Online Grocery is an Open Field … for Now

The e-commerce market as a whole is maturing, but buying groceries online is still far from commonplace in the U.S. As the fight for category leadership in digital grocery heats up, research shows that Americans have yet to settle on a grocer of choice. With this opportunity at hand, grocery competitors must act fast to differentiate themselves before Amazon.com and other mass merchants establish dominance.

According to new consumer survey data from RichRelevance, the majority of shoppers, 55.5 percent, haven’t yet ordered groceries online. Speaking to the opportunity at hand, 64 percent of them are willing to try a new brand when they do. Furthermore, most of those who have already shopped for groceries online haven’t yet made a habit of it: 60 percent say they use the service only rarely.

Still, Amazon is poised to take the lead, winning orders from 60 percent of current online grocery buyers, while another 10 percent have purchased online from Whole Foods. Big-box retailers and grocers are tied for distant second, with just over a quarter of online grocery customers opting for brands such as Walmart or Kroger. Discount clubs such as Costco trail the pack, with 15 percent of online grocery buyers trying them.

It’s no surprise that Amazon is a popular choice for online grocery, given that convenience and time savings are the top reasons consumers purchase groceries online, the survey found. Amazon is well-known for one-click ordering and swift fulfillment, including free same-day delivery to Prime members in some regions.

Clearly, it’s important for competitors to redouble efforts to speed and simplify purchasing, fulfillment and delivery. The survey also highlighted how merchants can differentiate themselves beyond operational mechanics. Grocers need to learn from the early mistakes of traditional retailers and not simply try to compete with Amazon on convenience, but focus on delivering a memorable, relevant customer experience. The category offers new opportunities to engage consumers with fresh ideas, gather key customer browsing and buying signals, and personalize the experience, creating a virtuous cycle of loyalty. Important areas for consideration include the following:

1. Personalize products and content.

The top features that would push consumers to shop more online range from presenting frequently bought items (56 percent), favorites (56 percent), and alternatives (50 percent) to suggestions to complete a meal (26 percent) and personalized apps/pages (37 percent). Grocers that anticipate and serve customers in a personal manner, whether they're looking for ease or inspiration, will make big gains with shoppers.

2. Showcase fresh, hand-picked items.

Limited selection is the top frustration for current online grocery buyers, while 53.7 percent of those who haven’t tried online grocery shopping say it’s because they don’t trust anyone else to pick the best or freshest items. To build trust, grocers can highlight seasonal bounty and serve relevant content that showcases the expertise of grocery staff — e.g., a video interview with a produce clerk.

3. Focus on lifetime value.

Sixty-one percent of online grocery buyers say they spend less online than in-store, and 40 percent said shopping online helped them to stick to their lists and make fewer impulse purchases. Personalized assortments and replenishment options can turn these cost-conscious shoppers into loyal customers. In fact, 55 percent of survey respondents said they would shop more online if grocers offered replenishment options and automatically displayed lists of favorite items.

4. Understand and respond to shoppers’ unique needs.

Whether opting to go vegan or accommodating allergies, nearly a third of consumers (31.7 percent) said they would be motivated to do more grocery shopping online if the could set dietary preferences and receive more relevant products. Retailers should invite shoppers to build online profiles and employ intelligent learning to make recommendations tailored to individual needs.

To stake their claim in the nascent online grocery sector, merchants should go beyond optimizing fulfillment efficiencies and leverage their unique assets to deliver individually tailored experiences that win over skeptics and earn loyalty.

Andy Charrington is an account director at RichRelevance, an omnichannel personalization technology.