The grocery industry is in the middle of a digital transformation and grocery ecommerce operations are popping up like mushrooms after rain, triggering a 200% YoY growth rate of the entire industry, according to Statista.
Generally, if you’re a grocery retailer looking to hop on the bandwagon or to optimize your digital channel, it is imperative to find or build an ecommerce platform that can sustain selling groceries online. But on a granular level, that platform needs to possess or be able to flawlessly integrate certain systems, functionalities and features to guarantee that the ecommerce will be operating at its best. Below, we mention and analyze them one by one.
A good online grocery operation rests upon superior order management capabilities that unify all commerce channels both for a seamless buyer experience and for actionable operational insights. There are three main aspects that an Order Management System (OMS) should address.
First of all, your chosen OMS should embrace and support an omnichannel approach, starting with a complete, unified overview of the inventory to ensure a greater yet perfectly accurate stock availability is displayed to customers. This increases conversion rates and Average Order Value (AOV) and diminishes the odds of “out of stock” notifications, which has been proven to be a factor that discourages customers from buying again at that same grocery store. Furthermore, in case a product does turn out to be unavailable, the customer should ideally be allowed to choose its substitute.
Going one step further, the OMS should sustain complex fulfilment scenarios that, once again, leverage multiple commerce channels to offer as many delivery options as possible while streamlining operations. That way, a grocery ecommerce channel can provide fast pick-up in-store or curbside pick-up by assembling the order from one of multiple inventory sources – the actual pick-up location, the distribution center, any other brick-and-mortar store using ship-to-store – or even a combination of them all for the greatest fulfilment optimization.
Likewise, it can offer home delivery by shipping from a distribution center or by using a ship-from-store model. Of course, for the utmost convenience, the date of delivery needs to be as precise as possible, down to hour slots. Why? Because the meat and the cheese and the ice cream have to go in the fridge as soon as they’ve been delivered, so grocery shoppers have to be present upon the exchange – but they cannot, should not wait around all day for it. Therefore, a good OMS should enable scheduled delivery in a way that also takes into account the inner workings of the operation (e.g. business hours, operational capacity, pick-up times, etc.).
Grocery orders in particular have to be easily managed and adjusted, because product substitutions and weight changes are bound to happen frequently, as will the associated partial refunds or extra charges.
For instance, a customer could have ordered 500 grams of tomatoes and paid accordingly, but tomatoes will rarely add up to that precise amount, so the order and payment will need editing. Or, the last bottle of the requested beer brand got bought by an in-store shopper right before the picker could get to it, meaning that another beer at a slightly different price will have to substitute it and that another invoice will have to be issued. These examples imply that the OMS needs to effectively communicate order changes to the customers and do so in a frictionless way – no one appreciates paying more or getting another product without a heads-up.
Lastly, the OMS should bring forward order insights that allow a sustainable growth of the entire grocery operation, starting from a micro view over each order’s lifecycle to a macro view of performance across different time periods, channels and business segments. See all operational opportunities in one place.
The second most important functionality, which will also perform best when having a state-of-the-art OMS, is a great order picking capability. It serves as a central element to any grocery ecommerce, but particularly if its order fulfillment operations are devised in an omnichannel manner, meaning that there can be a mix of warehouse picking and in-store picking.
A foundational step towards picking capabilities that can match that sort of complexity even during “unprecedented times” with surges in demand is having the OMS and Warehouse Management System (WMS) seamlessly combined. This will reduce picking costs and improve slotting optimization.
Yet a first-rate picking system entails plenty of other things. For example, a picking strategy according to working hours and other easily adjustable configurations should be automatically created, as well as a picking capacity following metrics such as cart capacity and picker productivity.
For each picking location, the system should support its management according to its specific layout, allowing for different picking prioritizations of product categories (e.g. frozen products should be last) and define picking rounds based on several criteria – how many items are close-by and can be picked up simultaneously? Naturally, there should also be pre- and post-picking flows (e.g. order audit, customer validation) that not only maintain the service quality, but also point out what can be improved.
Order picking can be a messy, laborious and time-consuming business and, if not optimized with the proper tools, it can significantly impact business margins – delivery capacity would be adversely affected, contributing to longer fulfillment SLAs that might scare customers away. Hence, good picking technology is more than worth the investment.
Traditional grocery shopping is inextricably close to promotions, because a promotional strategy is an effective way to increase the basket size, the basket value, the customer base and brand loyalty. In fact, research from Kantar Wordpanel concludes that approx. 40% of grocery shopping in the UK is based on multiple types of promotions, such as direct price reductions, multi-buy offers and product bundles.
Unsurprisingly, online grocery retail should propose the same value proposition, especially if an omnichannel experience is desired.
For that, a powerful promotions system is imperative, one that is both agile and customizable. The promo should automatically come into effect and stop, ensuring no or minimal manual labor is associated with managing it, a great aspect to consider given numerous promotions are likely to run at the same time. The system should also allow for promotional segmentation according to sales channels and customer clusters and other general conditions (e.g. certain items are in the cart, a specific value is reached, etc.). Then, of course, multiple types of discounts should be enabled – nominal discounts, percentage discounts, absolute discounts, BOGO (i.e. Buy-One-Get-One), free shipping, gifts, etc. Possibilities are endless and your system should be able to handle them all.
Bottomline, there should be a vast array of promotional configurations so that a grocery ecommerce website meets its many and varied goals. And for extra points, they should be easily implemented into loyalty schemes to encourage recurring orders.
Talking about order recurrence, another way to effectively boost retention rates is through repeat ordering. This element is a must for both new and existing grocery ecommerce stores alike, because customers are increasingly looking for more convenience in their grocery shopping and a repeat purchase functionality easily ticks the box. Considering grocery shopping has an extended time-horizon (i.e. people will always need to shop for food as a basic existential premise), a repeat ordering functionality would be the gift that keeps on giving.
On the most basic level, repeat ordering implies the literal meaning of the concept – buying again the items of a previously purchased cart with a single click. But grocery retailers vying to differentiate themselves on the market while also preparing for the future should think bolder: they should look towards possessing an actual subscription system. This is especially beneficial for grocery items like coffee, detergent, pet food and the likes, products that have a well-established replenishment frequency on which future automatic orders can be based upon.
Thus, customers could set up subscriptions for a specific product or actual shopping lists at any desired frequency, with the chosen payment method and fulfillment option – having all of their needs served. In turn, the grocery ecommerce operation will obtain valuable insights for inventory management and future supply & demand analyses.
Grocery customers have shopping lists containing tens of items from a variety of categories. In a brick-and-mortar store, a diligent shopper already knows where most items are (unless management has suddenly performed a layout change) and the search for one item usually ticks off another two placed in the immediate vicinity.
The online grocery shopping experience needs to imitate that intuitive navigation throughout a huge item catalog whilst delivering the added value of time. You can’t have a search query deliver hundreds of SKUs through which a customer needs to endlessly scroll – that’s a headache if it happens once, let alone if it happens multiple times, for each item on the shopping list. So, how to avoid it?
The wonders of AI came up with a solution to this technological quandary, the so-called Intelligent Search engines. An Intelligent Search engine understands search intent and delivers more relevant search results. It can fight off typos, propose items with a synonymous name and cut corners by providing an autocomplete search experience, according to relevance settings and merchandising rules to be decided by the retailer. The latter allows a grocery retailer to prioritize its own products or even create partnerships with brands vying for the top section of the search results.
All in all, combined with powerful filtering and sorting capabilities, an AI-driven search engine is unstoppable: it boosts conversion rates by creating a speedier and effortless shopping session and offers new types of bargaining chips to the entire operation. It’s a must-have for any outstanding grocery ecommerce operation.
We’ve said it times and times again, but we’ll keep saying it: online grocery shopping must save time and be effortless in order to give customers what they’re looking for. So, in addition to the aforementioned Intelligent Search engine, a grocery ecommerce store should prioritize, in general, the user experience and all of its facets. A smooth UX would not only increase the odds of a customer placing their first order, it would also give them an additional reason to shop again on the same grocery website. In an extremely convoluted market, this could give you the digital edge against your competitors.
Broadly speaking, the website performance should be superior and its navigation should be as intuitive as possible, guided by category pages and special viewing options (e.g. last viewed, online exclusive) that can lead customers right to what they’re looking for.
For the finer details, however, there are a plethora of features at a grocery website’s disposal. For instance, it can make use of product recommendations (e.g. suggesting products that are complementary to the ones added to cart) and a mini cart, the latter implying that cart items are displayed and editable without leaving the home page, complete with quantity, value and discounts.
The grocery website can also define a minimum order value and show the customers’ progress towards it and allow them to create, save and share shopping lists that are quickly added to the cart. Furthermore, it can customize its checkout so that it minimizes clicks in the shopping journey, implicitly diminishing cart abandonment rates.
This list is not exhaustive, certainly not with current technological offerings and future developments, but it should serve as an inspiration. Overall, any online grocery store is free to pick and choose what best fits their brand essence – as long as it also benefits the customer.
Full transparency: this particular functionality is not key – yet. We took the liberty to include it, though, because it will soon become one (you heard it here first!).
Online marketplaces are ecommerce websites where multiple retailers are selling their products. Instantly-recognizable names that embody a marketplace include Amazon, eBay and Alibaba, but the business model is definitely not the stuff of dreams: any self-sufficient retailer could become an enterprise marketplace (as opposed to joining one) with a bit of boldness and technological flair. Many retailers have done exactly that and the upward trend doesn’t seem to be stopping anytime soon: Gartner inquiries on enterprise marketplaces, for instance, increased almost 100% between 2019 and 2020.
The appeal of an online marketplace is easy to understand. At its core, a marketplace integrates the inventory of (curated or not) third-party sellers on a proprietary platform without necessarily weighing down the main operation – onboarded sellers could take care of their own fulfilment through dropshipping. For the main retailer, odds are that, with a diversified portfolio, cross-selling and up-selling opportunities would vastly increase, not to mention acquiring new customers through the promise of different items and brands. Additionally, third-party sellers would pay a fee to be present on the retailer’s marketplace, thereby triggering a new revenue stream.
Gartner highlights that by 2023 organizations that have operated enterprise marketplaces for more than one year will see at least 10% increase in digital revenue. Thus, retailers can reap hefty rewards by leveraging marketplace capabilities in their operations, a fact particularly applicable to the grocery industry.
Indeed, why should an online grocery operation be limited to food? Why not, for instance, offer Whirlpool home appliances like DIA Argentina does? Why not have a virtual hypermarket, a one-stop-shop for everything that customers desire, like Kroger’s? Or why not enrich a pure grocery experience by offering esoteric or premium items that are not normally to be found in the grocery store?
There’s a myriad of ideas to be built on top of the marketplace concept and the wonderful aspect is that a retailer is free to choose whatever synchronizes with the brand – an online marketplace is just that flexible. Thus, considering the current boom of online grocery retailers, having a platform with marketplace extensibility will be key to differentiate and grow a grocery ecommerce operation.
Implementing or optimizing a grocery ecommerce channel can be overwhelming, especially when there seem to be so many different things to consider, so many technological solutions to find and so many changing trends to match – all against the backdrop of a limited budget, a short time period and an internal team on a steep learning-curve.
We hope this checklist offers you a good starting point to set your digital project’s foundation. Each of the aforementioned elements will boost your online grocery store towards greater success in a unique way – if fulfillment flexibility is what matters most to your operation, go invest in an OMS; if you’re looking for additional revenue, a marketplace business model is the answer. If you want them all and then some, make a sustainable plan and tackle them one by one according to your most pressing needs.
There will be plenty of time to personalize and expand and fine-tune everything once your operation is stable. So worry about what truly matters in your grocery ecommerce today – and leave the rest for tomorrow.
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The CCX Company, in collaboration with VTEX Commerce Cloud, expresses gratitude for having had the opportunity to enhance its understanding of the advantages, trends, and other elements addressed in the current topic. This article was jointly developed and is brought to you by the VTEX Commerce Cloud team.
