Willard Bishop's recently-released 2015 eCommerce SuperStudy sheds some much-needed light on the value of online grocery shopping programs from both the retailer and supplier perspective, particularly in the areas of financial metrics, category performances and shopper behaviors.
The new study, which benchmarks category performance and ranks manufacturers’ performance across four leading click-and-mortar retailers, provides fresh insights on grocery e-commerce, including a list of top-tier CPG manufacturers that are winning the fair-share-battle for food and non-food sales within the digital marketplace.
Paul Weitzel, managing partner at Willard Bishop, said, “Overall, center store food and non-food categories are doing very well online; however, 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," Weitzel continues, "and consumers are shopping the entire store, which is very different than traditional in-store baskets, which are much smaller and more specific. You get fewer cherry pickers online [alongside] core customers shopping for convenience; they are profitable and very important."
'Paper Products Twice as Important Online'
Interestingly, he notes, "Some categories are disproportionately more important online," a good example being paper products, "which 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."
Among the categories that are trending stronger than others, Weitzel says, "Frozen foods 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 Weitzel 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 pick-up programs. Express-lane pick-up 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."
To that end, Weitzel advises retailers and CPGs to work in earnest to develop different promotional strategies while modifying variety tailored to the specific type of e-commerce program they are seeking to develop. "That really isn’t happening today. Some categories are two to three times more important online than they are in the store," some of which is driven by B2B business. Moreover, he sums, "There are 30,000+ 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."
Among the other key insights revealed in Willard Bishop's 2015 eCommerce SuperStudy, per Weitzel, include:
- Offering too many SKUs online: There is a need to continue to find the right assortment levels for each program. In some categories, 90 percent of the SKUs available online are never ordered -- not once over the entire year.
- A personalized experience that enables shoppers to navigate websites much easier.
- E-commerce is expensive but retailers can make money by advancing pick & pack operations and technologies to make store-level e-commerce programs more efficient and profitable.
- A significant portion of the baskets are incremental, but still have an opportunity to win new customers. B2B is only scratching the surface of this growth opportunity. Grocers have an opportunity to target local businesses and drive incremental business and this should become a top priority.