Research shows two ways retailers can grow profits from online grocery sales
Most of the today’s growth in grocery spending is happening online, but the additional cost of assembling/fulfilling these orders makes the business less profitable than typical sales through the store.
Brick Meets Click, Barrington, Ill., completed an independent analysis to quantify the dollar impact to grocers of using a leading software-based fulfillment platform for online orders designed to reduce labor costs and drive higher sales. The analysis examined 26 weeks of online sales data across 77 stores operated by two conventional grocery chains, which represented almost 100,000 transactions and an average order value of $120.
Most of the today’s growth in grocery spending is happening online, but the additional cost of assembling/fulfilling these orders makes the business less profitable than typical sales through the store. Therefore, grocery retailers need to find greater efficiencies and opportunities to drive sales.
“Whether a retailer has the volume of online orders to justify automation or not, there’s always a need for some manual in-store fulfillment,” says Bill Bishop, chief architect. “So, all grocery retailers have good reason to consider the benefits of implementing a software fulfillment platform to improve these manual operations. We wanted to study the dollar value of those benefits.”
This analysis documented that for a retailer who averages 70 online orders per store weekly, using the platform resulted in an increase in profits of over $10,000 per store annually. Direct labor cost per order decreased by more than 30% and accounted for about 85% of that improved annual profit. The platform’s “conversational commerce” component – in which order pickers text customers during order selection to ask about substitutions and/or if they’d like to add something – accounted for the remaining 15%.
The income-producing potential of the conversational commerce texting component may be underestimated since less than two-thirds of the orders included this tactic. For those orders in which it was used, there was a 33% conversion rate that boosted those respective order values by an average of $8.