We are also seeing an increase in mobile shopping and price transparency, both disrupting traditional grocery selling models.
(PRWEB) September 24, 2014
Ottawa, Canada: Grocery represents one quarter of U.S. retail sales; however, with the recent entry of Amazon and major mass merchandise players such as Walmart into online grocery, the industry as we know it will never be the same.
“All signs point to a critical inflection point in this market, including the success of disruptive new delivery-based business models and double-digit growth in the prepared foods category, reflecting more single households and a key facilitator to increased online grocery sales,” says Jenn Markey, vice president of marketing, 360pi. “We are also seeing an increase in mobile shopping and price transparency, both disrupting traditional grocery selling models. The question facing today’s grocery retailers and CPG manufacturers are: ‘What to do online, when and how?’”
According to leading price intelligence vendor, 360pi, while the digital grocery shelf may be daunting, it is not uncharted territory. The good news for U.S. grocers is that Amazon has had limited success in the U.K. market, which means there is plenty of information for retailers to learn to get a head start in the U.S. Below are some best practices to help grocers and CPG manufacturers navigate online grocery growth in the U.S. market:
- Survey the online grocery landscape: Both grocers and CPG manufacturers need to know who is selling which products, where and at what price point. Armed with competitive pricing and assortment information, grocers can identify incremental margin and sales opportunities – online and in-store. With this information, CPG’s can address threats to their brand and channel effectiveness by identifying and addressing marketplace threats.
- Be strategic when picking online categories: Understand which categories are leading in online penetration – today, these include breakfast foods, snacks, coffee and pet food. One effective way to gauge online category success is to leverage online keyword searches as a proxy for online consumer demand. This also helps determine SKU elasticity online vs. in-store.
- Package and price for online: This is typically where Amazon wins, by selling larger pack sizes at higher prices to facilitate online sales and mitigate the cost of shipping. A typical grocer starts with exactly the opposite model – single packs at low individual price points and an aversion to home delivery. CPGs and grocers must rethink packaging and pricing for online success.
- Price-per-unit vs. price-per-volume: Whether you’re a retailer, manufacturer or even a shopper, understand the game being played. Price-per-unit is typically how retailers navigate for online channel success. Price-per-volume helps CPGs understand optimal online pack sizing and pricing.
- Embrace zone-based strategy: Grocery and regional pricing are natural allies. Online zones need to reflect the local supply chain reality and can be blurred from a customer perspective with free or subsidized shipping. For CPG manufacturers, online represents an opportunity to create regional products and brands to reflect different geographic digital penetration and shopping preferences.
- Manage share of digital shelf: Grocers should avoid over-concentration on one or two online channels. CPGs should be especially wary of the “Amazons,” which include Amazon.com, AmazonFresh, AmazonPantry and Amazon Marketplace. For retailers star struck with models like Instacart, recognize that this is also a form of channel disintermediation and loss of customer interface and perceived value.
For more information about how to navigate through the online grocery waters, download this free report from 360pi.
360pi will be at the 2014 Shop.org Annual Summit, booth #2525. If you would like to meet with 360pi at Shop.org, please contact info(at)360pi(dot)com.
360pi derives profitable insights from product and pricing big data to help leading omnichannel retailers, etailers, and manufacturers compete and win in a price transparent world. 360pi's customer base accounts for over $US100 billion in annual retail sales and includes Ace Hardware, Build.com, Overstock.com, and RIS Fusion award-winner Best Buy Canada. 360pi monitors millions of products with unprecedented accuracy to give retailers and manufacturers real-time visibility into the market with full awareness of the competitive pricing landscape to "right price" for their respective customers. Ultimately, 360pi helps customers make smarter pricing decisions to drive increased revenues and margins.