© 2016 Inmar, Inc.
© 2016 Inmar, Inc.
Online Grocery Shopping: Lessons “To Go” for Brick & Click Engagement Paul Weitzel Vice President
© 2016 Inmar, Inc.
TOPICS WHAT ARE WE LEARNING? • Size of the Prize • Shoppers • Orders • Categories • Economics • Key Takeaways – For Retailers – For CPGs • Q&A © 2016 Inmar, Inc.
What Are Title We Learning?
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Grocery brick-and-mortar industry now $1.2 trillion 2014 Market Share*
Total Traditional Grocery Traditional Supermarkets Fresh Format Limited-Assortment Super Warehouse Other (Small Grocery) Total C-Stores Convenience (w/gas)* Convenience (w/o gas) Total Non-Traditional Grocery Wholesale Club Supercenter Dollar Store Drug Mass Military Total All Formats
Annual Sales (Millions)
Number of Stores
Dollar Share
40,835 26,490 1,190 3,893 565 8,697
46.3% 39.2% 1.3% 2.9% 1.8% 1.1%
$547,435.9 $462,276.5 $15,912.8 $34,589.1 $21,633.1 $13,024.5
159,238 129,282 29,956
15.1% 12.9% 2.2%
$177,721.1 $151,948.2 $25,773.0
60,325 1,414 3,947 28,268 23,444 3,074 179
38.6% 8.7% 17.6% 2.6% 5.2% 4.1% 0.4%
$453,663.5 $102,099.8 $207,495.6 $30,349.2 $61,086.1 $47,858.7 $4,774.2
260,398
100.0%
$1,178,820.5
Source: Willard Bishop 2015 Future Food Retailing Report * Includes all consumables. Excludes categories not found in Supermarkets (e.g., car tires, furniture, etc.)
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eCommerce now 4% of brick-and-mortar store sales eCommerce Share of Brick-and-Mortar Sales Today*
4% *For those stores that offer eCommerce.
Avg. 100-200 Orders/Store/Week High = 500-1000 Orders/Store/Week
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eCommerce growth 10X more
Annual Growth 21.1%
2.5%
Brick-and-Mortar
eCommerce
Source: Willard Bishop and eMarketer 2015
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Online grocery sales (brick & click) Online Grocery Sales
Food Consumable Retailers = $1.2T Annual B&M Sales Today
(In Billions) $72.5
Food Consumable Retailers Who Would Offer* eCommerce = $725B Annual B&M Sales Today
$58.0
$43.5
$29.0 Today $14.5 $7.3 $3.6
eCommerce Share B&M Sales
.5%
1%
2%
4%
6%
8%
Source: Willard Bishop eCommerce Research 2015, 2016 * Includes supermarkets, supercenters, fresh formats, military. Excludes limited assortment stores, club, drug, dollar.
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10%
Who are the shoppers? • A little over two percent (2.3%) of core brick-and-mortar (B&M) shoppers shop online today. • Nearly one-third (32%) of their sales are online. • One-in-four order at least once a month. • For Express-Lane (Drive-up) programs, they are the soccer moms with two kids in the back seat. • For Home Delivery programs, they skew more towards the elderly. • Online shoppers are willing to pay for convenience, it’s a lifestyle choice. © 2016 Inmar, Inc.
Demand varies by program type Top-Indexing Categories Online by Fulfillment Model (Share-of-Sales Online vs. In-store) Express-lane Drive-up 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
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Home Delivery
Diapers and Training Pants
Shelf Stable Entrees
Baby Food
Incontinence
Baby HBC
Chili
Frozen Breakfast
Single Serve Meals
Canned Pasta
Canned Meat Hashes and Stews
Lunch Combos
Bottled Water
Shelf Stable Milk and Milk Like Bev
Tonic and Mixers
Canned Fruit
Snack Nuts and Dried Fruit
Frozen Vegetables
Meat Snack
Pancake and Waffle Mixes
Paper
Frozen Bake
Pickles
Syrup
Baby HBC
Dry Dinners Pasta
Lunchmeat
Frozen Potatoes or Onions
Salt
Fruit Snacks
Frozen Juice
Canned Tomatoes
Jelly
Yogurt
Canned Fruit
Refrigerated Baking
Cat Food
Misc Dairy
Shelf Stable Seafood
Pasta
Frozen Breakfast
Best customers ordering more and more frequently Retailers are building eCommerce with core shoppers, but breadth of shop is similar across all shopper segments. All shopper groups are shopping the entire online store. RFMB* Group
RFMB* Group
(Value of Each Online Shopper Level)
(Breadth of Shop)
Level Platinum Gold Silver Bronze Tin New Lapsing
Average Order Size
Average Number of Orders/Yr.
Total Spend/HH
$223 $186 $143 $79 $150 $134 $132
38 27 21 16 7 2 1
$8,667 $4,968 $2,759 $1,286 $1,056 $307 $193
*RFMB = Recency, Frequency, Monetary, Breadth
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Shopper Group Platinum Shoppers Gold Shoppers Silver Shoppers Bronze Shoppers Tin Shoppers New Shoppers Lapsing Shoppers
Number of Departments in Avg. Order
Number of Categories in Avg. Order
6 7 6 5 6 6 6
23 25 19 13 22 19 19
*RFMB = Recency, Frequency, Monetary, Breadth
Orders are large and consistent • Online orders average 44 units per basket = +$140 before fees • Orders are very similar across Brick & Click (B&C) grocery retailers • They are 4X-5X larger than B&M orders • Home delivery orders are slightly larger than express-lane pickup orders • Ninety percent (90%) of orders are stock-up orders vs. less than 15% for B&M • Stock-up orders average 50 units per basket • Order size is consistent across all shopper RFMB segments (Platinum, Gold, Silver, etc.) • Order size is consistent over time within HHs • Order size is similar between trialists (38%) and loyalists (62%) • Online shopping frequency = 16 days
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Stock-up trips dominate Nearly 90% of all online baskets are stock-up type trips. Trip Type Distribution 90%
(In-Store and Online)
60
Trip Size Definition
50
20
40
80%
Grab-and-Go Fill-In Routine Stock-Up
60% 50%
30 40% 30%
20
20% 10 10% 0%
0 Grab-and-Go
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Fill-In
Routine
Stock-Up
In-Store
Online
Avg. In-Store Units Per Basket
Avg. Online Units Per Basket
Units Per Basket
Percentage of Orders
70%
Good portion of online shopping is incremental • Online shoppers prefer home deliveries over curbside pickup. – When given a choice, 73% of shoppers prefer home delivery versus express lane drive-up. – “If I have to go to the store anyway…”
• Significant portion of online sales are incremental. – Not sure how much is expandable consumption, probably small. Impulse and immediate consumption category sales are low. – Retailers see as an opportunity to repair leakage. • Categories they lost • Club packs (cube and weight)
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eCommerce incrementality Online shopping generates 38% more incremental dollars to B&C retailers. Average Weekly Spend at Stores Offering Online Grocery Shopping (Per Household) $141
+ 38%
Methodology – Analyzed in-store and online transactions for top shoppers (Platinum and Gold) over a 52-week period. Weekly spending averages were derived by household between the HH’s first and last transaction.
$102
Sample Size: 194 million transactions across in-store and online. Households Shopping In-Store Only
Households Shopping Both In-Store & Online
Source: Willard Bishop 2015 eCommerce SuperStudy™
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Who is winning online? • Food, Beverage, and GM are the big winners • Many Food, Beverage, and GM categories are indexing 120-250 online vs. B&M • Frozen and Refrigerated categories also doing well and over-index • PL over-indexes across center store • Fresh perimeter categories under-indexing • HBC under-indexing • The top-15 online categories are the same as the top-15 B&M categories
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Annual sales and profit per store The Grocery department generates 32.0% of total eCommerce sales. Share of Online Sales (By Department)
Temperature state is a non-issue
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Variety demands vary by category Top and bottom variety indexing categories. Online Variety Seeking Behavior (Percentage of Available SKUs Ordered Online) Top 20 Category Specialty Milk Fluid Milk Canned Tomatoes Cream or Creamer Cheese Breakfast Sausage Lunch Combos Packaged Salad Margarine or Butter Catsup or Ketchup Canned Pasta Yogurt Frozen Potatoes or Onions Eggs Mayonnaise Commercial Bread Pasta Canned Beans Canned Fruit Cultured
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Bottom 20 Percentage
Category
Percentage
86.1% 85.1% 83.8% 83.8% 81.2% 80.9% 80.9% 80.8% 79.2% 77.6% 77.4% 77.0% 77.0% 76.5% 76.2% 76.1% 75.4% 74.6% 74.4% 73.9%
Seasonal Merchandise and Misc GM Nail Care Cosmetic Hair Accessories Hardware Bouquets and Cut Flowers Auto Diabetic Tobacco School and Office Supplies Kitchen Accessories Self Service Deli Food Bar Clothing Care Service Deli Misc HBC Fresh Prepared Meat Bulk Beans and Grains Housewares Misc Meat Eye and Ear Care
0.8% 1.3% 2.0% 4.3% 6.7% 7.8% 7.9% 8.1% 8.4% 8.8% 11.7% 11.7% 12.2% 13.5% 15.3% 15.5% 17.5% 18.2% 18.8% 20.2%
Assortment productivity Less than half of SKUs available online cover 95% of demand.
Assortment Productivity (By Retailer Participant)
e-Retailer
# Unique SKUs Ordered
% SKUs Ordered More Than 4X Over Year
% SKUs That Cover 95% of Demand
A B C D
17,437 40,159 22,838 37,183
57% 79% 81% 63%
60% 44% 46% 47%
Average
29,404
70%
49%
Search engine used more to find products.
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eCommerce is profitable…On a direct basis • Fully-loaded, eCommerce programs lose money. • On a direct basis (“touch labor”), they are profitable.
MOST TO LEAST PROFITABLE ECOMMERCE FULFILLMENT MODELS 1. DC Pick, Home Delivery 2. DC Pick, Parcel 3. Dark Store, Home Delivery
• D.C. programs are more profitable than store pick programs.
4. Store Pick, Express-lane Drive-up
• The last mile is expensive.
7. Store Pick, Parcel
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5. Store Pick, In-store pickup 6. Store Pick, Home Delivery
DC vs. Store fulfillment programs DC Models
+ PLUSES
- MINUSES
• Fewer OOS • Fresher Product • No Store Interference
• Less Variety • HHs Have to Be Home
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eCommerce is expensive • It takes one hour to pick (shop) each order in a store • Pickers (shoppers) only shop one order at a time • Express-lane slots are available every 15 minutes • Four orders fill a 2-hour home delivery slot • Two exceptions drive the most costs, Not at Home and OOS • One OOS can turn a profitable order to a money losing order • One Not at Home will turn a profitable delivery negative
• eCommerce will require significant improvements in efficiencies to become a solid source of profit
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In conclusion • Store B&C models will continue to be an entry strategy for most B&M retailers. But, expect migration to dark store or wareroom programs with centralized inventory. • Assortment will contract over time to make the economics work. • Expect dual shopping trips for B&C locations. – B&C orders for routine – B&M shop for perimeter and non-routine – Curbside pickup of routine after perishables/non-routine trip
• Bet on local retailers. Retailers are within five miles of 80% of the U.S. population. But, expect game changing solutions, e.g., USPS. • Plan on traditional grocers winning back some leakage on the “lost” categories from alternative channels. • Jury still out on 3P services. © 2016 Inmar, Inc.
Retailer opportunities • Upgrade online systems and leverage better on-demand analytics • Help customers navigate more easily • Handle more complex promotions • Provide more targeted offers and personalized pricing
• Improve productivity in two key areas: • Store picking • Route optimization
• Start trimming back on variety • Develop a seamless Omni-channel • Brand and invest in your program, or outsource to 3P, don’t get stuck halfway
© 2016 Inmar, Inc.
CPG opportunities • Develop a strategy to win with local grocers • Get content right, a bigger issue than most people think • Help retailers determine core SKUs and appropriate assortment ranges across clusters and fulfillment models • Right online package sizes • Case pack SKUs
• Support retailer digital coupon programs • Begin incorporating eCommerce insights into your category reviews and JBPs • Be prepared for discussions on COGS and trade • Don’t forget the 3P platform companies like Unata and MWG • Help them with taxonomy and search engine opportunities © 2016 Inmar, Inc.
Q&A
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HOW DID WE DO?
CLICK THE SURVEY BUTTON FOUND ON THE SESSION PAGE © 2016 Inmar, Inc.
THANK YOU Paul Weitzel
[email protected] 847-756-3717 © 2016 Inmar, Inc.
