How customer-centricity is the key to the online grocery market

The British online grocery retail market is set to grow by almost nine per cent over the next five years according to IGD—meaning the UK has one of most voracious appetites for grocery delivery. But that means supermarkets are now facing competition from multiple sources, including traditional retailers offering home delivery, digital disrupters like Amazon, and new players with distinct, farm-fresh offerings, like Riverford and Farm Drop. But rather than crying over spilt milk (or split bags), supermarkets can learn from disrupters to leverage their natural strengths to win in the online grocery market. In essence, a data-led, locally optimised approach to decision making is critical, whereas a one-size-fits-all strategy is doomed to failure. Disrupting the original disrupters It is easy to forget that supermarkets were once a revolutionary force in grocery retailing. They supplanted butchers and bakers across the land by offering the convenience of getting all your groceries from one shop. But now the convenience of doing everything in one big shop has been surpassed by the ease of receiving the goods at home. Ocado is now the UK’s fastest growing grocery retailer and Amazon’s UK grocery arm, Amazon Fresh, is projected to achieve 40% growth by 2020. Amazon has done so well not necessarily because of the inherent ‘quality’ of the products it delivers, but because of its relentless focus on service and efficiency improvements. The latest move to complete deliveries while customers are not even home could be a game-changer. Rather than just reacting, supermarkets need to instead focus on what they are offering—and double-down on their own USPs. The supermarket's advantage is intact One huge advantage supermarkets have is the huge history and record they already have with customers. While the internet was still very much in its infancy, supermarkets had already created loyalty cards to provide a tailored, data-led offering to customers. They now have rich insights going back 20 years. Knowledge is power, and although these disrupters may be doing things differently, they are starting way behind the curve in terms of understanding the market. Effective use of the data they have is critical. The questions they need to ask themselves include: What are the real time insights and updates consumers can benefit from? Many ask for feedback after the delivery, but how quickly is this integrated into the process? Who should the driver deliver the shopping to if the customer is out? How can I use data to smartly select the right substitutes based on the customer’s previous behaviour? Supermarkets are also well placed to succeed because they are built on logistics anyway. They are perfectly geared up for efficient home delivery given their size, number of locations, and ability to get produce wherever it needs to go. Optimising for local Ultimately, the key to winning with home delivery is a local-first strategy. Half of all Google searches now carry local intent, primarily as a result of the mobile-first nature of internet users. Yet supermarkets, with their legacy of central planning, have been slow to react to this shift in consumer behaviour. It is remarkable that you still see so few big brands doing local advertising. Optimising for local is connecting your audience with the right messaging, using the right vernacular, and promoting the right products. Of course, it's not easy to do, but the effects are transformational. It might mean creating thousands of tailored ads for customers based on the triggers that will engage them. For younger consumers, this is particularly profound. They will not have the attachment to a brand that older consumers might have. What is going to make them want to use your brand versus any other? My own experience is telling. I moved house a while ago, a long way from the nearest physical location of my regular supermarket. This supermarket should be able to tell from my loyalty card activity that I’ve moved. But there was no activity other than vouchers to go in store. This seemed very archaic. As I'd moved some distance from a store, a fairly simple use of location data should have automatically looked to convert me to becoming someone who would become a home delivery customer. Using the data to read the signals and then tailoring the offering is key. With that in mind, there are four groups supermarkets should consider targeting for home delivery. Key audiences to engage with for home delivery: People moving out for the first time This is an audience entering a scary new world of responsibilities as they fly the family nest. As an audience, they are likely to be working hard—likely to cover astronomical rents—and possibly playing hard. How can you win their loyalty at this time of change in their lives? Think about the offers and products they might want. Many major players have a homeware section, ideal for someone furnishing a new flat and being delivered at home. By helping them now, you can create goodwill and a brand halo effect. Couples The issue here is two opinions becoming one. What do you need to do to get your brand to be the supermarket of choice? As anyone who has watched Location, Location, Location will attest, one party in the relationship generally becomes the decision maker. If the data shows that you’ve suddenly stopped shopping, you are clearly not the decision maker. You lose influence. A canny supermarket will offer deals for both couples to entice both to use the brand. Families with young children Convenience is a big driver with time-pressed families juggling work and childcare, which means home delivery can be a godsend. However, one criticism of home delivery is the perceived lack of freshness and not being able to look and feel the product before buying. In offering home delivery, emphasising the freshness of your products can win customers among this audience. Older generation loyal customers This is an audience that often gets overlooked but is growing at an exponential rate. According to the ONS, the population aged 65 years and over is projected to grow by around 50% between 2016 and 2039. If you see an ageing segment and the top end stops frequenting a store, this could be the signal to offer home delivery. For this age group, emphasising the convenience—and doing things at their own pace—is likely to appeal. The experience also needs to be thought through. Do you focus home delivery slots earlier in the day? What are the qualities of the delivery driver? Getting the same person every week may well be critical to an audience more used to the social aspect of shopping. By using data smartly and relying on their strengths, traditional supermarkets can steal a march on the new disrupters and remain relevant to customers. Mike Fantis is the VP and managing partner of DAC UK, the local digital performance marketing specialists.

How customer-centricity is the key to the online grocery market

Check out our free weekly podcast

Read Next

How can the physical retail sector win its battle to survive?

Five lessons from the demise of The Body Shop

Sustainable packaging and e-commerce: what more can be done?

Is AI retail’s friend or foe?

“The old storefront model is dead”: the future of retail are pop-up shops

How can the physical retail sector win its battle to survive?

Five lessons from the demise of The Body Shop

Sustainable packaging and e-commerce: what more can be done?

Is AI retail’s friend or foe?

“The old storefront model is dead”: the future of retail are pop-up shops

Pop-up shops: a strategy for retailers

BP appoints convenience retail VP and senior deal manager

Moss to open new store in Gloucester Quays

Monsoon Accessorize profits fall amid ‘difficult trading’

Lidl to invest £500m into British pork

Ted Baker’s European arm faces collapse, 149 jobs at risk

Check out our free weekly podcast

Read Next

How can the physical retail sector win its battle to survive?

Five lessons from the demise of The Body Shop

Sustainable packaging and e-commerce: what more can be done?

Is AI retail’s friend or foe?

“The old storefront model is dead”: the future of retail are pop-up shops

Related Articles

Pop-up shops: a strategy for retailers

BP appoints convenience retail VP and senior deal manager

Moss to open new store in Gloucester Quays

Monsoon Accessorize profits fall amid ‘difficult trading’

Lidl to invest £500m into British pork

Ted Baker’s European arm faces collapse, 149 jobs at risk