Retailers around the world will be feeling the effects—and assessing the impacts—of the coronavirus pandemic for years to come. But a snapshot of the evolving and extraordinarily complex event’s impact on the still-emerging field of digital grocery commerce is captured in an exclusive assessment that benchmarks the online performance of 89 global retailers detailed in this report.
The 2020 Grocery Digital Maturity Benchmark Study from Incisiv examines the digital grocery sales platforms used by retailers in four formats—traditional grocery stores, hypermarkets, discount/cash-and-carry stores and warehouse clubs—for 195 attributes across four stages of the customer journey: Research and Discovery, Ease of Ordering, Order Fulfillment, and Customer Engagement and Service. Public information and the Incisiv digital database for determining fulfillment maturity were used for benchmarking purposes. The study used 50 million data points from Incisiv and cites 48 million data points from an associated Q3 2020 Grocery Shopper Survey, done in partnership with Mercatus, a title sponsor.
Digital Leaderboard 2020
Its findings confirm a headline revealed with the release of the last such study, also exclusively detailed in WGB, one year ago: The most “digitally mature” retailers—in short, those with leading comparative capabilities comprising elements of the shopper journey—are capturing a considerably greater share of the growth of a growing shopping modality. Only, that was before the pandemic struck, and much of the steady growth opportunity in digital seemingly arrived all at once, delivering a still bigger prize to the best in the field, and bringing into further relief the urgency to invest in capabilities among those in the rear.
Pre- and Post-Pandemic TrendsPost-pandemic, the growth rate of online grocery retail will stabilize with some people reverting to in-store shopping.
The advantage to the mature has also increased since COVID. Where on a five-year basis the 27 most mature retailers in the survey were outgrowing their lower-ranked rivals by 2.2 times, it’s been closer to 2.5 times when comparing only the second quarter of 2019 to the second quarter of 2020, says Amar Mokha, chief operations officer of Incisiv, in an interview. Digital adoption by consumers—that is the percent of consumers pursuing online grocery—in the same time frame grew from 24% to 43%, Incisiv says.
“So when the industry grew 8%, the most digitally matured grew almost 19%. That is almost two and a half times,” Mokha says. “So the digitally more mature have grown, but at the same time, the market has shifted. The investment in digital growth is reaching rich dividends, and going forward, it will increase exponentially as the big ones get bigger and they corner more market share.”
Retailers might be forgiven—temporarily, anyway—for overlooking the uneven distribution of digital bounties when those bounties were good, he adds.
“If you talk to any brick-and-mortar grocery retailer today, they are all very happy that everybody’s growing,” Mokha says. “But most of them don’t realize what increments of revenue they are leaving on the table, simply because they’re not as digitally mature as the competition, or as the bigger players.”
As the pandemic unleashed an element of life-threatening danger to the simple habit of in-store shopping in March, triple-digit year-over-year digital sales gains among U.S. food retailers were not uncommon. But did they realize they were getting pantsed by a Texas-based independent when it comes to ease of online ordering at the very same time? That’s one thing the benchmarking study calls out.
Customer Satisfaction Across Four Key Stages
Customer satisfaction is still low across many key aspects of the shopping journey. Grocery retailers must look holistically at how changes in shopping behavior must be addressed from a technology and process perspective.
But as Insiciv anticipates the initial pandemic explosion online will recede a bit before resuming a period of steady growth—which it now projects to grow to about 21% of total grocery retail by 2025, or 60% above pre-COVID expectations—retailers must begin a period of intense and comprehensive assessment and reassessment. And not solely in the areas in which they need the most help, but in their operating model as a whole, if they want to share in that $250 billion prize. Doing so profitably, for some, may require an entirely new look at what they provide and how they provide it as volumes grow to a point at which servicing the digital shopper profitably and effectively isn’t quite the fantasy it might have been six months ago, Insiciv executives say.
“I think this slowdown in growth is going to accompany a rigorous period of taking stock by retailers realigning their operating models. It’s not just the technology pieces most of the people have put in, whether that is a Radius solution, or some third-party solution that we plug in very quickly,” Mokha says, referring to Radius Networks, a location-based solutions company (a title sponsor of the study) that provides payment and location solutions in use by many of the ranked retailers.
“The next step is going to be aligning the operating model. Creating a mix of forward deployment of inventory through the use of dark stores. Only retailers like Amazon are in advanced stages of that. All operators should take some of those elements over,” to realize last-mile profitability, he added.
Work To Be Done for Everyone
If it sounds like there’s a lot of work ahead, that’s because there is. It is at once illustrative of the opportunity before retailers—and a reminder of how far they still have to go—that customer satisfaction scores remain low across many key aspects of the shopping journey, the study shows. That was evident in the relative inability even for the best online retailers to absorb as much demand that came with the onset of the pandemic. To Incisiv, it’s an argument for grocery retailers to “look holistically at how changes in shopping behavior must be addressed from a technology and process perspective.”
Eight aspects examined in the benchmarking study (two each under the broad terms of Discovery, Online Ordering, Fulfillment, and Customer Engagement and Service), none of them scored better than 48% among respondents who said they were “satisfied or extremely satisfied” with the capability offered them.
That score was as low as 20% when it came to the availability of delivery time slots—which was a sore point among shoppers during the height of the pandemic, even if that ultimately contributed to greater store traffic.
Generally, customers were least satisfied with search and discovery (32%) and site navigation and filters (34%) in the Discovery bucket. They also don’t much like Fulfillment—the above mentioned delivery time slots or curbside wait times (47%). Among Customer Engagement and Service, retailers have work to do to improve ease of contacting customer service (34%) and returns (41% in grocery, an area especially impacted by the pandemic, as many retailers temporarily suspended the practice as a safety measure). Finally, there was Online Ordering, where the 48% satisfaction of inventory visibility and 47% score in ability to shop from coupons and promotions were two areas grocers did best, but still have room to improve in the eyes of more than half of their shoppers.
“Retailers didn’t catch up [to the pace of digital growth or customer adoption] because there are still significant friction points in the digital experience across the customer buying continuum,” Mokha says. “While they might put in technology fixes very quickly, it will also involve a sizable effort on an operating model recheck. What I mean by that is, how do you allocate store labor for delivery orders vs. having that labor service customers who are walking into the store? That’s where we see the retailer assessed as a market leader is successful. In addition, [those who] invested in the right digital technologies, were the first movers when it came to realigning the operating model to provide a full omnichannel experience to their customers.”
Importantly, Mokha adds, the right investments can also address some of the reasons retailers have seemingly dragged their feet in digital investment—namely, that e-commerce hasn’t yet proven profitable for most of them.
“That’s been on everybody’s mind, right?” he says. “Most of this digital adoption has come at the cost of profitability, [because] most of the people don’t even have a sense of what it really costs to fulfill a customer order.”
A breakdown of retail leaders across the board in online ordering, research and discovery, fulfillment and customer engagement and service.
It’s a tricky road to navigate, he confesses. Currently, the grocery e-commerce field is thick with retailers anxious not to miss out on the opportunities inherent in growing online adoption. Some are turning to solutions such as third-party fulfillment providers, only to see that by meeting near-term demand they are ultimately ceding growth to retailers that the study suggests possess the capabilities to provide a better experience. Instacart, for example, is continually expanding partner retailers, including recently Walmart in some markets, crowding its marketplace. Target’s Shipt business is expanding into categories such as wine and beer delivery. And restaurant delivery specialists like Door Dash and Uber are adding on-demand grocery delivery to their mobile applications, a practice becoming more important to them as foodservice businesses suffer.
“The single biggest reason of dissatisfaction most of the consumers have highlighted is the nonavailability of delivery slots or curbside pickup slots. That has been the single biggest reason why they’ve switched over to a third-party delivery service because they’ve made wider availability of slots and delivery options to them,” Mokha says. “But the digital experience as such has not been delivered. So especially in the light of the pandemic, the large shift to these third parties has happened because of digital issues with getting the delivery on time, or getting your stuff delivered. And the people that we spoke to highlighted various other challenges, where they shifted over to a third party but they did not like the whole idea of unauthorized substitution of products even when they were clearly called out, and the inability to get the right service in terms of the order, whether it was the ripeness of the fresh produce or the substitutions.”
That phenomenon highlights a challenge for third parties, which according to the survey identifies them as a “laggard” or “near laggard” in most of the elements making up the four broad categories measured. In fact, only in account management are third parties recognized as a “near leader,” or the second of five tiers identified in the breakdown. They are “laggards” in areas such as content, cart and communication, and “near laggards” in search, homepage layout, navigation, social media, checkout process, convenience, payment, returns, customer service, targeting, personalization and rewards.
Improvements Along the Journey
all gains in some aspects of the shopper journey since the last study, particularly in the areas of search, navigation, convenience, product assortment, delivery and location services, with this year’s study calling out individual retailers providing standout service along the journey.
In Research and Discovery, the study found, both adoption of basic navigation and nuances of search improved from the last study, while certain areas like the ability to “hide” or filter unavailable products or user’s ability to sign on from social media remain areas in need of further development.
“Getting Research and Discovery right isn’t just a technology issue, it goes far deeper,” the study notes. “Strategies must be formulated and implemented on how content is set up, how it is categorized, what its taxonomy looks like, the integration of multimedia content, and key work linkage. Foundational elements form the basis of greater result relevancy and recommendations. Too many grocery retailers are still using tools that are suggesting very basic recommendations,” for example, more of what was just bought.
Top-scoring retailers in this area, according to the study are Target (No. 5 in overall maturity rankings); the European retailers Coop, Tesco and Morrisons (Nos. 16, 1 and 13, respectively); BJ’s Wholesale (No. 2) and Brookshire’s (No. 4).
Gains, Losses in Digital Functionalities
Overall, grocery retailers remain at a lower maturity for digital functionalities. However, in 2020, significant improvement has been realized across the buying journey.
An advantage for Target is the ability for users to filter web results only for those items also available in-stores—a capability just 6% of retail sites have. Ahold Delhaize’s Dutch banner Albert Heijn (No. 8) lets its shoppers browse through recipes and their ingredients online, a skill just 16% of the study’s retailers currently offer.
An examination of Online Ordering capabilities reveals two areas of focus that will drive better performance for grocery retailers, the study found.
One is “offering the right information at every stage of purchase” by integrating the product pages and cart with inventory availability, loyalty program, personalization and fulfillment options to drive speed, urgency of purchase and product cross-sell.
Companies also have the opportunity to improve checkout efficiency by upgrading add-to-cart capabilities, reducing the steps required for checkout, including biometric and “one-click” capabilities, and offering more contactless payment options.
The study found incremental adoption improved this year in the areas of ability to reorder from previous orders available in a customer’s history—now offered by 82% of retailers, a 37% increase from last year; and digital receipts which grew in adoption by 21% this year and are now available at 79% of the retailers studied.
Online Ordering leaders as ranked by the study this year are BJ’s, Target, Brookshire Grocery Co., Tesco and Publix. No. 3 in the overall rankings, Publix counts among its advantages the ability to offer online shoppers customization of orders (for example, ripeness of fruits or thickness of sliced meats), an ability shared by just 21% of the retailers studied.
In Fulfillment, grocery retailers over the last year have improved on several aspects of home delivery, including a 20% incremental leap in providing free delivery on a minimum order (now 48% availability industrywide) and an 11% incremental increase in availability of alcohol orders for home delivery, now at 58%. However, improvement is still needed in areas such as communication in pickup and returns. That matters as pickup is growing faster than delivery as a fulfillment option.
Revenue Growth vs. Digital Maturity
The correlation between revenue growth and digital maturity is even stronger during the pandemic. While the overall grocery retail segment grew 8% in second-quarter 2020 vs. second-quarter 2019, the most digitally mature retailers grew 19%, or about 2.4 times the average.
“With more than 45% of customers changing their fulfillment preferences, coupled with a whopping 370% increase in curbside pickup in Q2 2020, fulfillment has moved from being an afterthought to a key differentiator and a winner,” the report noted. “While the fundamentals of fulfillment remain the same … customers have additional expectations including contactless delivery and payments.”
Walmart, behind strong availability and execution of pickup, leads this ranking among retailers, followed by Kroger (No. 7), Publix, Costco (No. 6) and Wegmans (No. 17). Brookshire’s shines here in offering pickup in as little as two hours for its online shoppers—a capability just 2% of its peers currently possess.
The pandemic highlighted shortcomings and opportunities in the Customer Engagement and Service attributes of ranked retailers. “In times of massive uncertainty like the current pandemic, customer service and engagement goes beyond a function—it sets the foundation of trust with customers,” the report noted. “Good experiences in bad times results in more than customer satisfaction and more importantly, it leads to customer advocacy and loyalty.”
Offering “high-touch” options like live chats is a clear and simple opportunity for retailers to improve this kind of service, but it’s one that just 37% of retailers can currently boast and growing slowly. Communicating availability of pickup or return policies, giving shoppers the ability to have multiple delivery addresses, and save credit-card data for easy reordering are areas in which adoption by retailer has improved over the last year.
Tesco—the No. 1 ranked retailer in the entire survey—Albert Heijn, Kroger, Giant Eagle (No. 38) and Carrefour (No. 19) are the five most mature retailers in the service rankings. The Italian retailer Essalunga (No. 63) is highlighted here for a unique feature integrating its online grocery service with voice-based virtual assistants like Google Assistant.
Movers and Shakers
Brookshire’s might be one of the biggest surprises on the list, but the regional retailer scored well with its fans and their wallets, Mokha says. “The average order value for the Brookshire customer was almost $130, compared to the average of those that we surveyed, which came to about $92. And the satisfaction with the digital channel was higher, and that’s when we assessed it. Also, it sort of corroborated the story that their digital channel was significantly more mature than many other bigwigs who were in the list,” he says.
Last year’s No. 1, BJ’s Wholesale slid to No. 2. “And the reason for that is they’ve basically not invested as much on fulfillment capabilities because they were late adopters into curbside or even basic things like subscription services and so on for products. So that has sort of driven the ranking lower for them,” Mokha said.
And this year’s top-scoring retailer, Britain’s Tesco, captured the maturity rankings by exemplifying the very recipe for operation integration of e-commerce prescribed by the study. “In addition to the investments that have been made on the front end, they have been market leaders in sort of aligning the operating model to service and the ‘new normal’ life,” Mokha says. “So offering a complete, full-fledged omnichannel experience with their customers, that is what has driven them to the top.”
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