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Radical The Digital UK Grocery Shopper 2010


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Overview of online and mobile grocery shopping in the UK

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Radical The Digital UK Grocery Shopper 2010

  1. 1. 1       THE  RADICAL  COMPANY:  THE  UK  DIGITAL  GROCERY  MARKET  2010         ,  shopping  will  be  series  of  links  and  connectivity  when  a  collective  dialogue  takes   place  in  all  places  and  at  all  times,  between  shopper,  retailer  and  brand  whenever  and  wherever   the  shopper  wants  this  to  take  place.   (Source:  Graham  Thomas  2005  when  the  first  work  began  on  expanding  outside  of  a   single  web  platform  into  mobile  and  other  devices.)             Radical  Company   a:  43/45  Camden  Road.    London.    NW1  9LR   a:  10100  Santa  Monica  Boulevard.    Los  Angeles.    CA.    90067   a:  9  Ann  Siang  Road.    Singapore.    069690     t:  +44  (0)  845  658  5909   Contact:  
  2. 2. 2       1.  The  Future   More  grocery  shopping  will  take  place  through  digital  channels  albeit  from  a  base  of  currently   representing  only  4-­‐5%  of  total  grocery  sales.       Share  of  total  grocery  spend  shows  that  online  has  continued  to  grow  during  2010  with  Tesco   showing  greatest  growth.  Currently  Tesco  on-­‐line  is  worth  £1.2bn,  grew  by  16.1%  year-­‐on-­‐year  fiscal   2010  vs.  2009,  and  captures  some  50%+  of  online  sales.  (Source:  Tesco)     Ocado  in  their  company  presentations  predict  a  x10  growth  for  the  next  ten  years.       Home Delivery Share of Till Roll Grocers 0.0 0.2 0.4 0.6 0.8 1.0 1.2 1.4 1.6 1.8 2.0 2.2 2.4 2.6 Apr222007 May202007 Jun172007 Jul152007 Aug122007 Sep092007 Oct072007 Nov042007 Dec022007 Dec302007 Jan272008 Feb242008 Mar232008 Apr202008 May182008 Jun152008 Jul132008 Aug102008 Sep072008 Oct052008 Nov022008 Nov302008 Dec282008 Jan252009 Feb222009 Mar222009 Apr192009 May172009 Jun142009 Jul122009 Aug092009 Sep062009 Oct042009 Nov012009 Nov292009 Dec272009 Jan242010 Feb212010 Mar212010 Weekly 3 Point Centred Moving Average Share(Expenditure) Tesco Internet Asda Internet Sainsbury's Internet Waitrose+Ocado Internet
  3. 3. 3     IGD  forecasts  that  £7.2bn  will  be  spent  on  food  and  grocery  shopping  online  by  2014,  almost  double   off-­‐line  growth.       (Sources:  IGD/TNS)   Fundamentally,  growth  will  come  through  the  often  unsaid  issue  that  grocery  shopping  in-­‐store  is   seen,  by  and  large,  as  a  drudge.  It  is  a  task  that  people  want  to  do  with  the  minimum  of  fuss  -­‐  though   many  issues  still  exist  and  the  off-­‐line  shopper  experiences  a  series  of  stress  points   OFFLINE SHOPPER JOURNEY STRESS HOTSPOTS   0 5 10 15 20 25 30 35 40 45 50 2007 2008 2010 2013 2014 2025 1.8% 2.3% 4.0% 9.5% 12.0% 40.0% Total  Online  Grocery  Sales  (%  of  off-­‐line)
  4. 4. 4     Other  factors  that  will  drive  growth  include:   -­‐     -­‐  the  potential  success  of  Amazon  grocery,  currently  in  test  (though  there  is  little  indication  in  the  US   that  a  similar  offering  is  driving  conversion  to  online  grocery  shopping)   -­‐  the  opportunity  for  the  discounters  to  enter  the  market  e.g.  Lidl  and  Aldi   -­‐  some  strong  growth  seen  among  pure-­‐play  retailers,  e.g.  Zooplus  in  the  pet  supplies  sector  (see   chart  over  page)   -­‐  further  changes  in  demographics  that  will  likely  drive  more  shoppers  into  on-­‐line  for  their  main-­‐ shop  (and,  as  an  aside,  there  will  be  an  increase  in  convenience  stores  for  in-­‐between  top-­‐up  shops).   -­‐  Gen  Y  shoppers  are  approaching  grocery-­‐buying  age,  and  are  comfortable  doing  so  online   -­‐  but  the  middle-­‐aged  as  they  grow  older  are  also  more  comfortable  shopping  on-­‐line   -­‐  widespread  broadband  access,  making  on-­‐line  grocery  shopping  easier,  more  stable  and  quicker   -­‐  greater  choice  through  more  products  (the  long-­‐tail)  and  the  need  for  more  information  on  issues   such  as  health,  ingredients  and  provenance   -­‐  the  desire  for  customisation  and  digital  platforms  allow  e-­‐retailers  to  personalise  the  shopping   experience   -­‐  price  comparison,  free  delivery,  increasing  car  costs  will  all  make  on-­‐line  more  attractive    
  5. 5. 5     GROWTH  OF  ZOOPLUS ACROSS  EUROPE AND PREDICTIVE  GROWTH  SHOWS  OPPORTUNITY  FOR   SPECIALISTS ) 300m mid-term goal NB: Pets at Home just announced (all) sales up by 15.7% Source: Zooplus Finally  there  is  the  expansion  of  grocery  shopping  across  mobile  platforms  thereby  offering  further   opportunities  to  shop  or  capture  needs  and  indulgencies  through  instant  lists.   On  mobile,  currently  5%  of  all  Ocado  orders  are  through  the  mobile  phone.  (Source:  Ocado).  Tesco   report  that  close  to  1.5m  Tesco  apps  have  been  downloaded.      
  6. 6. 6      scan  bar  codes  and  add   them  to  their  shopping  list.  This  could  be  done  in-­‐ on  an  ad  for  example.  All  of  this  encouraging  further  and  extended  purchases.                
  7. 7. 7     2.  Characteristic  of  on-­‐line  versus  off-­‐line   GENERAL DIFFERENCES / SIMILARITIES ON-LINE OFF-LINE GROCERY © Kantar Retail 2010 P|Nestle Purina UK|1119|1119000a|GT(lh) 37 Measure Online Offline Numbers Smaller Larger Demographics Younger/Older Families More affluent Everyone Shopper Missions Main Shop All Shops Basket Size £90-125 Average is less but so is main shop average Shopper Needs Same Same Time to Shop (Main Shop) 25-40 mins 70-90 mins   GENERAL DIFFERENCES / SIMILARITIES ON-LINE OFF-LINE GROCERY 38 Measure Online Offline Price Comparison Possible Limited but on way with mobile SKUs Unlimited Limited Interactive Yes Limited but on way with mobile Trade Promotions Virtual and greater possibilities Becoming more confusing Pricing Flexible Inflexible  
  8. 8. 8     GENERAL DIFFERENCES / SIMILARITIES ON-LINE OFF-LINE GROCERY 39 Measure Online Offline Shopping Vision Binocular Peripheral Impulse Less More Purchase Decisions Predetermined Less   (Source:  Radical)                                  
  9. 9. 9     3.  Grocery  Retailer  Objectives   Putting  aside  that  few  retailers  have  made  a  profit  from  on-­‐line  grocery  shopping,  overall  retailers   should  be  seeking  the  following  benefits:   Increased  revenue  through  increased  penetration,  improved  browser-­‐to-­‐buyer  conversion,   bigger  basket  size  and  (possibly)  cross-­‐     Increased  loyalty  (visit  frequency  and  basket-­‐size)  by  improving  the  individual  customer   experience  online   Maximised  media  and  affiliate  sales  opportunity  by  delivering  advertising  messages  to  the   right  audience  at  the  right  time,  and  by  keeping  customers  on  the  site  for  longer.  This   achieved  through   More  selling   Better  selling   Improved  ad  inventory  placements   Enhanced  targeting   Enhanced  reporting  &  analysis   Key  Strategies  to  increase  revenues  per  visit  include:   Grocery  cross-­‐sell  area  in  aisles   products     Non-­‐food  cross-­‐sell  area  in  aisles     Alternatives  &  compliments  within  product  information   Ranking  of  products  within  categories  (aisles,  search  results)  so  that  the  most  relevant  come   first    rather  than  alphabetical  order     Prioritisation  of  promotions  within  featured  space  to  drive  participation     Targeted  communications  on  key  landing  pages  (branding  messages,  trade  driving  messages)   to  help  move  shoppers  through  the  site     However  the  single  biggest  driver  of  growth  will  be  personalisation...  
  10. 10. 10     THREE STREAMS OF PERSONALISATION Targeted promotions / events Targeted banner ads Targeted content (e.g. My Local Retailer) Filtered range: only show what is relevant to my needs Personalised product recommendations Personalised ranking of search results Customised look & feel eg. My Home Page Customised functionality eg. My Virtual Home, My Virtual Model Wish lists We know you, regardless of channel of contact (online, mobile, store, driver, call centre centralised and coordinated communication) Thumbs up/down: did you enjoy the products we recommended? Show a summary of my recent purchases, viewed items, etc. What do customers need? How do we deliver this? Make your messages relevant to my interests and needs Help me deal with choice overload Allow me to tailor how I shop, and how I interact with retailer Remember me the next time I visit on and offline 1. Predictive: Behavioural targeting 2. Reactive: User driven customisation 3. Proactive: CRM                              
  11. 11. 11     4.  Understanding  the  Digital  Shopper   Today,  cross-­‐platform  experiences  demonstrate  the  integral  nature  of  shopping  wherever  it  takes   place:   THE SHOPPING EXPERIENCE: INTERNET PLAYS INTEGRAL PART OF THE PROCESS 54 Discovery The shopper often takes an iterative path to making their purchase decision. PurchaseTrigger There are several circumstances or situations that initiate a shopping experience. Decision to purchase online or off is made once the criteria (best price, most convenient,etc.) has been fulfilled. Passions Product Service Life event Offline Online & Offline Discovery path Necessities Social events Lifestyle enhancement Forums Content sitesAuctions/ Classifieds Sponsored sites Pop ups Email Banners Friends/ Family Read reviews Store visit Advertising TV Radio Print Price comparison sites Advertising Coupons/ Discount deals Word of mouth Search Website Purchase criteria fulfilled Online       SIGNIFICANT  BEHAVOURAL  DIFFERENCES   -­‐  e-­‐shopping  is  a  fundamentally  different  experience  from  off-­‐line  shopping.  This  affects  shopper   behaviours  and  purchase  patterns.     -­‐  the  shopper  journey  is  critically  different  on-­‐line  than  off-­‐line  and  there  is  a  different  relationship   between  the  shopper  and  the  retailer.   -­‐  e-­‐ -­‐line  but  continue  to  use  off-­‐line   shopping  for  other  shopper  missions.  However  the  on-­‐ -­‐line     MORE  HABITUAL   -­‐  as  the  on-­‐line  sh   this  throws  up  challenges  when  wanting  to  increase  basket-­‐size  both  in  terms  of  value  and  the   number  of  unique  products.  
  12. 12. 12     -­‐  purchase  decisions  are  significantly  more  likely  t are  a  key  mechanism  to  help  the  on-­‐line  journey.  There  is  less  willingness  to  try  new  brands  online  or   to  switch,  cross-­‐trade  or  upscale.   -­‐  grocery  e-­‐retail  favours  market-­‐leaders;  it  favours  habitual  purchases.   OPPORTUNITY  TO  DRIVE  LOYALTY    -­‐  e-­‐retail  shoppers  are  more  loyal  to  a  single  retailer  than  they  are  in  the  bricks  and  mortar  world.  In   the  UK  off-­‐line  shoppers  on  average  shop  at  2.7  grocery  retailers;  in  e-­‐retail  it  is  1.3.  However,  on-­‐ line  and  off-­‐line  loyalty  is  different:  on-­‐line  loyalty  is  currently  driven  by  absence  of  negatives  and   lack  of  retailer  choice  than  off-­‐line  where  loyalty  is  a  more  considered  choice.   -­‐   -­‐  visitors  spend  on  average  between  45-­‐70  minutes  on  a  site  and  will  visit  between  25-­‐ 50+  pages  dependent  on  the  number  of  unique  items  they  buy.   -­‐  Loyalty  varies  significantly;  one  large  grocery  retailer  only  has  15%  of  shoppers  returning  in  2009;   another  has  65%+.     BUT  SHOPPER  NEEDS  REMAIN  THE  SAME...   Variety Seekers: enjoy rich content and peripheral purchases 10% Browsers: Prepared to seek information but will considered (will be experimental) 30% In and Out: wants to shop as quickly as possible (the least likely to x-shop and stretch basket) 60% THREE KEY TYPOLOGIES OF ONLINE SHOPPER 43   (Source:  Radical)  
  13. 13. 13     On  average  some  40-­‐70  grocery  items  are  being  ordered  in  a  typical  main  basket  shop  with  a  value   that  may  exceed  £120.  If  this  done  outside  of  using  a  favourites,  this  may  take  upwards  of  an  hour   and  is  perceived  as  being  laborious  by  customers.  And  this  main-­‐shop  happens  on  average  once   every  ten  days.   Variety  Seekers:  shop  form  the  broadest  range  of  sources  and  are  likely  to  undertake  pre-­‐planning   before  embarking  on  shopping  mission.  Will  be  the  most  valuable  shoppers  and  the  ones  where  new   applications  have  considerable  opportunity.   Browsers:  Have  a  loose  plan  and  will  seek  inspiration  in-­‐store;  navigation  essential  for  them.   They  have  the  smallest  average   basket  size  and  are  the  segment  that  need  to  be  laddered.            
  14. 14. 14     A  typical  shopper  experiences  a  series  of  highs  and  lows  during  the  shopping  experience  (as  they  do   when  shopping  in  the  bricks  and  mortar  world).  The  retailer  should  be  ensuring  that  the  highs  are   enhanced  and  the  lows  eliminated.   EMOTIONAL HIGHS & LOWS: GROCERY SHOPPING -4 -3 -2 -1 0 1 2 3 4 0 2 4 6 8 10 12   This  should  focus  on  the  four  key  needs  that  shoppers  consistently  play  back  as  being  crucial  to  the   shopping  experience     SHOPPER  NEEDS    THE  SAME  4  EVERYWHERE  whether  on-­‐  or  off-­‐line   -­‐   .  Wherever  shoppers  shop  the  number  one  need  is  to  be  able  to  find  the   products  that  they  are  looking  for.   -­‐  Having  filled  their  basket  they  want  to  minimise  queue  and  check-­‐out  time  and  other  stress  hot-­‐ spots   -­‐  However  during  their  shopper  journey  it  is  critical  to  make  it  easy  for  customers  to  pick  up  bargains   -­‐  And  finally,  to  inspire  customers  to  buy  outside  their  everyday  repertoire  as  most  on-­‐line  grocery   -­‐   But  above  all  else:  make  the  experience  better  than  shopping  in-­‐store.    
  15. 15. 15     This  leads  to  some  fundamental  rules  in  building  the  site  architecture:   Improved  Navigation     Helping  customers  easily  find  specific  items  they  are  looking  for   Promotions   Ensuring  these  are  prominent,  ta   Inspiration     Introducing  customers  to  new  /  complementary  /  more  suitable  products   Creating  a  shopping  environment  they  find  engaging/enticing/welcoming   Inviting  them  to  continue  journey  with  other  parts  of  e-­‐retailer  offering  post  checkout   Personalisation   Predicting  customer  needs,  e.g.  based  on  life  stage  and  previous  behaviours   Check-­‐Out   Ensuring  this  is  not  only  quick  and  easy  but  that  the  route  to  check-­‐out  is  the  fastest   possible.        
  16. 16. 16     5.  Creating  Connectivity    and  connectivity  when  a  collective  dialogue  takes   place  in  all  places  and  at  all  times,  between  shopper,  retailer  and  brand  whenever  and  wherever     Using  differing  platforms  creates  connectivity.  (Though  the  danger   processes  are  created  instead.)  Platforms  and  tools  are  means  to  make  the  shopping  process  easier   across  the  shopper  journey    whether  shopping  takes  place  in-­‐store  or  through  digital  platforms.   The  simple  process  is  Plan,  Search,  Find,  Order  and  Delivery.  As  with  most  of  this  note  the  simplicity   belies  the  problem  of  getting  this  right  without  even  including  the  complexity  of  differing  segments   having  differing  needs  and  emphasis  at  each  o  f  these  steps.   The  purpose  of  using  mobile,  3rd  party  web-­‐sites  and  other  digital  platforms  (in  and  out  of  home)  is   to  enable  individuals  to  select  tools  and  paths  that  suit  them  best.  (And  this  includes  e-­‐mail,  SMS,   call  centres  and  so  on)   This  means  that  all  processes  have  to  be  device  neutral.     This  also  means  understanding  the  path  to  conversion  and  at  what  touch-­‐points  it  can  take  place:               search e-­‐ mail/SMS retargeting affiliates
  17. 17. 17     5.1  Mobile   While  all  the  headlines  ar M-­‐sites  that   will  most  influence  shopping  behavioural  change  in  the  future.  That  shopper  behaviour  will  change   and  m-­‐commerce  will  become  important  is  a  given  if  what  happens  in  Japan  is  repeated  in  the  UK.   I SHOP WITH MY MOBILE - I shop whilst sitting with my friends - I get extra information on products before I buy them - It knows where I am so tailors offers - It knows who I am and tailors offers    
  18. 18. 18       The  US  is  ahead  of  the  UK  when  using  mobile  coupons  to  drive  traffic  to  store.      
  19. 19. 19     But  currently  m-­‐commerce  sites  have  still  to  be  widely  adopted.  Of  the  Top  200  UK  Lifestyle  Apps  in   iTunes:   -­‐  53  are  High  Street  Retailers   -­‐  30  have  full  M-­‐Commerce  Apps   -­‐  but  only  13  have  M-­‐Commerce  mobile  sites   -­‐  and  8  have  both  an  M-­‐Commerce  App  and  Mobile  Site   (Source:  O2  and  Apple.)     Tesco  lead  the  way  among  grocery  retailers  to  bring  shopping  to  the  mobile  phone:   -­‐  Total  app  downloads:  1,400,000   -­‐  Rising  at  the  rate  of  15,000  a  day   -­‐  Tesco  Groceries  apps  in  use:  350,000  (4%  of  o   -­‐  Tesco  Club  Card  app:  700,000   -­‐  Tesco  Finder  app:  260,000   -­‐  Product  location  requests  average  8,000  a  day  peaking  at  five  requests  per  second   Tesco  use  mobile  to:   -­‐  Make  the  online  shopping  experience  better  than  in  store     -­‐  Inspire  customers  during  their  grocery  shop       -­‐  Create  collaboration  environments  with  family     -­‐  Harness  the  power  of  social  networking     -­‐  Help  customers  shop  quickly  and  easily  
  20. 20. 20           They  through  to   a  full  grocery  shop,   further  apps  across  many  needs                      
  21. 21. 21     5.2  Social  Media    Shopping  for  the  most  part  among  key  customers  segments  is  collaboration:   -­‐  among  families  and  friends   -­‐  and  trusted  sources  e.g.  a  TV  chef,  magazine  or  through  forums  such  as  Mumsnet   This  leads  to  the  need  to  integrate  ordering  processes  and  tools  across  many  platforms  if  this  is  to  be   taken  advantage  of       Tesco  and  Ocado  for  example  have  strong  social  media  links  particularly  on  Facebook:       My  Shop  Assist  from  Tesco  enables  shoppers  to  add  products  to  their  basket  from  within   Facebook.  This  will  create  opportunities  is  to  link  from  brand  Facebook  groups  directly  to  the  Tesco   basket.    
  22. 22. 22     Brands  such  as  P&G  IAMS  are  already  creating  multiple  connections  across  multiple  platforms   enabling  a  single  data-­‐base  of  consumers  to  be  built  and  then  used.                                  
  23. 23. 23     6.  Key  Areas  of  Weakness   This  final  section  looks  at  two  areas  where  online  grocers  still  need  to  improve  their  executions.     We  identified  12  reasons  why  e-­‐retailers  get  excited  about  pet...   Family  focused  so  drives  larger  baskets   Recession  Proof  (particularly  cat)   Pet  owners  overspend   -­‐in  bricks  and  mortar   gaps   Regular  demand  patterns  so  simplified  logistics   SKUs  suit  .com     Bigger  sizes  and  structural  advantages  of  home  delivery  over  in-­‐store   Opportunity  to  reward  loyalty   Can  deliver  better  choice  to  all  shoppers...Long  tail   High  margin  accessories   Trade-­‐up  opportunities  and  growth  in  premium  lines   Online  can  provide  the  rich  content  pet  owners  enjoy  or  need.   X-­‐trade  to  profitable  financial  products  and  other  services  such  as  vet     Low  margins  on  regular  food   Suppliers  need  to  do  more  to  add  value  to  category   Lack  of  innovation   Source:  Tesco,  Ocado,  Zooplus   Search  is  where  consumers  start  and  where  they  research.  All  grocery  retailers  -­‐  other  than  Tesco    -­‐ have  no  presence  against  key  search  terms  although  the  specialists  do  well.  All  brands  are  poor    for   some  reason  none  understand  how  consumers  search  for  pet  online.  So,  for  example,  no  retailer  or   pet  brand  appear  on  the  most  popular  (Source:  google  analytics)  search  term  when  it  comes  to  pet:   pets  for  sale.      
  24. 24. 24         Retailers  are  also  poor  at  helping  pet  owners  quickly  get  to  the  online  pet  category  and  the  brands   they  want.  Tesco  are  the  best  as  they  attempt  to  use  pet  owner  decision  trees,  and  have  their  site   architecture  follows  the  rules  of  best  design  and  content  for  on-­‐line  shoppers.      
  25. 25. 25     Ocado  expoilts  their  Facebook  presence  and  it  is  possible  to  link  products  to  personal  pages  but  it   takes  seven  steps  to  get  from  Home  Page  to  Brand     We  have  identified  five  things  shoppers  look  for  in  their  online  shopping  experience.  Deliver  against   these  and  experience  shows  they  will  become  more  loyal    visiting  more  often  and  spending  more   each  time       We  can  then  assess  e-­‐retail  sites  across  these  five  criteria  thereby  identifying  areas  of  improvement.      
  26. 26. 26           Radical  Company   a:  43/45  Camden  Road.    London.    NW1  9LR   a:  10100  Santa  Monica  Boulevard.    Los  Angeles.    CA.    90067   a:  9  Ann  Siang  Road.    Singapore.    069690     t:  +44  (0)  845  658  5909   Contact: