How to Succeed in the Emerging U.S. Grocery Market: Complete Analysis of U.S. Online Grocery Market, and Online Retailers' Features & Functionality.
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How to Succeed in the Emerging U.S. Grocery Market: Complete Analysis of U.S. Online Grocery Market, and Online Retailers’ Features & Functionality.
Complete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 2
Introduction
eCommerce in the US has continued to gather pace, The growth of eCommerce means that success for
with the second quarter of 2016 seeing online retail fast moving consumer goods (CPG) manufacturers is
grow at 15% year over year. Once considered immune more and more dependent on how their products are
to the shift to the digital economy, grocery categories represented in the online channel. Understanding the
are no longer the exception as a growing proportion of intricacies of how retailers operate online, and what
retail sales move away from physical stores and into the capabilities are on offer is critical for brands looking to
online channel. Established firms face competition from optimize their online performance.
Amazon both online and offline, increasing the need for
retailers to react to the changing market. In this analysis, Clavis Insight looks at the major online
grocery retailers in the United States, comparing annual
According to a Clavis Insight Survey, in the past six revenue, range and online store functionality for the four
months 50% of shoppers have made a purchase in the biggest established players, in addition to the uniquely
Fresh & Grocery categories online. Online frequency of positioned Instacart. Go to the Appendix for a full table
purchase is also higher than in 2015 with 45% of online showing the functional capabilities of each, including
grocery consumers shopping the category weekly, and size of portfolio, membership, delivery and navigation
over 80% engaging with the category at least monthly. options, as well as product content, consumer
engagement and mobile app capabilities.Complete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 3
Size of the prize: What is the opportunity The Major Players Online
for brands?
The grocery sector is a late bloomer when it comes to The online grocery market in the US is less mature than
online penetration. Current estimates put 2016 online that of the UK, with different retailers tackling one city
sales at 6%, compared to double-digit share figures or region at a time before expanding. Peapod is the
in other categories such as electronics, but this is national leader when it comes to fresh delivery online
significantly up from 2% in 2015. Online penetration with 5.4% of total online grocery market share according
is expected to continue to grow, at an annualized to IBISWorld. It only operates on the east coast of the
rate of 13.2% during the five years to 2020 according country and has been slowly increasing coverage since
to IBISWorld. (An estimate from Brick Meets Click, a its inception in 1989.
grocery research and consultancy, forecasts online
grocery spending in the United States will reach
between 11% and 17% in most markets by 2023.)
This presents an opportunity for brands capable of
establishing strong online positioning in order to take
advantage of future growth.
For this analysis Clavis Insight looked at some of the + Amazon
largest players in the grocery market, including Amazon, + PeaPod
Walmart, Peapod, and Fresh Direct among others. + Fresh Direct
+ WalmartComplete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 4
Peapod will deliver to the following areas
Chicagoland S. New Hampshire
Milwaukee Massachusetts
S.E. Wisconsin Rhode Island
Indianapolis Conneticut
New York
New Jersey
Maryland Philadelphia
Virginia S.E. Pennsylvania
Washington D.C.
*Note, Peadpod directly competes with Fresh Direct in New York City, New Jersey, Connecticut, Philadelphia.Complete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 5
Other major retailers, such as Whole Foods, have Brands operating in the brick & mortar space are used
decided to outsource their online delivery to Instacart. to competition from both rival brands and retailer’s
Instacart was once valued at over $2bn, but the private label offerings; the online channel is no
company has stumbled in recent months as growth different. All of the retailers included in the analysis
remains below expectations. Instacart’s struggle is offer their own private label ranges (Instacart can
further proof that this market is still in its infancy in the
deliver retailers’ private labels), and often prioritize
United States. these ranges ahead of leading brands reflected in
Search results. One could argue whether this is the
The biggest threat to existing retailers is by far Amazon. correct strategy to drive category value and growth,
While Amazon Fresh first launched in 2007, the service but it is the reality that brands need to be aware
has only recently incorporated into the main Amazon. of. Brands therefore need to ensure that they are
com domain. Its main website generates over 2.1 billion continuously educating their retail partners with
visits per month, dwarfing the 1.4m received by Peapod. online category insights, and forming collaborative
This launch accompanies Amazon’s traditional portfolio of partnerships around category management initiatives
items and Amazon Prime Pantry and help make Amazon to deliver growth.
the number one overall grocery retailer in the US.
Here we see Walmart Grocery following other retailer’s
Share of Shelf and Size of Portfolio policy to strongly push private label, with 40% of the
Search results for “Olive Oil” returning a private label.
Amazon Fresh is the newest entrant into the online Other retailers have lower but not insignificant levels of
grocery market, yet boasts the largest catalog of items private label items appearing in Search results.
at over 100,000. Walmart Grocery was far behind with
30,000 items, with Peapod and FreshDirect closing out
the group with “over 12,000” and “over 3,000 fresh”
items respectively.
Regional Availability: % Of Products In-StockComplete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 6
Amazon only recently launched a private label line charge a delivery fee no matter the size of the order.
in the home goods and grocery space, and does not Instacart’s model is unique in that you can wave the
yet have an Olive Oil brand. This time should be used minimum shipping fee by signing up for a $99 per year
by brands to well position themselves against key membership.
categories on Amazon Fresh if they expect Amazon to
expand their existing private label. Amazon prime recently switched its pay structure from
$299 annual to $14.99 monthly as an “add-on” fee to
Online store functionality a Prime account. The memberships still come with a
$50 minimum order, making Amazon one of the more
In our analysis of online store capabilities, we looked expense options out there.
at the differences across a host of retailer functions
including delivery options, mobile capabilities, product Speed and convenience is fast becoming a competitive
representation, and more. Understanding the nuances differentiator between online grocery platforms. In a
between key retailers will enable brands to better recent Morgan Stanley survey, data shows that many
optimize against key online metrics such as Ratings & shoppers do not see going to a store as a major
Reviews, Availability, Search, and Content Integrity in inconvenience. In fact, 67% of shoppers said they like
order to drive sales on the different platforms. to select fresh products themselves, 33% said they
enjoy shopping in stores, and 27% said that the store
Membership and Delivery options is more convenient. This may explain why Walmart
Grocery advertises that you do not need to leave your
Most US online retailers don’t charge consumers a car during pick up, or why Instacart offers users the
membership fee, in an bid to get more to sign up, ability to pay a premium for faster 1-hour delivery.
and some offer free delivey for orders over a certain
treshold, while others charge for delivery regardless of
order size. FreshDirect and Walmart offer free shipping
on orders over $30, while Instacart and PeapodComplete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 7
The Digital Shelf – Search and Menu placement Availability
When shopping online, what would historically be Product Availability may well be the most important
considered shelf “placement” is determined by how metric that brands track in both the online and offline
well products rank for keywords on Search results channel. While warnings of low stock are expected in
pages, or where they are located in the category more established online stores, most major online grocery
navigation menu structure. This is why many brands platforms only enable “out of stock” or “in stock”.
will make it a priority to ensure their products appear
on the first page of Search results, in order to maximize Peapod offers two options once an item goes out of
exposure to the greatest number of shoppers. stock: you can have a comparable item substituted into
the order or be offered a rain check for the next time
Brands should be aware of what constitutes the first the item is in stock.
page of search on any given retailer. In the grocery
space this number various greatly, from around 20 Instacart is unique in that it acts as the delivery arm of
items on Amazon and Walmart, to 120 spots on some brick and mortar stores such as Whole Foods. Its
Peapod. Regardless of first page length, brands should policy is to replace your requested item with a suitable
be looking to optimize their search performance to best fit if the item is out of stock in the store. If you do
increase conversations from the search results page. not like the alternative items, then they can be dropped
from the order.
Section Functions Peapod FreshDirect Walmart Grocery Instacart Amazon Fresh Amazon Walmart
Availability OOS statuses Y Y N Y Various Y Y
Availability Low stock N N N N Y Y N
Waitlist / Email
Availability Y N N N Y Y N
NotificationComplete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 8
Shopper Sentiment – Ratings & Reviews
Product Ratings & Reviews are a proven sales driver in Once again, Amazon has thought ahead to help solve
the online channel. Given consumers have over three this problem. Some items have had their regular Amazon
times more trust in Reviews than in brand advertising, Reviews pulled into Amazon Fresh in order boost
a high volume of high-scoring reviews can act as free Review counts. For example, both Dole and Del Monte
advertising for your product, driving ‘add to basket’. have Reviews going back to 2014 for their canned fruit
It is also particularly important to generate user products. In this competitive space, these two brands
engagement for new products. dominate Search results for “canned fruit” on Amazon
Fresh. For Dole, 67% of their products on the first page
Surprisingly, three of the five retailers looked at for this have a positive Review score, while that’s true for 60%
report do not support user Reviews. While Walmart of Del Monte products. This means that Dole can take
allows Ratings and Reviews for general merchandise, advantage of positive past performance on Amazon to
its grocery portal does not. And while Peapod does propel its strategy on Amazon Fresh. On other online
support Reviews, the vast majority of items do not grocery platforms, all brands are starting at zero.
have any due to this feature being a recent addition
to its website. Many items on Amazon Fresh do have
at least one Review, but total counts are low for most
categories since Fresh recently expanded to so many
cities. This is another opportunity for early moves to
boost the appeal of their item but increasing consumer
engagement with their online portfolio.Complete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 9
Content Integrity – Delivering an Engaging
Shopping Experience
More and more consumers are by-passing Google For example, of the retailers analyzed only Amazon
and other traditional Search engines, instead turning Fresh allows product images to be added to the
directly to online store fronts for superior production description portion of the product page. While this
information that educates and engages. Product page type of A+ Content is popular on Amazon, most
Content in online stores is the means for brands to Amazon Fresh pages’ lack Content outside of the most
educate and reinforce their product efficacy and brand basic details and a single image. This is a sign of the
equity. In the absence of having a physical product immaturity of the market. Brands need to be aware of
to touch and feel, it is the opportunity to create a the limitations in place and take advantage of the tools
shopping experience that both informs, but also drives available to best positon their product. Amazon is joined
conversion. Unfortunately, Product Content is another by Fresh Direct as retailers with multiple images toward
area where the online grocery market lags the general the top of the page, as Instacart and Walmart Grocery
eCommerce market. lack this basic feature. Multiple Images are important
because they allow shoppers to get a better item for
what the item looks like, increase conversations.Complete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 10
Mobile Apps
In terms of eCommerce and online Content in particular According to a 2016 study done by Progressive Grocer,
more and more industry watchers are talking about the roughly 43 percent of millennials shoppers say they use
importance of Mobile. Speaking at the Clavis Insight some kind of mobile app to grocery shop, a further sign
eCommerce Summit in 2015, Ocado’s Head of Product that brands will need to optimize for smaller mobile
and Merchandising, Hannah Gibson, stressed the screens. Mobile ready images call out pack size, color,
importance of Content, adding that brands and retailers and other key details. This saves shoppers from having
needed to think mobile first when it comes to creating to zoom in on text located on labels or small bottles.
their online store Content. “It’s really difficult to create
Content that works well to engage the shopper on Amazon offers its Fresh service within the standard
mobile, with small screens, minuscule images and short Amazon app, which will boost the number of shoppers
bursts of text,” Gibson explained. “But if you can get exposed to its service. Walmart offers a standalone app
your Content to work on small formats then it will work just for its grocery service, while FreshDirect, Peapod,
for desktop web pages as well.” and Instacart all offer their own apps as well.
In the United States, shoppers have been flocking to
mobile across multiple categories, driving 1/3 of all Black
Friday traffic this year. This is only a sign of things to
come, and brands that get ahead of the curve to optimize
for mobile shoppers will have a distinct advantage.Complete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 11
What do brands need to win?
How can brands take their knowledge of the key Building customer engagement on websites with sparse
eCommerce metrics and turn it into success in the Reviews, such as Peapod, will help cement certain items
online grocery space? has category leaders. As the market matures, there is
room for brands to be aggressive and to jump ahead
The key foundation of capabilities and resources of rivals on a slew key online metrics.
needed to succeed in the online grocery channel
will include measurement and analytics. As we have The eCommerce channel isn’t going to go away; in fact,
seen, many of the retailers trail traditional retail sites it is continuing to grow its share of overall retail. Brands
when it comes to their current feature set. No matter need to understand this ever-evolving landscape, the
he metrics and KPIs you choose to follow, basic retailers and capabilities of their online stores to be
improvements will have a significant impact on your better armed in order to win in the coming years.
online offerings. Luckily there are usually plenty of
examples where you can demonstrate impact. It might
be about optimizing product titles for better Search
performance or quickly identifying distribution gaps
in certain online retailers.
2 1
3Complete Analysis of US online Grocery Market, and Online Retailers’ Features and Functionality 12
UK Grocery Category
Functions Peapod FreshDirect Walmart Grocery Instacart Amazon Fresh Amazon Walmart.com
Size, Operations
and Offering
Online Launch
1989 1999 2015 2012 2016 1994 2000
Year (UK)
Over 15 major cities London, and ten
Over 30 locations
including Atlanta, major US cities
Northeast, Chicago including
Boston, Chicago, including Los
area, Washington New York, New Bentonville,
Regions Served Denver, Los Angeles, New Entire US Entire US
DC area, Jeresy, Philadelphia Arkansas; Phoenix,
Angeles, New York, York City, Boston,
Philadelphia Arizona; Denver,
Philadelphia, San Chicago, San
Colorado
Francisco, Seattle Francisco
Product Count 12,000+ 3,000 30,000 Varies by Store 100,000+ 200+ million 4+ million
Own Label
Y Y Y N Y Y Y
Capabilities
Marketplace
N N N N N Y Y
Capabilities
Pricing & Delivery
Shipping Y Y Y Y Y Y Y
BOPIS /Click &
Y N Y N N N Y
Collect
In-Store Only N N Y N N N Y
Subscription/
N N N N N Y Y
Subscribe & Save
Membership N N N N Y Y Y
Fastest Shipping/
Y N 2 hour 1 Hour On The Day Delivery One Day 2 Day
Delivery Available
Free Shipping Must be a prime
N $30 $30 N $35 $50
Threshold member
Delivery Fee $9.95 under $100 $6.99 free pick up $3.99 $299 per year $3.99 $3.99
Availability
OOS statuses Y Y N Y Various Y Y
Low stock N N N N Y Y N
Waitlist /Email
Y N N N Y Y N
Notification
Navigation options
& Placement
Menu Filtering
Y Y Y Y Y Y Y
Navigation
Menu Page Size 120 25 60 All Items (80+) 24 24 39
Search Page Size 120 25 60 50 24 20 20
Suggested Search
Y Y Y Y Y Y Y
Terms
Spelling
Y Y Y N Y Y Y
Forgiveness
Sponsored Search Y Y N Y Y Y Y
Search History Y N N N Y Y Y
Consumer
Engagement
Ratings & Reviews Y N N N Y Y Y
Enable
Manufacturer N N N N Y Y N
Responses
Review Syndication N N N N Y N Y
Chat / Feedback
N N N N Y N N
Functionality
Q&A N N N N Y Y Y
# secondary images
N Y N N Y Y Y
(up to 5)
Content & Product
Page Structure
Video N N N N Y Y Y
Variated Pages N N N N Y Y N
Detailed
Y Y Y Y Y Y Y
Description
Images/Graphics
N N N N Y Y Y
in description
Detail Bullets Y Y Y Y Y Y Y
Best Seller
Y Y N N Y Y Y
Rankings
Ingredients Y Y Y Y Y Y Y
Allergy Y Y Y Y Y Y Y
Nutrition Panel Y Y Y Y Y Y Y
Sponsored Products
N N N N Y Y Y
on Product Page
Suggested Items on
Y Y N Y Y Y Y
Product Page13
Online Key Metrics
Availability Track your portfolio’s state of Ratings and Reviews Set targets for
availability by retailer, category, brand, and total number of product reviews and
manufacturer to optimise your range, maxi- average rating score to help drive omni-
mise distribution, and improve sell-through. channel sales.
Search Rank Understand where your Media Tracking Monitor online
products rank in search results for specific media placements for compliance
search terms to ensure your products are and effectiveness; track category
discoverable. competitors.
Content Integrity Monitor compliance Price and Promotions Tracking
of product content for individual SKUs Monitor pricing and promotions for
by category and online retailer so that you your products and your competitors’
can make sure your products are optimised products to make sure your products
to win the digital shelf. are optimised to win the digital shelf.
Category Placement Understand where Location Based Tracking Monitors location-
your products rank on the online store based product Distribution, Availability and
category menu structure. Target categories Price & Promotion, and provides aggregated
to ensure specific product sets are analysis of metrics at the market-level by
easily discoverable. retailer, brand and category.14
About Us
Clavis Insight is at the forefront of the ecommerce
revolution, delivering ecommerce insights and online
retail store analytics to a broad range of consumer
products brand leaders around the world. Our
Insights are designed to enable you to optimise your
distribution, content integrity and online placement
in the digital channel in order to protect your brand
online and grow your sales.
To learn more please contact: info@clavisinsight.com
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