The grocery industry seems to have a foot in two worlds as it faces unique challenges of an accelerated transition to online retail during the pandemic.
One is the realm of the traditional grocery marketplace in pre-COVID times, when the majority of consumers shopped in stores for groceries. The other is today’s marketplace where shoppers flock online, away from brick-and-mortar shopping. As customers opt to help socially distance, they now increasingly leverage online grocery platforms for delivery or curbside pickup.
With restaurants and bars closed or at limited capacity, consumers are spending more on groceries than ever before. Online food and beverage sales are forecast to grow by 60 percent in 2020.
However, much of how the grocery industry still operates — as it moves away from the in-store shopping model — is locked in the norms of the 2000 to 2020 era. The grocery industry has a golden opportunity for significant online revenue growth in the near and long-term future that it is not being maximized, according to digital shopping platform firm Zycada.
Many grocery chains are failing to take full advantage of this potential as they continue to offer customers dull, out-of-date, and clunky online shopping. Most still do not use video or other rich content in their online stores. These modern marketing approaches would allow them to personalize content and better showcase a brand’s creativity, personality, and sense of humor, suggested Zycada’s CEO Jim Brear.
Grocers are not doing enough — if anything — to capitalize on this golden opportunity. Personalizing their shoppers’ experience is key to an effective e-commerce platform, he said. “Grocery chains’ websites and apps severely lack it,” Brear told the E-Commerce Times.
Thin Margins
The most significant factor holding grocers back from fully embracing online shopping is the industry’s profit margins, countered Meaghan Brophy, retail and e-commerce analyst at Fit Small Business.
“As it is, stores have very low profit margins on most grocery items, with the exception of beer or liquor and prepared foods. So, I am not sure I agree with the assessment that there is an opportunity for significant online revenue growth in the grocery industry — at least, not net revenue,” she told the E-Commerce Times.
Other cost-bearing issues cloud the online grocery retail operating formula. For instance, adding on any type of delivery or curbside pickup adds an extra layer of labor costs that grocers cannot easily make up in increased prices, she noted. Plus, grocery delivery requires climate control for refrigerated and frozen goods, which is also expensive.
“In short, there is almost no way for traditional grocers to meet these kinds of shopping demands while still making a profit,” said Brophy.
Rich Content and Video
The best way to personalize e-commerce is through video content, reiterated Zyczda’s Brear. Video provides an immersive experience that brings products to life while giving retailers the chance to better showcase their brand’s appeal.
“Think about commercials for candy, beer, beef jerky, or just about any other food and beverage brand. They are funny, unique, and entertaining,” he explained.
Grocery chains can also go beyond video with other types of rich content. For example, retailers can use advanced recommendation engines that intelligently display other items customers may like based on their browsing history.
Another strategy is to use augmented reality (AR) to simulate the experience of viewing a product in real life, suggested Brear. Most grocery chains use virtually none of this dynamic online content.
Bare-Bones Boredom
Instead, grocery retailers fill their e-commerce platforms with lifeless static content, such as images and text. These visuals often offer nothing more than simple ingredient and nutrition information, observed Brear.
“The result is a bare-bones experience that serves as a simple default shopping option for customers that do not want to visit brick and mortar locations. The in-person experience of browsing aisles and sections is not replicated at all on these platforms,” he said.
The downside is this stale approach makes it difficult to compare products. As a result, online shoppers are not incentivized to view more products and purchase more items like they are at traditional e-commerce platforms.
Nevertheless, all is not lost with grocers’ transition to online. Grocery chains are proficient at promoting digital coupons and other discounts in their e-commerce platforms.
They also are effective at categorizing their products and make it relatively easy to search for a specific item in their online store, Brear noted. Consumers can quickly find something that they know they want.
“The problem is online grocery platforms do not take steps beyond that to deliver a robust and engaging browsing experience that would make it easy to compare products, discover new ones, and drive shoppers to make extra purchases they were not already planning,” he said.
Ride the E-Commerce Wave
Online grocery sales are projected to rise. But grocers who sit back and wait may miss the shopper crossover, warned Brear.
Gradual growth in online grocery sales took place as part of the general consumer shift to e-commerce during the past few years. Then grocery sales spiked in 2020, primarily due to online shopping’s sudden and rapid rise that resulted from the COVID pandemic.
In other words, circumstance has mostly led to the climb in online grocery revenue. It did not result from merely moving the storefront online.
“Because of the pandemic, consumers today are more accustomed and willing to buy groceries online than they ever have been. If grocery chains put more effort into improving their e-commerce experience, their online sales will grow even more than they already have,” he asserted.
For example, data shows that faster e-commerce speeds and better personalization lead to higher average purchase value. Customers who are buying groceries online purely due to COVID would spend more on each transaction if the e-commerce experience was better optimized. They will also be more likely to keep buying online once the pandemic has passed if the e-commerce experience is improved.
Unbounded Potential
Either way, Brear sees the growth in online grocery sales continuing to increase. The sky is the limit for retailers.
“Online food and beverage sales will grow this year by 60 percent in spite of the fact that grocery chains have not optimized their e-commerce platfor∑ms like retailers in other industries have. If grocers do boost their e-commerce experience, they could easily grow online revenues more than 100 percent on a yearly basis,” he said optimistically.
That rosy sales prediction is not for just online grocery sellers. The pandemic has dramatically accelerated the transition from brick and mortar to e-commerce.
Consumers are now amenable to purchasing most things online. However, the majority of shoppers still think that grocery shopping is best done in person, according to Brear.
“If grocery chains provide a better e-commerce experience, they can change that perception and entice consumers to buy groceries online just like they do with home goods or electronics,” he said.
Marketing Enhancements
When the pandemic started, many smaller grocers started offering pickup and delivery options. Grocers wanted to serve their communities and maintain shopper loyalty, noted Fit Small Business’ Brophy.
That was when shoppers first wanted safety from crowds and buying convenience, so there was less need for marketing frills online.
However, whether or not grocery stores offer online shopping, merchants absolutely have room to improve with digital marketing, she agreed.
“Even if they do not want to sell online, there are plenty of ways grocers can make the shopping experience easier. Store and aisle locators for products, and building digital shopping lists, are some examples,” said Brophy.
Addressing Platform Limitations
Not all retail platforms are alike. Some do little to push new marketing innovations that take outdated e-commerce websites to performance levels beyond digital shopping lists and order carts.
For instance, dynamic content, such as video and advanced recommendation engines, requires far more computing resources than static content platforms can handle. This added content type can cause e-commerce platforms to slow down when they incorporate content options like video, which can deteriorate the customer experience.
Zycada solves that delivery issue with bot technology. It improves page load and time to interactive (TTI) speeds up to 10-20x, noted Brear.
“Using this technology, online retailers can easily deliver dynamic content without slowing down their websites and apps,” he said.
Taking this approach enables retailers to smoothly support this new marketing content. That, in turn, lets grocers better personalize their e-commerce platforms.
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