Online Grocery Sector Needs a Little Marketing

If grocers can raise customer awareness of online grocery shopping and drive consumer adoption, Datamonitor found the online grocery sector can reach a value of $26.8 billion by 2005.

Datamonitor’s report, “Online Grocery in the US, 2001,” found the market for online grocery shopping is growing strongly, with total consumer expenditure increasing at a compound annual growth rate of 108.6 percent from $0.8 million in 1996 to $1.5 billion in 2000. But at the same time, consumers are deterred from using online grocery shopping services because they are unaware of such services in their local area.

“Grocery executives are not accustomed to building brand awareness and marketing on the Internet,” said Erlina Hendarwan, consumer analyst with Datamonitor. “Traditionally, they have limited marketing to a localized audience. In order to exploit the market potential of online grocery, grocery executives should begin to build brand awareness and consumer demand now, in preparation for online grocery developments in the future.”

On the technical side, online grocers need to align their front-to-back end office systems to provide adequate order fulfillment, service availability and customer support. According to the Datamonitor, online grocers must implement marketing and production plans that include an efficient logistics and supply chain system and link automated order processing with personalized marketing efforts. In the future, concerted CRM techniques and advanced technology developments such as broadband Internet access and wireless technologies will drive the growth of online grocery shopping.

Datamonitor’s report said that brick-and-mortar retailers who invest heavily in online shopping services will emerge as the most important players in the online grocery industry. Spurred by consumers’ need for convenience, they will provide consumers with a full range of grocery items and a more flexible and less expensive order fulfillment system of in-store pick-up. The ability to leverage the value of their existing brand, loyal current customer-base and preexisting infrastructure will result in lower costs and allow them to reach profitability at a faster rate.

The “Online Grocery Buying” study by Gomez, Inc. and commissioned by Supermarket News found that about 11 percent of Internet users surveyed fall into the category defined as Online Grocery Buyers, consumers who have purchased groceries online in the last three months. A further 11 percent are Deserters, defined as users who have purchased groceries online in the past, but have not done so in the last three months and 78 percent are Offline Buyers, who have never purchased groceries online.

The study also put the monthly amount online grocery buyers are spending on groceries, both online and offline at $334. For grocers, the Internet presents an opportunity to build a more efficient operation and strengthen consumer relationships if they can shift a greater portion of the $334 monthly spending to the online channel.

As with buying most products online, the primary motivations to purchase groceries online are convenience related, such as the ability to shop from home, have products delivered or shop at any time during the day. The Gomez study revealed that lower prices and wider product assortments are not the key motivating factors for online grocery buyers.

There is plenty of room to improve the convenience of grocery shopping. A recent Harris Interactive ShopperInsight study found that lack of checkout staff is by far the single most important factor affecting customer satisfaction with grocery shopping.

The Harris study, conducted among 5,797 online respondents in late February/early March 2001, showed 35 percent of supermarket shoppers indicated that their primary supermarket (where they buy most of their groceries) does not have enough check out staff on duty during the times they shop. The second most commonly reported problem that had an effect on customer satisfaction, at 22 percent, was a lack of staffing in specialty departments.

Respondents were asked how their primary supermarket performed across more than thirty attributes, considered to be possible causes of dissatisfaction, and to indicate their overall satisfaction with that supermarket on a ten-point scale. Four of the top six reasons for overall dissatisfaction with supermarket shopping have to do with inadequate staffing and with inefficient or unfriendly service.

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