The drivers of e-commerce growth in the grocery industry
The advent of game-changing technology has enhanced the convenience of online grocery shopping in recent years to the delight of consumers. Product information is searchable at a consumer’s fingertips via smartphone. User-friendly retailer apps assist the time-strapped and cost-conscious shopper. Fresh, quality foods are delivered to the home with the click of a button. It has become undeniable that the lines between real and virtual marketplaces are increasingly blurred.
After years of slow growth, analysts and experts are predicting grocery e-commerce sales to pick up significantly within the next two years. Online grocery sales are predicted to increase 21.1% annually through 2018, according to research from BI Intelligence, a research service from Business Insider, New York, compared to 3.1% for physical supermarkets. In 2015, UK-based Kantar Retail found shoppers spent between 3-4% of their grocery budgets online—up from just 1% three years ago.
To deliver a truly seamless customer experience across all channels, food manufacturers and retailers must think more about their roles as consumers and the overall shopping experience as multi-channel capabilities evolve. By thinking about e-commerce holistically, supply chain partners can collaborate to ensure product is easily searchable, described by trusted information and tracked across the supply chain. Here are some of the other drivers of e-commerce growth in the grocery industry and how supply chain efficiency can clear the way for further innovation.
Consumers want to know more about how their food was processed, where it came from and what it contains. They are empowered to learn almost everything about the products they buy and are demanding transparency in a way that has otherwise never been possible prior to the explosion of e-commerce and social media platforms.
Consider the shopping experience of a Millennial family. They have never known a world without the Internet, have grown up shopping online and are now creating their own households. They make up a significant portion of shoppers who care about the environment, prioritize health, want a streamlined shopping routine and focus on getting exactly what they want.
All of these expectations represent substantial growth opportunities for manufacturers and retailers, but there is work to be done to ensure the consumer receives trustworthy information that will lead them to a sale—regardless of channel. Supply chain stakeholders need to work on foundational supply chain data and the processes that govern it to ultimately enhance their online consumer engagement strategies. Many companies are prioritizing data quality improvement as a pre-requisite to transparency, recognizing that product data is a strategic asset in today’s marketplace.
Data quality programs currently underway at many consumer packaged goods (CPG) companies focus on data governance processes to support continual, effective product data management. These companies understand the integrity of product data must be maintained throughout the product’s lifecycle in the supply chain. Through good quality data, consumers are provided with the right tools to validate product purchases. When product descriptions, ingredients, nutritionals or allergens are not transparent, sales and consumer satisfaction can suffer.
With an ever increasing list of names being given to different kinds of commerce, including e-commerce, social commerce and mobile commerce, the grocery industry has the opportunity to think more holistically and look at the marketplace the way the consumer does—it’s just “commerce.”
To reap the benefits of standardization, the industry must have uniform and consistent adoption. Applying a barcode that contains a Global Trade Item Number (GTIN) brings more efficiency, consistent information and can allow companies to track and trace a product, which is particularly helpful in the event of a recall or if the quality of a product has come into question.
Once products have been identified with GTINs and barcodes for global uniqueness, electronic commerce can be achieved. With the exchange of standardized product information, it becomes possible to move away from sending faxes and paper copies for orders, invoices or advance shipping notices. Business transactions become seamless, especially with the ability to link internal systems to an external system all trading partners can utilize.
Standards provide this critical bridge and enable enhanced efficiency and collaboration. These standards not only lead to improved data for the consumer, but also help retailers improve inventory management to meet multi-channel consumer requests. Leveraging standards to their fullest potential, retailers and brands can more accurately forecast trends and improve on-shelf availability. As omni-channel increasingly defines the future of all retail, businesses are finding they must adopt new standards and technologies or risk losing sales and customer loyalty.
Successful early adopters
Several years ago, many in the industry did not think consumers would be interested in purchasing fresh foods online. However, today’s consumer is proving that assumption incorrect. Twelve percent of U.S. consumers say they order groceries online for home delivery—using outlets like Peapod, FreshDirect or AmazonFresh. Another 55% say they are willing to purchase their items online, according to Nielsen research. A recent Food Shopping survey found the majority of consumers today are shopping frequently, going to up to four channels a week and averaging 22 visits a month, which points to an interest in purchasing foods for a specifically planned meal or occasion, rather than the traditional one trip per week.
What has made these early adopters successful is that these companies recognize a digital experience is not just a commerce platform. They understand the customer purchasing journey and how to apply what can be found in-store across all channels such as seasonal shopping, event-driven promotions (i.e. Super Bowl) and have adapted customer loyalty programs. In any case, it’s important to recognize that new commerce options should not compete with traditional success—it is not “in-store vs online.” Those with a holistic approach will be able to capitalize on new opportunities.
Ultimately, as online grocery shopping matures, the industry has an opportunity to provide a solid, consistent foundation. Now is the time for food companies to look inward at their own quality of product data and supply chain efficiency to gauge their readiness to meet these growing consumer demands.