S E P T E M B E R 2 0 1 9
Trends & Insights Report
• The State of Grocery
• Changing Consumer Behavior
• The Changing Digital Landscape
• An Update on DTC
• New Innovations in Retail/Grocery
Online grocery sales grew 15%
this year, according to a new
report from Brick Meets Click.
E-commerce in Grocery
channel has been slower to
catch on compared to other
retail categories, so what is
driving this shift?
The State of Grocery
The U.S. grocery industry is undergoing a massive transformation. This shift is placing significant pressure on both retailers and the CPG brands carried on their
shelves. The shopper is in control and looking for convenient and innovative experiences including: digitally enabled shopping models (home delivery and curbside
pickup,) new in-store formats, and subscription meal kits. Although the majority of brand sales are still happening in-store, expanding shopping and delivery
models enables greater access to the consumers wallet, driving incrementality.
Meghan Garrity, Director, Starcom Commerce/Digital Shopper Practice
Tech is transforming ecommerce: Major brick-and-mortar grocers are investing in more robust omnichannel strategies to capitalize on ecommerce options to provide
customers with the convenient grocery shopping experiences they desire. Rapid growth online has prompted major retailers to invest more than $28 billion in grocery
ecommerce capabilities over the past 18 months, (per CommonSense Robotics Ltd.) The lions share of this investment supported a surge in on-premise pickup
locations and home same-day delivery options by major retailers, as well as on acquisitions and partnerships such as Amazon.com Inc.’s purchase of Whole Foods
Market Inc., Target Corp.’s acquisition of Shipt, and the Kroger/Ocado partnership to bring 20 automated sheds and robotic fulfillment to the US.
New retail formats are helping to drive down costs, but for consumers: Smaller stores with expanded fresh
department are breathing new life into retailers. Those retailers who have focused on fresh departments (produce,
deli, bakery, etc) are yielding higher store growth overall with $720K more per store on total food and beverages
sales (per Nielsen). By offering a selective fresh assortment, including options in seafood and produce, as well as
and carrying more meat alternatives, and complete meals within fresh departments. Stores of the future will focus
on the customer rather than the competition.
Omnichannel is impacting grocery in powerful ways:
• Personalization is vital to success in grocery, as in all of retail, however, this category may lend itself better to
creating truly personalized experiences. Both direct-to-consumer (DTC) and legacy brands speak directly to the
customer and use data to create new products that meet today’s customized eating plans and tastes.
• Shopper trust is everything: Credibility and reliability is difficult in an omnichannel grocery world. Retailers must
ensure the customer’s safety is the utmost priority, or feel the wrath of losing them. Both physical safety such as
product safety (food recalls, temperature controlled holding, and timely deliveries) as well as digital brand safety
and customer data protection must be of the utmost priority to build and retain a shopper’s trust.
A shift is happening…
• 14% of shoppers are now using grocery
Click & Collect, expected to reach 30% by
• 22.6M shoppers will use grocery apps at
least 1x per month, rising to 30M+ by
• 59% of Click & Collect shoppers still enter
the store on a pick up trip
• 36% of Click & Collect pick up shoppers
will go inside for a cold beverage or snack
How can brands keep up, or get in front of these changes?
Source: Coca-Cola Retailing Research Councils
“An explosion in consumer choice & accelerated expectations of convenience are creating new
opportunities for retailers to help brands create meaningful connections.
Brands must be disciplined in their approach to create separation in
a digitally constrained shelf – and leverage rich audience intelligence
to influence the shopping mindset throughout the full-funnel path to
Customers who are digitally engaged into a retail ecosystem are more valuable –
they shop more often, and are more loyal. But brand loyalty doesn’t always
transcend shopping modalities.
VP Kroger Precision Marketing,
Product & Commercial Strategy
Changing Consumer Behavior
While e-commerce continues to be the fastest-growing channel, adoption in grocery has been relatively slow (Food/Bev ~3% total ecom penetration in category) when
compared to other categories (20% cross-category.) However, we are beginning to see a major shift to online grocery as the barriers to adoption and growth are coming
down. In fact, online grocery is expected to reach 12% share by 2025. Retailers are investing heavily in technology, supply chain, and partnerships that will make for a
seamless customer experience.
Connecting with shoppers is vital to drive growth. Grocery shoppers are using all available purchasing options: in-store, last mile delivery (3rd party such as Instacart),
online (click & collect and delivery,) and subscriptions (meal kits or frozen meal delivery). These are not mutually exclusive; shoppers prioritize convenience (speed,
delivery, simpler process) based on their needs, and use all of the above options based on their needs. Brands must win the shopping occasion by leveraging online
and offline moments for incremental sales.
Meghan Garrity, Director, Starcom Commerce/Digital Shopper Practice
Invest for the long term: Although ecommerce adoption is on the rise, it’s not an instant win. Brands must support their products via search
and onsite placements to stack the deck to influence purchase. Grocers with loyalty card data will highlight previous purchases (both online &
in-store) with a simple “Buy again” option. Winning the top placement as either a previous purchase or top search result is vital to a brand’s
online success. Although Wall Street tends to focus on the short term goals, online grocery is still in its infancy. However, if brands don’t take
the risk to invest, are they willing to concede this growth opportunity to their competitors?
Consumer-Centric Planning: Brands should pivot marketing strategies to focus on customer behavior, and not their platform (in-store vs
online). Advertisers must rewrite the traditional marketing funding source-siloed model of brand, shopper, ecommerce, and trade
dollars, and pivot to a coordinated, holistic planning effort. This allows for planning across tactics such as brand awareness, shopper-
driven insights, promotional effectiveness, and retail on-site share of search. Planning models must evolve past using only reach and
frequency planning to objective based metrics (R/F, ROI, ROAS, HH Penetration, Buy Rate, Redemptions, etc.) to deliver on converting
the complicated grocery shopper.
Build Brand Equity & Retailer Equity Simultaneously: Focusing on a company’s JBPs and utilizing retail insight-driven planning
efforts, allows brands to support key initiatives at retail. By planning holistically, marketing efforts are coordinated nationally
via brand, shopper, and ecommerce support, which ultimately builds both brand equity and the retailer relationship.
The path to purchase has
many twists and turns, but
data is creating a new
roadmap for brands
The Changing Digital Landscape
The path to purchase has completely changed. It’s no longer linear and the traditional sales funnel now comes in “all different shapes and sizes.” The key to digitally
transforming a brand is to provide a frictionless, personalized experience, and understanding how to navigate the retailers changing environment to activate effectively.
Jason Comack, VP, Director, Starcom
Digital Channel Engagement is Driving Loyalty
Customer Lifetime Value is metric that was often brought up during the course of the event. Now more than ever consumers have choice between not only their brands
of preference, but also their mode of shopping, and therefore, it is imperative that brands and retailers engage the consumer across all of their need states.
Consumers value and expect convenience and the emerging models of Online Grocery Pickup and Last Mile Delivery expand ways of servicing consumer need states.
By creating a frictionless journey between the add-to-cart and pick-up stages of purchase, brands can drive loyalty and repeat usage. With Walmart expected to grow
their pickup coverage to 78% of the nation combined with online grocery pickup consumers being of higher value (with a 2X average checkout v. standard purchase),
this will be a key channel for brands to win going forward.
Retail-Owned Digital Responsibility Changes
Over the past two years, we’ve seen a significant digital t