Online grocery sales hold opportunity for produce retailers - The Packer

Online grocery sales hold opportunity for produce retailers

12:57 PM 08/22/13

CHICAGO — Digital marketing and mobile technology are changing the retail landscape, and grocery retailers need to take advantage of emerging trends to increase sales, become more efficient and stay relevant to consumers and their needs.

That was the takeaway from an Aug. 20 general session on online retailing at The Packer’s Midwest Produce Expo, which featured presentations from Bill Bishop, chief architect of Barrington-based Brick Meets Click and Willard Bishop Consulting; Drew Schwartzhoff, Eden Prairie, Minn.-based C.H. Robinson’s director of marketing and sourcing; and Tony Stallone, vice president of merchandising and food safety for Skokie-based online grocer Peapod, a subsidiary of Royal Ahold, Netherlands.

Bishop shared research from Brick Meets Click on how grocery retailers use digital platforms to connect with consumers.

“There’s a gap between good retailers’ presence online versus in-store,” Bishop said.

He said Facebook is a good way to alert shoppers to events and promotions and to get an idea of what they want from a retailer.

“It is a great way to sense and respond,” he said.

Social media platforms aren’t a replacement for a solid company website, however, and Bishop said retailers need to invest time in creating valuable content for consumers on their sites.

He also said one in 10 consumers uses a mobile device such as a smartphone, so having relevant content consumers can access on the go is crucial.

“I can’t tell you how important a small savings of time is when you can click a coupon or make a digital list,” Bishop said. “Once they get used to (using) it, they aren’t going back.”

He said the primary reason consumers use online retailers to buy groceries is because they can’t find what they’re looking for in the stores they shop at.

Changing the supply chain

Schwartzhoff shared insights from the supply chain and logistics side of C.H. Robinson’s operations and also research the company did about heavy consumers of produce.

“In most retail settings, depending on what you’re selling, the supply chain is changing really, really quickly,” he said.

While supply chains previously were linear and involved single-focused steps from producer to consumer, today’s global commerce, along with government regulations, the explosion of online retailing and the accompanying consumer buying behaviors have made the supply chain increasingly more complex.

“Working with one-solution providers and partners doesn’t work anymore,” Schwartzhoff said. “Providers that can integrate services to their customers are coming out on top.”

C.H. Robinson’s research on heavy produce consumers showed 52% had bought groceries online, and that home delivery was the most popular way to receive purchases. The majority of consumers surveyed found the idea of an online grocery service appealing or very appealing, Schwartzhoff said, and that most would prefer to buy groceries online from the retailer whose brick-and-morter stores they usually shopped.

Schwartzhoff said consumers gave high ratings for the freshness and quality of online produce purchases, but didn’t rate the price value as high.

In that regard, he said the consumer perception of online grocery retailing is a complex picture. Consumers like going to the store to shop, he said, but most are open to letting other people pick out their produce for them through online shopping.

Freshness, quality, discounts and variety are consumers’ perceived benefits of in-store shopping, while convenience, speed and access to hard-to-find items make online shopping attractive, he said.

Retailers should emphasize new benefits of the digital marketplace, “things that meaningfully move the needle of consumers wary of buying online,” Schwartzhoff said.

Peapod

“The customer that is online is a little different than the customer in a particular brick-and-morter store,” Stallone said.

He said online grocery shoppers buy more produce, and more organic produce, than in-store shoppers, are very brand-loyal and have a large basket size, typically $160 or higher. Education, rather than income level, is the defining characteristic of online grocery shoppers.

Grocery is the fastest-growing online retail category, Stallone said, but is a lot different than other online retailing because customers buy a lot of unrelated products and have about 50-60 items in each basket, versus a few similar products such as books or movies.

“One thing everyone is always buying is produce, so you need to take advantage,” he said.

Peapod started in 1989, before the advent of the Internet, and has seen double-digit growth across the market in the past four years, Stallone said. The retailer sells more produce than any other item, he said.

“Online grocery shopping is all about reinforcing a positive experience,” he said, and so is selling produce.

He said strawberries are a big seller for the company, and Peapod research shows 90% of consumers will choose their store brand based on the quality, rather than price, of berries.

“People are willing to trust us” for the quality of produce selected for them, he said.

A wealth of information about consumer shopping habits is available to online retailers and can be used to grow sales, Stallone said.

“It’s all about mining a lot of great data that is out there.”

He said Peapod also uses digital coupons, such as a deal that offered consumers a free basil pack when they bought tomatoes and fresh mozzerella.

Looking ahead

In a question-and-answer session after the presentations, Stallone said he expects AmazonFresh to be a major competitor in the online grocery marketplace.

“They’re going to be a game-changer,” he said. “They’re going to do what Target and Wal-Mart did for groceries. We expect Wal-Mart to be a big player in the future.”

Bishop sees online retailing as a way to streamline costs and make operations more efficient.

“When you think about taking costs out, disappearance is a huge cost,” he said. “I think digital is a way to get rid of disappearance. If I were in your shoes I’d take a look at what’s realized at retail and what’s produced.”

Schwartzhoff expects growth in retailers’ use of mobile notifications to consumers to increase sales with recipe ideas, stock-up sale notifications and other content.

“I don’t think we’re seeing it quite as much in grocery as we will.”

All agreed that price and convenience are the bottom line for consumers.

“Saving price, saving time are the two currencies we have to worry about,” Bishop said.

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