and less time with traditional media, virtual shopping carts are taking on new importance for food retailers.
Supermarkets are enhancing their online marketing efforts–and shoppers are responding. Besides new digital habits that are spurring more online shopping, higher gas prices also are encouraging consumers to rely more heavily on e-commerce, experts say. As a result, online retail spending in general hit $36.3 billion in the third quarter, up 13 percent from the year-ago period, according to estimates from Reston,Va.-based comScore Inc., a market research firm. It was the eighth consecutive quarter of year-over-year growth in e-commerce spending, the firm reports.
The trend has attracted the attention of giants Walmart and Amazon.com, which are testing online grocery ordering and delivery, while smaller players are looking into the viability of adding e-commerce to their operations. The result is a more competitive playing field.
"Every day there's someone breathing down our back," says Brigid Bonner, vice president of digital marketing at Marshall, Minn.-based Schwan's, referring to the increase in online competitors.
Yet certainly there's room for growth: While comScore reports that total U.S. e-commerce spending reached $227.6 billion in 2010, the web accounted for just 2 percent of all consumer packaged goods sales, or $12 billion, according to Nielsen. The New York-based market research firm expects that figure to more than double to $25 billion by 2014.
But e-commerce involves more than online ordering. In many markets and for many demographics, grocers can use the Internet to help induce greater loyalty to a particular brick-and-mortar store and to encourage larger shopping cart values.
The integration of e-commerce and the grocery business has two distinct elements, suggests Curt Alpeter, executive vice president of retail and CPG sales at MyWebGrocer, a Colchester, Vt.-based digital services provider that serves 113 grocery retailers nationwide. "There's planning, which is facilitating the in-store experience, and then there's shopping, where the consumer actually uses the Internet to buy groceries," Alpeter says.
Grocery marketers who understand and cater to both uses can capture a greater share of the online market, adding more capabilities as shoppers demand them.
Online grocery shopping has caught on in certain urban markets, particularly New York City, where consumers are especially time-pressed and less likely to own automobiles, and where supermarkets tend to be smaller than average and therefore carry fewer SKUs.
In some parts of the country, "consumers just don't think of the Internet when they think of groceries."
In other parts of the country, though, "consumers just don't think of the Internet when they think of groceries," Alpeter says. For people who use the car as part of their daily commute, a quick stop in the supermarket on their way home to grab a few items for dinner is simply part of their routine.
Buying groceries online also requires consumers to plan ahead, which many don't usually do, research suggests. As a result, buying a week's or a month's worth of groceries online requires a degree of organization and planning that many shoppers aren't used to.
What's more, perishables in particular are still considered "high touch" purchases by most shoppers. As Lauren Freedman, founder of Chicago-based e-commerce consultancy the e-tailing group, says, "Getting people to purchase in categories where touch and feel is a factor is the biggest challenge."
During the past decade, apparel and home décor merchants have overcome this challenge by adding to their websites rich media technologies such as zoom and alternative views, which allow shoppers to see the merchandise in detail online. Unfortunately for grocers, such technologies won't necessarily reassure consumers about the freshness of a store's fruit on a given day.
To compensate for these drawbacks, food retailers could emphasize one of the Internet's benefits: its limitless capacity. While a physical store allows a merchant to carry only a finite number of SKUs, an online storefront can offer just about any product. By providing consumers online access to specialty ethnic foods, for instance, a grocer can engender their loyalty and increase order size.
Online-only grocer ShopFoodEx.com, based in Roanoke, Va., credits that philosophy with setting it apart from the competition. For example, while other companies don't ship products in glass bottles or jars due to the possibility of breakage, ShopFood-Ex.com does.
"We try very hard to offer hard-to-find items via customer request," says founder Greg Land. The company also makes a point of selling single units of products that others offer only in bulk.
Schwan's, which expanded its decades-only food delivery service to encompass online ordering about eight years ago, takes the opposite approach: Rather than trying to be a one-stop shop, it sells roughly 400 SKUs, primarily frozen foods and prepared meals.
"You have to look to your core competencies that are unique."
"You have to look to your core competencies that are unique," Bonner says. "In our case, we're the only company with a national footprint that can keep frozen food frozen." Easy does it
A supermarket that wants to ease into online ordering could begin by offering replenishment services, suggest experts. Many households use roughly the same amount of toilet tissue, detergent and other commodities each week or month. Allowing shoppers to specify online the regular delivery or in-store pickup of a set quantity of those items "makes a lot of sense," says David Diamond of marketing consultancy David Diamond Associates in New York. "Walgreens and CVS do a great job with this on the prescription side of their business but not on the [over-the-counter] side," he says.
ShopFoodEx.com, for one, lets shoppers create and maintain "quick lists" on its site for easy reordering. It also has "usual order" functionality: The shopper can save a previous order, then replenish the exact items simply by clicking the reorder button on the site's horizontal toolbar.
Businesses that have little or no online presence can easily get started with an order-online, pick-up-in-store option. During the holidays, for example, customers could reserve turkeys for Thanksgiving or deli trays for Super Bowl Sunday. And as with the case of replenishment, shoppers who come into the store to pick up their online purchases are apt to buy auxiliary products as well.
Making a plan
Retailers that want to focus on the planning aspect of e-commerce would do well to offer online coupons, recipes and other content, such as cooking tips. For instance, the website of Wakefern Food Corp.'s ShopRite includes a recipe center, where a shopper can check a box next to each ingredient in a recipe to add the item to her online shopping list, which she can then print and bring to the store. This one-step functionality simplifies meal planning and shopping for the customer while encouraging add-on sales. "You want to leverage content and recipes as a reminder that [shoppers] need to make another purchase," Freedman says.
As retailers in other sectors have found out, enticing consumers often means offering them something in exchange for their attention. In addition to recipes and assistance with shopping lists, online grocers often provide coupons. ShopRite makes special discounts available to Facebook followers to encourage consumers to "friend" the Keasbey, N.J.-based company.
Likewise, offering a weekly e-newsletter that serves as a circular can help retailers acquire names and e-mail addresses to build a marketing database, Diamond says. What's more, virtual circulars are less expensive than printed ones, while allowing for immediacy and personalization, which can lead to greater response.
Although often overlooked, personalization can make e-newsletters more relevant and increase their open rates. Hannaford Supermarkets in Scarborough, Maine, for example, allows consumers who register on the company's website to specify what types of products they want the site to flag for them. A shopper who wanted to avoid products containing added sugars, for instance, would see an icon and warning if she were to select a product with added sugars from an online circular or place it on her virtual shopping list.
The ability to offer a relatively inexpensive, targeted interactive experience is arguably the greatest strength of e-commerce, surpassing even the convenience factor. Providing shoppers with personalized content and coupons at their fingertips is an optimal way for grocers to benefit from multichannel commerce.