As E-commerce Comes of Age, So Too Will Physical Stores

The transforming platter of the retail food industry, coupled with consumers’ evolving tastes about where, when and how they shop, is powering unprecedented upheaval for a business that never sleeps. And though the reigning topic du jour – e-commerce – is the primary paddle stirring the murky pot of late (more on that momentarily), a plethora of vats brewing on the front burners of the supermarket stove is every bit as compelling, if not more so.

To be sure, a series of major developments erupting in the grocery world in recent weeks – ranging from the unexpected to the inevitable, and everything in between – has kept our editorial team on its toes. Fortunately, however, we’re ever mindful that the food industry is a fascinating and many-splintered thing, brimming with intriguing stories, including those depicting the genuinely progressive strides many grocers are taking to adapt and reimagine their physical presence in new and creative ways.

To that point, look no further than our 2015 Store Design Contest champs, which are individually profiled in our August issue. With a hearty shout-out to the first-ever trio of winners from the same metro market that’s clearly a hotbed of retail activity – Baton Rouge, La. – we're proud to tip our hats to the overall strong showing of contenders in our sixth store design showdown. In a perfect world, I’d have the chance to personally visit each and every one, walk the aisles, sample the wares, behold the bounty and, most importantly, shake the hands of the folks who made it possible. But the next best thing is learning how these dynamic labors of love came to be, and we look forward to seeing what comes next from these talented retail and design partners.

Meanwhile, when considering the rapidly changing retail landscape and companion opportunities therein regarding online grocery offshoots, it stands to reason that supermarket floorplans will be vastly different in a few years from what we see today.

To that end, Willard Bishop’s recently released “2015 eCommerce SuperStudy” sheds some much-needed light on the subject from both the retailer and supplier sides. According to Paul Weitzel, managing partner at Willard Bishop, online center store food and nonfood categories are doing “very well.”

However, Weitzel says that “the different fulfillment models cause category performance to vary significantly. The online trip averages 44 units per order 90 percent of the time, when the basket is more than 50 units. Online orders are large and broad, and consumers are shoppingng the entire store, which is very different than traditional in-store baskets, which are much smaller and more specific.” With fewer cherry pickers online, “core customers shopping for convenience are both profitable and very important.”

Interestingly, “some categories are disproportionately more important online,” a good example being paper products, which Weitzel says “are twice as important online than in-store. This is a category that many grocers gave away to mass and club, and e-commerce is showing that they can win back some of this business.”

So what categories in particular are trending stronger than others?

Asserts Weitzel: “Frozen food indexes the highest online on a fair-share basis among all store departments. Temperature state is not an issue. In addition, consumers are accepting someone else picking out their fresh product,” which, he says, “is no longer an issue for most core online shoppers.”

However, different fulfillment models cause category performance to vary significantly. “Some categories are also disproportionately more important for home deliveries versus store pickup programs,” observes Weitzel. “Express-lane pickup locations tend to be soccer moms with two kids in the back seat, so family, children’s and baby categories index really high at these locations. Stores that offer home deliveries see higher sales for categories that cater more to the elderly population.”

Accordingly, Weitzel advises retailers and CPGs to work in earnest to develop different promotional strategies while modifying variety based on the specific type of e-commerce program they’re seeking to develop.

“That really isn’t happening today,” he acknowledges. “Some categories are two to three times more important online than they are in the store,” partly driven by B2B business, he says. Moreover, he concludes, “There are 30,000-plus locations within 2.5 miles of 80 percent of the U.S. population, so traditional grocers are in a perfect position to capitalize on this growth opportunity and start winning back share.”

Indeed, words to live by for food retailers, who can learn more about Willard Bishop's insightful e-commerce SuperStudy here.