OPINIONTechnology

E-Commerce 2.0 Comes of Age

Why retailers’ first-generation e-commerce initiatives are no longer enough

Primed by studies projecting 20% of industry sales moving online within the next few years and triggered by Amazon’s aggressive moves to grow its online grocery business—especially its acquisition of Whole Foods—supermarket retailers have rushed into e-commerce. Nearly all retailers have rolled out vertically integrated online shopping solutions that provide a digital storefront, order management and order-picking and -fulfillment capabilities. But online shopping solutions have become commoditized, offering little meaningful difference in the shopping experience or fulfillment operations.

This first-generation approach to online grocery shopping—let’s call it e-commerce 1.0—has created siloed digital customer experiences, reinforced by the other disparate digital efforts deployed by retailers. This siloed digital experience is the antithesis of what shoppers today are demanding. Even worse, retailers using third-party services that completely disassociate the shopper from the retailer’s physical stores and digital presence.

While some retailers see using a third-party service as a way to move fast, the retailer is in reality walking away from the customer base they have spent years building in their brick-and-mortar stores.

Tech-enabled shoppers are tough taskmasters and retailers’ first-generation e-commerce initiatives are no longer enough, especially for digital-native younger shoppers who have grown up in an Amazon world where product search and discovery are an inherent part of a seamless digital experience across devices and channels.

Seizing the opportunity provided by comprehensive digital customer engagement means taking a different view of e-commerce. This next generation—let’s call it e-commerce 2.0—separates the digital customer experience from the operations of managing and fulfilling orders. E-commerce 2.0 provides the shopper a seamless user experience designed to foster product discoverability while giving the shopper options as to when and how they actually get their products (shop themselves, click-and-collect or home delivery).

Safeway and Kroger each provide examples of a splintered user experience. On the primary Safeway website, a shopper can browse the weekly ad only, there is no access to a store level product catalog to aid in finding products of interest. To do that, the shopper has to click over to the online shopping site. The mobile experience is worse. A search of the app store finds the usual Safeway shopping app, an online shopping app, a pharmacy app, and a rush delivery app powered by Instacart. Not exactly a seamless user experience.

Kroger, while being one of the best digital marketers in the U.S. supermarket industry, is encountering growing pains. A customer can browse a store-level product catalog that features a few filters such as gluten-free, organic or low-fat, and can select items to put on their shopping list for Kroger’s click-and-collect service or to shop later themselves. But if the shopper wants home delivery, he is directed to another site with a different look and feel that’s powered by Instacart. If the shopper wants nutritional guidance, she is sent to Kroger’s new OptUp app, where she can see a product’s overall nutrition score—but that’s not available through the website, only through the separate OptUp app.   

An e-commerce 2.0 user experience is very different. The shopper is able to flag favorite products, receiving a notification whenever they go on sale or a coupon is available. The shopper can browse the entire store-level product catalog using powerful search and filter tools to quickly find products of interest. Expanded nutritional information is available along with sustainability info. The shopper can self-identify specific health conditions that are used to drive recommendation of beneficial products powered by leading edge nutrition science. The entire experience is contextually relevant with personalized search and relevant recommendations to aid in product discovery. Lastly, placing desired items on the shopping list, the shopper can make the decision to shop for themselves or to send the list to the store for click-and-collect or home delivery.

The e-commerce 2.0 retailer separates the all-important customer user experience from the operations of order fulfillment. The e-commerce 2.0 retailer owns the entire digital customer experience, retaining valuable customer relationships while being able to provide new services such as organizing the customer’s list by aisle for their favorite store or real-time product and recipe suggestions when the shopper is in the store.

So why should retailers focus on deploying the next-generation 2.0 digital marketing ecosystem when they’re still rolling out first-generation solutions? Three reasons:

  1. Food retailers everywhere are competing with Amazon and other sophisticated digital marketers and a seamless, comprehensive, relevant user experience is now a shopper expectation. It's not a nice-to-have, but a must-have today.
  2. Shopping online is only one digital activity and the vast majority of grocery retail sales continue to happen in the store; retailers should be focused on driving digital engagement with all their shoppers.
  3. Compelling digital engagement built on a personalized user experience is shown to drive a 5% lift or more in customer spending along with increases in trips and retention.

I can already hear retail executives griping, “I’m still rolling out our first-generation online shopping capabilities and now you’re telling me that we need something different?”

Digital transformation is not a single event but an ongoing process. Retailers are no longer in charge of innovation—shoppers are. And shoppers are rapidly adopting new technologies and growing accustomed to new experiences provided by digital deities such as Amazon, which means traditional retailers must adapt to a world driven by increasingly fast innovation.

Gary Hawkins is the founder and CEO of the Center for Advancing Retail & Technology. He can be reached at gary.hawkins@advancingretail.org.

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