How you can handicap the race to reinvent grocery shopping

• Published on October 27, 2016

Bill Bishop

Chief Architect, Brick Meets Click

What do cars and grocery have in common these days? If you answered lots of digital-driven innovation rocking the traditional model, then you read my mind.

A recent Economist article summed up all of the competing innovations in today’s car market – self-driving cars, intelligent cars, ride services like Uber and Lyft, car share services instead of ownership – as “The Race to Reinvent the Automobile.” A similar “race to reinvent grocery shopping” is underway as digital innovations in the marketplace compete for consumer’s attention, and the outcome depends on how consumers react and respond.

Retailers and suppliers are like observers at the racetrack, foot on the rail, racing form in hand, trying to figure out how to handicap the race – here’s a tool that will help.

Dueling innovations in the marketplace

Digital influence and online shopping options have clearly produced a significant uptick in the competition for share of both mind and wallet.

Digital influence is big – and bigger than many realize. It impacts 31% of food and beverage sales according to Deloitte. These influences include a wide range of communication platforms such apps, sites, and social media – from idea generator/sharers like Pinterest, AllRecipes, and Facebook, to savings apps like Ibotta and Cartwheel, to new information sources and transparency about food origins, health values, and prices, and even devices such as Amazon’s Echo (which puts Alexa in the middle of household conversations).

In addition, ecommerce now offers consumers a wide variety of online grocery options that make it possible to skip the trip down the aisles entirely for some or all of a household’s grocery purchases -- 40% of grocery shoppers have tried it according to Brick Meets Click research, and 21% use it regularly for at least some grocery purchases.

Online shopping options seem almost endless, and more keep appearing each day. Shoppers have:

• Plenty of sources to choose from – Amazon, supermarkets, organics, farmers market-style, specialty retailers, mass marketers, etc.
• Many choices about how the offer is structured – from subscription services to one-off’s like meal kits or big trip stock-up orders.
• An array of fulfillment possibilities to fit the needs of the moment – from slow and economic, to click and collect, to on-demand delivery.

Lasting impacts on shopping habits

It’s not clear which of today’s dueling innovations will finish “in the money” in the race to reinvent grocery shopping, but their presence is already changing the future in some significant ways by:

• Expanding the choices people have of where to shop and which information they will use to make purchasing decisions.
• Shortening the time between recognition of a need and when the purchase is made.
• Changing the way consumers organize and execute their grocery shopping. (Think of the impact of Basket Bandits.) 

Don’t underestimate the growth potential

Complicating the picture is the fact that although most grocery purchases still happen in store, digital is where the growth is. Overall growth in the grocery market is flat (maybe one percent per year), in contrast, digital is growing 15% per year.

To put it another way, consider that the business from the 80% of consumers who aren’t open to changing their grocery shopping habits is growing very, very slowly if at all – but business is growing very quickly among the 20% who are open to change, and digital is where it’s happening. 

Tools for handicapping the race

A. Create your own adoption curves

Whether you’re a grocer or a CPG brand with traditional roots that’s looking for guidance on how to navigate these waves of innovation, the advice is the same. 

The first thing you should do is find out where your customers are on the adoption curve for online grocery and digital tool options. Tracking their progress relative to interest level, readiness and use will give you the best guidance for how and when to invest. 

Traditional grocery retailers will want to understand how their customers are changing where and how they shop for groceries.

• Which digital platforms are your customers using?
• Where are they on the adoption curve?
• What are they looking for and not finding in terms of greater convenience, product information, assortment, and ease of shopping (such as ordering, fulfillment, payment, etc.)? 

CPG brands and other suppliers will want to learn how consumers are prioritizing channel choice when buying their products (in-store, online, or blended).

TWO TYPES OF ADOPTION CURVES: The blue bell shaped curve identifies the different adopter segments, describes their size, and shows the sequence of adoption. The gold S-curve shows how the innovation accumulates total market share over time. (Image source: http://www.ondigitalmarketing.com/learn/odm/foundations/5-customer-segments-technology-adoption/)

2. Follow the adoption drivers 

So what propels that adoption curve? Studies across different fields have shown that the adoption of specific innovations is typically influenced by the following set of drivers.

• The relative advantage of the innovation – how big is the improvement vs. the traditional practice?
• Compatibility – the ease of integrating the new innovation into daily life.
• Complexity ­– how challenging is it to actually use the innovation?
• Tryability – how difficult or risky is it to try?
• Observability – how easy is it for others to see that a household has begun to use it? 

These drivers apply to grocery shoppers trying new digital tools, too, and they can provide insights into why some digital innovations have more success and lasting impact than others.

3. Location matters, more than ever

Lastly, it’s important to recognize the importance of location. Your local market will differ from national averages – specific use may be higher or lower, but either way, it is important to measure/find out. 

The range of involvement in digital influences and use of online options is highly influenced by how many are present and their attributes (per the list above) in a given market. As the number of digital options increases in a market, so does consumer awareness for the services due to advertising and promotions, and greater awareness drives adoption rates up. 

How prepared are you?

Going forward, retailers and suppliers need to understand exactly what’s happening in the race to reinvent grocery shopping if they want to compete for business. The data is out there, and adoption curves – like a good set of binoculars at the racetrack – make it possible to bring the contest into focus before it gets to the homestretch.