E-Commerce Represents Major Gap for U.S. Grocers

Grocers in North America have been much less active on digital, consumer-focused innovation than other retailers over the past decade. While most of their focus has been on branding, store assortment, and complex promotions, the actual possibility of having a personal relationship with consumers, wherever they might be, at any time that is convenient for them, has not been on most food retailers’ radars because of the belief that food shopping is typically done in-store, in-person.

However, recent research points to the evolving relationship consumers have with grocery shopping. Nielsen and the Food Marketing Institute found that roughly 30% of digital shoppers claim they spend 25% of their food budget online today. According to the same study, in just 5-7 years, as many as 70% of U.S. consumers will regularly purchase consumer packaged goods online!

E-Commerce Lags Behind

There is no doubt that the Amazon effect has been an important trigger for grocers in particular to start shifting the way they view their work methods, the available sales channels, and more importantly their approach to consumers. And for anyone who follows retail industry news, or participates in retail conferences (NRF, EuroShop etc.), topics such as Big Data, business intelligence, AI, customer engagement, omnichannel, etc. should be very familiar. But the main gap grocers have not yet managed to fully and successfully implement is the E-commerce solution.

The research from Nielsen and the Food Marketing Institute reveals that many retailers and manufacturers are simply not ready for the age of online grocery. While most other retail verticals have implemented a well-established E-commerce platform, including all the relevant operations such as customer reach, in-store fulfillment and pickup (and of course reasonable and timely delivery), grocers in North America have chosen to rely on external solutions like Instacart and Google Express.

New Commerce Opportunities

Grocers without such a platform, or with one that is not sophisticated enough, will have to deal with it sooner or later, no matter how well they consume and analyze data, or communicate with customers on social media, or provide a good looking app that holds recipes and digital coupons. A robust digital platform is essential, and if implemented wisely can be the foundation of connected commerce experiences. If the starting point for a grocer used to be the store location, its appearance, and the product assortment, today’s starting point must shift toward the E-commerce platform and the order fulfillment solution. As noted in the chart below, online grocery sales are poised to grow by $12 billion over the next three years; there is a tremendous opportunity waiting for those grocers that are able to quickly extend their business model to include online shopping.

A Platform for Innovation

The correct technological implementation of an E-commerce solution can be used as a platform to implement innovative mobile solutions, to communicate advanced social media content, and to apply sophisticated AI processes. The side effects of such a strategy will of course be having to figure out how to handle the additional security threats to retailer systems and to customers’ personal information, and how to adjust the conceptual approach to supply chain management. On the other hand, if applied with the correct technology and appropriate architecture, it can be a great opportunity for easy implementation of new ideas, customer journeys, and innovative technologies as soon as they are introduced to the market.

The big players such as Amazon, Walmart, Kroger, etc. have either already passed this stage or are in an advanced stage of implementing a reasonable solution. The smaller players have to rush this evolution process, or—depending on how old their systems are—maybe even consider a larger transformation in their approach to retailing.

This rush can be very risky and needs to be done with careful and detailed planning, but not all grocers have the necessary technological knowledge to do this in-house. Partners like Diebold Nixdorf offer end-to-end support for this type of transformation, with integrated solutions that help retailers no matter where they are on their transformation journey. We provide new and enhanced software solutions that support a truly connected retail environment where physical and digital channels are seamlessly integrated. Combining mobile, online, in-store, near-store and at-home consumer experiences into consumer-centric journeys, we foster an open and integrative approach based on a micro-services strategy centered around our Vynamic Retail software suite. This is just the beginning, so stay tuned for more innovations designed to help drive connected commerce for the future of retail!

Wondering how our integrated solutions could transform your store network? Let’s talk about your challenges and priorities.