Monday, 22 September 2014

Looking at Online Grocery Shopping From the Supplier' Viewpoint

Life is not easy for suppliers selling their products through a supermarket’s online channel. The tried and tested tactics which work in the physical supermarket are of minimal use.

Online offers no opportunities for eye catching secondary displays designed to capture shopper attention should the brand be missed on shelf. There is no way to sample something new and delicious. Promotions which are visible when the shopper casts his or her eye along a 20 metre shelf are easily missed when confined to a screen measuring 15 inches x 6 or less.  The challenge is particularly acute for impulse products like confectionery, or soft drinks, lines which are probably not on the shopping list but are tempting when spied in store.

Whilst there may be some debate about how big the online channel might become, there is no doubt that it is more buoyant than traditional supermarket shopping, and suppliers are slowly waking up to the fact that this channel needs dedicated resources if they are to get the best out of it. 43% of major multinational suppliers interviewed by the IGD (Institute ofGrocery Distribution) have staff assigned to the online channel at least as part of their role. However just 24% have dedicated people to the channel on a full time basis, and only 10% have tailored the way they sell their products on line.

Without imagination and focus many suppliers resort to money off mechanics to promote their products, which can be expensive, and is at best a short term solution.

The key of course is to understand how shoppers approach online grocery buying and then work out how best to capture their attention. Research company Evolution has found that online shoppers tend to be very single minded and this not surprising given that the main reason to use online is to save time. Only 4% start their shop by browsing various categories, and just 1% start by looking for meal and recipe suggestions. 19% start with the special offers page (although 53% get round to it at some point). 25% shop by keyword (milk, eggs etc) and tend to work from a shopping list. Suppliers may want to explore opportunities on the “favourites” page. This is the first page visited by 44% of shoppers, and around 56% refer to this page at some stage during their shop.

It is becoming clear that a one size fits all approach is unlikely to work online, and that personalisation will become increasingly important. To get the best out of a marketing activity it must be relevant to the needs of individual shoppers, whether they might be one of the 35% who do their weekly shop online, or more likely, one of the 53% who only use online infrequently to do a big shop. Equally, there is little point in featuring a pet food initiative to a non pet owner, or a beer blitz to someone who only drinks wine and spirits. 

Having good shopper research data helps address the challenge of selling on line where space is limited and competition to get noticed is fierce.  It is also critical when negotiating with retailers who will have the last say about the strength, depth and promotional support demanded to feature a particular supplier’s products. 

Friday, 12 September 2014

Discount Grocers - Growing Now But Will it Last?

With Morrisons announcing a halving of their profits and a 7.4% like for like sales decline, and Waitrose facing profits down 9.4%, despite delivering a bit of growth (up 1.3% in like for like sales) it seems timely to examine reasons for the seemingly unstoppable rise of discount grocers.

New store openings are a big contributor to their growth. Aldi opened 42 stores in 2013, and will add a further 54 new stores this year.

Another key factor is their ever-widening appeal. Discount grocers can no longer be seen as a specialised shopping experience favoured by the financially hard pressed. Recent IGD (Institute of Grocery Distribution) data suggests that 26% of shoppers visiting discount grocers fall into the affluent AB category compared with 27% for traditional supermarkets. Conversely 26% of DE shoppers visit discounters compared with 25% visiting supermarkets. In August 2014, 54% of all shoppers in the UK claimed to have  visited a discount store in the past month, up from 45% in August 2013, and the average spend per visit has increased by 15%.

Despite the growth, discounters rely heavily on top up shopping. They have not captured a big share of the main grocery shop. Just 15% say that a discounter is their main store. If discounters want to continue growing they need to get more shoppers spending more per visit.

In theory they seem ready and willing to do so. A third of them agree strongly that they would use discounters more if they could get their main shop there.

But before they make an Aldi or Lidl a main shop, customers want to see more products. They want more fruit and veg , and they want to buy food for their evening meal. They want to be able to buy products for special occasions, and they want a range of staples.

So basically what they are asking for is supermarket variety at discounter prices. That is a challenge for discounters as they try to fit customer demand for more products into a business model which until now has relied on a small, high volume range manufactured at rock bottom prices. Discounters also need to address the march of technology. They are a long way behind mainstream grocers in producing smartphone and tablet friendly apps designed to make shopping quicker and easier.

It is probably safe to predict further years of fast growth. Aldi is committed to a near doubling of stores by 2021, up from the current 531 to 1000. The number of shoppers visiting a discounter will rise from the current 54%, and the emergence of Netto as a Sainsbury partner will mean even more opportunities for shoppers to visit a discount store.

Thereafter the going might get tougher as mainstream grocers start fighting back with competitive pricing strategies, intelligent use of variety and choice, and customer friendly technology.