Paul Weitzel | March 29, 2018

e-Commerce CDTs Show Brands Are More Important to Online Grocery Shoppers

The Best Brick & Click Locations Just Hit the 10% Milestone!

2022 was the magic year when online grocery sales were forecasted to reach 10% of brick & mortar store sales. Well…in some of the most established brick & click operations, the 10% milestone has already been achieved. That's correct! In some stores, brick & click sales are now 10% of brick & mortar sales. While most new brick & click programs are seeing online sales averaging 2% to 4% of brick & mortar sales, well-run programs in strong eCommerce markets are growing and reaching key volume thresholds that suggest eCommerce is very real and, more importantly, sustainable.

Our recent online sales data from eCommerce grocers show the growth trend line on track to reach the 25 billion forecasted mark by 2022 and several programs are now poised to steal significant and game-changing sales shares from those operators who lag in this growth space.

Big Brands Are Winning Online

And the big brands are winning too! We recently completed a fresh round of CDT (consumer decision tree) work across several key center store categories to understand how consumers are shopping online. We looked at brick & mortar baskets and brick & click baskets for retail stores offering online shopping. We found the Brand attribute moving higher up on the consumer's purchase decision criteria for online shoppers compared to in-store shoppers. For those of you who use CDTs, you know this suggests brands are more important than other product attributes to online shoppers as compared to brick & mortar shoppers.

We attribute this shift to several factors:

  1. Many online shoppers prefer to find items using a search engine rather than scrolling through pages and pages of product. Shoppers generally know what they are looking for and there is less browsing and therefore less shopping online.
  2. There is an increasing use of the auto-replenish feature (selecting items from previous baskets) when available to make the shopping experience easier and this is helping brand loyalty.
  3. Early adopters are less price sensitive online.

So, online shoppers are more often looking for specific brands when ordering, even more so than inside a brick & mortar store. If you're a brand that makes it into the online shopping list, you are going to do really well in the eCommerce world. If you are not on the e-list, you are going to be shut out of the growth.

This plays out in spades at one of the leading pure-play e-tailers, is a dream world for leading pet food and pet supplies brands. Much of their business is auto-replenish and auto-reorder. This means consumers are reordering the same SKUs every time and the reordering is done automatically (timed). Consumers enjoy significant savings from these two programs and Chewy gets a very loyal customer, more efficient orders and better inventory forecasts.

We do see new technologies like virtual shopping (digital shelf) making their way to eCommerce platforms and they will have an impact on how consumers shop online. We don't know yet what the adoption curve will look like and a lot will depend on the overall experience shopping from a virtual shelf. If virtual shopping becomes an accepted tool, then we are likely to see more browsing and more shopping. However, it is still more likely that features that make reordering easy, like auto-replenish, will still be used by many and this helps brand loyalty.

It's not uncommon today for key grocery categories to index 130 online compared to brick & mortar sales and it's not uncommon for key brands to outperform this index. Combine the fact that retailers are experiencing significant incrementality with their online business and you can begin to sense how eCommerce can really benefit brands who know how to win in this space.

CDTs Can Address Online Assortment and Page Layout Decisions

While CDTs are used heavily to help develop a more shopper-friendly shelf layout in brick & mortar stores, they can also be used to design a better layout for the pages of products online. Knowing which product attributes are more or less important to consumers when shopping online can help create better groupings of product on web pages. Better groupings will make shopping easier and improve the online experience for those consumers who do browse.

In addition to improving page layouts, CDTs can help rationalize online assortment. CDT work produces incrementality and important substitutability scores that can help define more optimal assortment ranges. Most brick & click grocers today want to make every item that is available in the store, available online. As programs mature, rationalizing assortment and creating a more efficient pick and pack operation will be required to make money at eCommerce. Having efficient assortment will be a critical component to creating a sustainable program.

More to Come

We've only scratched the surface with understanding online shopping behavior. E-commerce platforms are improving every day. New capabilities will allow e-tailers and their trading partners to leverage personal pricing, personal shopping and other new features that will transform the way we shop for groceries and how we evaluate the overall online experience. At some point, the experience will begin to be valued as much or even more than the products themselves. E-tailers will be judged on a whole new shopper value equation and the importance of brands will likely shift.

It will increasingly be important for CPG manufacturers to work with their eCommerce partners to begin elevating content, improve messaging and providing the right packaging. Expect more video content, more video recipes and other interaction tools to improve online shopping experiences. Personalizing pages to individual households will emerge and better connect the right brands with the online path-to-purchase.

Speed Is Life?

If you have not developed an eCommerce growth strategy you are already behind. If you are not sure if you should develop one, well, you will probably find fewer growth opportunities in the years ahead. If this is not your number one priority, it should be a close second.

Brick & mortar grocers are already beginning to map out center store reinvention strategies as they begin to look to rebalance retail space to meet this emerging need. New operating practices will emerge and new business practices will impact trading partner relationships. The best operators see it and they know it's coming fast. The best CPGs see brand equity elevating online and are tapping into this immediate opportunity. Online shopping will continue to revolutionize how consumers purchase and receive goods and leveraging actionable CDT insights is a critical first step to developing a good online strategy.

E-commerce is the speed of life. Are you truly ready?

Paul Weitzel

Paul Weitzel is VP, analytics solutions at Winston-Salem, N.C.-based Inmar. He leads the firm’s efforts in providing retail growth solutions for food manufacturers, distributors and retailers. His specific areas of expertise include optimizing the 4Ps, quantifying value creation opportunities, developing channel growth strategies, helping manufacturers achieve speed to shelf and developing ecommerce growth platforms.