Already before the COVID crisis started, online groceries has been a fast growing industry in the Netherlands. Over 2020, it is expected that the online grocery market will be 5.3% of the total Dutch grocery market, which is a 70% increase from the year before. Research firm Gfk expects that this share will further increase to roughly 7% in 2020. Considering that groceries is one of the largest industries in the retail environment and a need of any individual, the rise of online will have an obvious impact on our daily lives. A whole new shopping experience is created for consumers, in which they save time from not having to go to the physical store anymore and save energy from not having to carry kilo’s of groceries. The rise of online groceries also results in new players and changing business models of incumbents. Founded in 2015, online supermarket Picnic is already aiming at a yearly revenue of roughly €500 million. Following Picnic’s “free delivery, lowest price” guarantee, industry leader Albert Heijn has launched AH Compact and is therefore differentiating from its traditional model of charging a fee for grocery delivery.
As we can see, consumers’ place of purchase is changing from the shop floor to the couch. However, consumers’ need for food and beverages won’t. Coca-Cola will still sell sugar water and Kraft Heinz will still sell beans, so what does the rise of online groceries mean for them? Let’s have a look at some important elements of online groceries.
First of all, the digitisation of grocery shopping will have an impact on packaging of goods. Considering the fact that goods will more and more be purchased online and instead of store shelfs, producers can rethink the way they package their goods. For instance, producers often make packages much bigger than is needed (we all know the feeling of disappointment when opening a bag of chips) in order to increase visibility on the store shelfs. Since the decision is made online, the package of a product is not that important anymore for the decision making, which means that a producer can reduce the size of the package and therefore have less costs and waste of materials. Also, online supermarkets will demand smaller packages in order to have more efficient utilisation of space in their delivery vehicle. For this reason Picnic does not offer crates of beer. As such, Heineken and AbInbev already developed alternative multipacks as a substitutes for beer crates.
Moreover, online consumers behaviour is very different from in-store consumer behaviour. Particularly, impulse purchases which play an important role in physical stores are lost due to less impulse factors in an online environment. Lighting, store layout, smell and sound in a in-store environment often affect the consumer’s decision process. Online, consumers are limited to the information they see on their display. Often, they only shop from a mobile device which only shows a few products at the time. As such, the positioning of their products in an online supermarket will become increasingly important for food and beverage producers for whom impulse behaviour is important. In order to stimulate sales online, they should allocate more of their marketing budgets to retail media, which is advertising at the point of purchase. Retail media will allow them to influence the ranking position of their products and advertise their products through banners at the online supermarket.
Lastly, producers of food and beverages should care about online because of data. Traditionally, it is difficult to analyse customer behaviour in physical grocery store. However, online stores are able to capture much more data by tracking consumer behaviour through their applications. Food and beverage products should partner up with online stores and invest in data and insights. For example, online allows you to analyse how many consumers view and click on a product which they do not end up buying. Who are those customers? Why are they interested but do not buy the product? What do they buy instead? This data can be very valuable to FMCGs as it helps them to optimise their products.
Sources
https://www.businessinsider.nl/albert-heijn-ah-compact-picnic-online-boodschappen/
https://www.businessinsider.nl/picnic-omzet-2020/
Fassnacht M., Wriedt S. (2011) Online grocery shopping: Determinants of online impulse buying behavior. In: Wagner U., Wiedmann KP., von der Oelsnitz D. (eds) Das Internet der Zukunft. Gabler. https://doi.org/10.1007/978-3-8349-6872-2_14
