With the national players continuing to increase their ecommerce efforts across the US, the regional operators have been stepping up their activities in the channel.
Partnerships proving popular
There are a number of benefits to grocers creating a partnership with an online service to fulfil their ecommerce operations. It lowers the initial cost and investment, as well as being quicker to launch due to the infrastructure already being in place. There can also be sales efficiencies from the larger volume handled and the benefit of using the partners existing experience and access to customer data. However the negatives are that the retailer has less control over the process and is also exposed to the pricing model set by the partner. In the long term, this could potentially mean higher costs and a lower return, as well as a negative association if the online partner doesn't meet customer expectations. Also, with a number of retailers using the same partners, there is less chance to stand out from competitors.
Instacart continues to lead the way
What originally started as a personal shopper app has evolved to become the leading grocery ecommerce partnership provider in the US. Covering 185 grocers, including Whole Foods Market and Publix, the service covers 34 markets and has built up a wealth of insight into how customers shop online. Like any ecommerce business, one of the biggest threats to Instacart is Amazon. To try and combat this, it is trying to lock in customers with a subscription service, similar to Amazon Prime, called Instacart Express. For $149 a year, shoppers get unlimited free deliveries on all orders over $35. Half of all its orders come from Express members and they spend an average of $450 a month, an appealing proposition for retailers wishing to partner with Instacart. It continues to attract new retailers, with local Arizona grocer Bashas one of the latest to partner up.
Regional player Meijer, which is headquartered in Michigan and operates across six states will be launching a home delivery service through a partnership with Shipt. The service will give customers access to 55,000 items through the Shipt app or directly through Shipt.com. This offers shoppers greater convenience, product variety and service that was not available before. Shipt is a membership based service and costs $99 a year, which gives customers unlimited free grocery deliveries on all orders over $35.
Going it alone
Whilst partnerships are proving to be a popular model in the fragmented US market, some retailers are choosing to develop their own services. Raley's has launched an enhanced online operation, offering customers pick up services at 95 store locations. The retailer has improved the online ordering system, launching a new website and an improved mobile app. Customers are now able to move seamlessly between mobile and desktop platforms during the ordering process. There are also a number of pure play online retailers growing their presence in the US. One of these which is growing in popularity is New York based Fresh Direct, which is expanding its geographical reach, the latest of which is a push into Washington.
Success through merging online and offline
For grocery retailers to achieve success in the online channel, they need to consider technology as an opportunity, not a threat. Considering how to engage with customers through Smartphone's in particular and engaging with them both in-store and online will create the greatest opportunities to create loyalty. Smartphone's can be used to direct customers to products in-store, store digital coupons and pay for goods, removing a number of pain points during the shopping trip and making the experience closer to hassle free. With online being a low margin industry, as well as one that attracts a high infrastructure cost, retailers will need to continually invest in services provided in-store and customisation for individual customer needs. Having a strong offer both in-store and online will help retailers to stay competitive and work in harmony with the online channel, rather than against it. This is beneficial as shoppers that buy across online and offline generally spend more in total.