StrategyDigital transformationHas the retail apocalypse come for grocery brands?

Has the retail apocalypse come for grocery brands?

With Amazon investing heavily in the grocery space, brands like Kroger, and even Walmart and Target, have no choice but to embrace digital transformation.

Over the past few years, “adapt or die” has been a common theme in the retail landscape. The convenience of ecommerce has forced brands to improve the customer experience in their physical locations. Those who don’t may find themselves on CB Insights’ timeline of retail bankruptcies. The same need for digital transformation has come for grocery brands.

Grocery shopping isn’t dead; people will always go to the supermarket. eMarketer projects that only 2.8% of food and beverage sales will take place online this year. But innovations from big players could accelerate that.

“Loyalty tends to be about convenience,” says Jim Cusson, president of Theory House, a retail marketing agency that works in the grocery space. “By integrating things like online shopping tools and free delivery, grocers are using technology to make a more convenient shopping experience. That’s what builds loyalty and creates more stickiness. If I wanted the cheapest prices, I’d just shop at Lidl every day.”

Grocery brands aren’t immune to the Amazon effect

The largest grocery chain in the U.S. (and the third largest retailer in the world), Kroger sold more than $105 billion last year. Digital sales grew 66% quarter over quarter, according to the company’s earnings report from Q1. Kroger’s investments in technology are also extraordinarily above average for the grocery sector. According to a June survey by Phononic and Regina Corso Consulting, 49% of grocery executives don’t think their industry is as tech-savvy as other retailers.

Grocery brands tech savviness

Kroger shoppers can buy groceries online and pick them up curbside. Thanks to a partnership with Instacart, Kroger also delivers. To improve the latter, Kroger also invested in British online supermarket Ocado with plans to use the company’s automation technology in warehouses.

Robotic warehouse pickers, where have we heard that before? Oh, right. Amazon. The Amazon effect has invaded the grocery store, especially since the ecommerce colossus acquired Whole Foods Market two years ago. Whole Foods gives Prime members—three-quarters of its customers—perks like two-hour delivery and discounts unavailable to non-members.

Groceries are also Amazon’s fastest-growing category. While that growth may hurt grocers, individual food and beverage brands have an opportunity to thrive.

“Grocery brands are definitely leaning in early and aggressively, but the smart brands in this space are those who are emerging or insurgent,” says Connor Folley, founder and CEO of Downstream, which specializes in helping brands boost their Amazon ROI. Folley, a former Amazon marketing manager himself, offers up Ainsworth Pet Nutrition and Amplify Brands—acquired by Smucker’s and Hershey’s, respectively—as examples.

CPG is devoid of meaningful research and development, so they typically acquire innovation,” he continues. “Amazon search advertising presents shelving exposure that has never been available with enough ad budget that you can get your products front and center to more than 30 million customers.”

Better apps and delivery options

For the grocers to flourish in the same way, they have to match Amazon in terms of convenience. Delivery options could be key there. According to a March survey by courier service disruptor Dropoff, 64% of U.S. Internet users want same-day grocery delivery.TheStreet - grocery delivery infographic

In addition to its own online grocery delivery, Walmart has Postmates partnerships in seven cities. Target shoppers also have access to same-day delivery, thanks to the brand’s acquisition of Shipt.

Apps, an area where Cusson increasingly sees grocers investing, also play a big role in the perception of convenience. In May, Market Force Information found that 44% of consumers had used a grocery app this year, up from 39% in 2017. Beyond purchasing, apps provide several ways to streamline the shopping experience, with obtaining coupons being the most common.

“A good grocery app has a lot of mapping,” says Cusson. “Cost of entry used to be products and prices, but with advances in technology, we’re seeing other benefits being laid on top. Ultimately, ease and access to product and pricing has to be paramount. Bells and whistles can make life easier, but they have to be based on a shopper’s need. If not, the opportunity for use decreases dramatically.”

Whitepapers

US Mobile Streaming Behavior

Whitepaper | Mobile US Mobile Streaming Behavior

3y

US Mobile Streaming Behavior

Streaming has become a staple of US media-viewing habits. Streaming video, however, still comes with a variety of pesky frustrations that viewers are ...

View resource
Winning the Data Game: Digital Analytics Tactics for Media Groups

Whitepaper | Actionable Analysis Winning the Data Game: Digital Analytics Tactics for Media Groups

3y

Winning the Data Game: Digital Analytics Tactics f...

Data is the lifeblood of so many companies today. You need more of it, all of which at higher quality, and all the meanwhile being compliant with data...

View resource
Giving a Voice to Your Brand

Whitepaper | AI & Automation Giving a Voice to Your Brand

3y

Giving a Voice to Your Brand

Voice commerce, or conversational commerce, is a major disruptive opportunity in US retail. It opens up the possibility of building deeper relationshi...

View resource
Mobile Messaging Masters

Whitepaper | Mobile Mobile Messaging Masters

3y

Mobile Messaging Masters

Every year the mobile market continues to grow and develop. Cyber Monday 2018 saw $2.2 billion in sales stemming just from smartphones in the United S...

View resource