With the ease of purchasing food with one click, picking it up in store or getting it delivered straight to your door, more and more consumers are profiting from online food retailing. eFood is attracting the attention of customers, retailers and investors across Europe.
The Nordics – a benchmark for Europe?
It’s particularly favourable for online retailers in regions with a low population density. Take Scandinavia for example, online retailers are generating extraordinary turnovers in the online grocery segment because people living in those areas have to travel long distances to get to their nearest store. Online retailing has a huge market potential to fill this supply gap and investors have already identified this.
For international retail chains, online food retailing has become increasingly important. Philip Clarke, CEO of retail giant Tesco, even declares that it’s his company’s future: “Food shopping online is all the growth we have in our core food business in the UK.”
Furthermore, food and consumer goods research group IGD forecasts that eFood sales are set to double by 2016 in five key Northern European markets: Britain; France; Germany; Switzerland; and the Netherlands. But this growth is coming mainly from occasional buyers rather than loyal customers.
Recent studies show that for many consumers, the most important buying motives are home-delivery, curiosity, attractive prices and time saving. Yet the biggest barriers to a wider acceptance include restricted shopping possibilities, a lack of visibility and tangibleness of online products, and no guarantee of product quality.
Today, the online grocery market faces two key challenges: Gaining customers and maintaining loyalty.
Individualisation is an expected service
Online food retailers should focus their efforts on adding value – connecting their offer with an attractive price promise. With the help of a transparent and efficient supply chain, fair return possibilities, good information and a detailed customer review system, the online food retail market can become an attractive alternative to bricks and mortar stores.
Beyond the auxiliary and ancillary services, like predefined cart composition, individual product branding or subscription and flat-rate offers, retailers can build ecommerce models in the food trade to make them more attractive to the broader public.
“Ecommerce is interactive commerce. The individualisation according to customer preferences is an animated counterpoint to the hardly emotional purchase in the brick and mortar grocery store,” claims Alexander Ertner, vice-president of the Working Committee for food trade, bvh.
Profitability by continuous learning
Very few online food retailers have ever succeeded in gaining customer loyalty from occasional buyers. However, already there are some promising concepts that can make shops more attractive for regular customers. For instance, a loyalty scheme in connection with customer profiles or a wish list functionality ensuring that the product range is always adapted to customers’ needs.
Joost W. van der Laan, an independent consultant for Retail Economics, sees the possibility to quickly react to customer feedback as a major advantage of online retailers against brick and mortars: “The most promising communication feature is the possibility for customers to respond to the retailer’s information and marketing mix elements. A retailer may solicit assortment suggestions and complaints. The internet makes it possible to use customer complaints as powerful drivers for quality improvement in the company.”
Retailers operating web shops should also focus on an easy customer journey. Only by doing this will they ensure that customers are willing to return. The correct interpretation of the search query can be sales relevant and avoids losing the customer to the competitor, who is only one click away.
Investments in product data and usability
Online pure players are saving costs on the sales area and sales forces required for bricks and mortar stores, but these economised resources should be invested in the right areas.
Dr. Mirko Warschun, partner at A.T. Kearney, says: “Retailers could profit from the fact that on the internet it is much easier to implement a clear connection between the product and other specific information than in a supermarket. In contrast to the offline world, which requires heavy investment in screens, information can be made available, updated and adjusted to the current offer with ease. Additionally, with the help of intelligent up- and cross-selling methods the average receipt can be increased.”
Delivering the right content to the right customer is essential for high turnovers and conversions. Andreas Wagner, product manager of FACT-Finder argues: “Investments in product data and content ensure ROI is reached quickly, when made available to customers via search and navigation functionality. Thus, content delivery is as important as content generation.”
Finding the right business model
With regard to the company’s earning power, the choice of business model is crucial.
Centre of distribution with delivery: When reaching a four-digit number of orders per week, a centre of distribution pays off due to low labour costs. From here, the merchandise is delivered to the customer’s home, something which German online retailer Lebensmittel.de has offered for several years providing total shopping convenience.
But although several online merchants operate this model successfully, it doesn’t guarantee automatic success – as the case of Amazon proves. In July 2010, it began to sell eFood in Germany, but due to several external Amazon suppliers, which priced their own forwarding expenses and delivered products in separate packets, the service was not attractive enough to become established.
Centre of distribution with the customer (“Click-and-Collect”): This time the saving concept is based on the “Drive-in” idea, where consumers order online and pick up their merchandise at a centre of distribution; in most cases not having to get out of their car. It’s a well-known model in the UK and France, with the pickup process taking only a few minutes.
Addressing customers everywhere: Cross channel distribution
The future will show to what extent online pure players will be able to gain market share in the food trade. It is unlikely that brick and mortars will suffer in the short term, as customer satisfaction with existing shopping possibilities is too high, at least in most countries.
With a cross channel orientation retailers are combining the advantages of both worlds – online and offline. It’s vital that a cross channel solution is applied which proves its ability to provide local availability and other relevant buying information at every touchpoint. Location-based service guarantees that daily updates and local offers in brick and mortar stores are integrated online and made available via smartphone, PC or tablet devices.
Find out more at www.fact-finder.com/solutions-for-retailers
Originally posted January 13 IMRG