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    EXPERT COLUMN: Unleashing ‘Click-and-collect’

    U.S. online grocery retailing industry stands to gain from concept.

    Peapod.com

    For some time now, shoppers in Europe have been embracing online grocery retailing, and have benefited from the added convenience it brings. The market is maturing, and new concepts are being introduced that offer new levels of flexibility and convenience. Can the U.S. grocery industry take advantage of these same developments?

    An increasingly time-poor consumer base has been drawn to online shopping experiences that are more organized and less physically demanding than venturing into the store. In the United Kingdom, for example, companies like Ocado that deliver groceries fresh to consumers’ doors have driven serious competition with established supermarket giants like Tesco, Sainsbury’s and Asda for a number of years.

    As well as the core online shopping option of home delivery, Europeans are embracing the idea of “click-and-collect,” a concept in which shoppers order their groceries online and later pick them up from the store, already packed, paid for and ready to go. This provides shoppers with additional flexibility and convenience, as they don’t have to worry about being home at a specific time, or having to wait for a delivery that’s running late. Click-and-collect also brings benefits to retailers, which forgo the significant expense of delivery vehicles, fuel and driving staff, and therefore enjoy margins that are considerably higher than those of home delivery.

    U.S. shoppers haven’t yet shown the same appetite for online grocery shopping as their European counterparts, or at least they haven’t been offered the same opportunities to embrace it, outside of the localized reach of pure-play companies like Peapod in the Northeast, FreshDirect in New York or AmazonFresh on the West Coast. But, noting the onward march of wider Internet-based retailing and increasing broadband penetration, the industry predicts that U.S. online grocery retailing will almost quadruple in size by 2020 -- reaching almost $50 billion (Kantar Retail 2012).

    Opportunity for U.S. Grocers

    Is click-and-collect potentially a way forward for established U.S. grocery retailers? Certainly, in big metropolitan areas, it could be a profitable way to take advantage of this wider industry growth, as click-and-collect is something that can be tailored to fit in with what we know about individual shopping preferences/constraints. We live in an increasingly time-poor environment, and for the cash-rich, anything that drives up convenience can be worth paying a premium for. So there’s a great opportunity to develop premium services for specific customer segments looking for convenience that are willing to pay that bit extra for it.

    But how can we identify these customers, and how can traditional American brick-and-mortar grocery retailers capitalize?

    Many grocers have loyalty programs or, at the very least, some foundational data exchange with shoppers, which means they have the ability to learn lots about their existing customers’ personal information and shopping habits. Within U.S. grocery retailing, Cincinnati-based Kroger has led the way in analyzing this type of data and using it for customer identification, segmentation and overall relationship management for quite some time now, but this can be replicated by others through expertly mining, refining and defining relevant datasets.

    We’ve seen many iterations of shopper classifications based on how you shop and what you buy, and these are valuable in their own right. But traditional customer data mining, analytics and segmentations can take you only so far. What if we could combine not only who you are and what you buy in-store, but what you do outside of the grocery store?

    Follow the Trail

    In today’s world of increasing digital footprints, customers leave an ever-growing trail of behavior across many facets of their lives, whether shopping in-store, browsing online, using their smartphones or consuming media. It’s becoming much easier to access and combine multiple datasets that can give us a rich view of customer behavior outside of the traditional in-store environment.

    All of these actions can be brought together to fantastic effect and, using smart analytical techniques, could tell us which customers are most likely to be online grocery trailblazers and use click-and-connect services. If you have enough data points on a customer, you can not only understand what kind of products they like to buy, but also how they like to pay for them; what channels of communication they are likely to respond to best; what kind of offers they interact with; and what media types appeal to them. It’s all about building up a complete picture of the shopper and getting her engagement and permission so we can serve her better.

    Retail organizations across noncompeting verticals could take this further by forming alliances that offer incentives to customers, in return for information sharing. Think about the customer who buys a DVD or Blu-ray in a particular retail outlet. Wouldn’t it be beneficial for the customer if his local movie theater knew of his film preferences to provide early offers or alerts for upcoming movies of interest? This could become a closed loop: When that movie is available on DVD/Blu-ray, further incentives could be offered on having watched the movie at the theater, by providing discounts for a subsequent DVD/Blu-ray purchase.

    It’s important to note that this form of data exchange can only work where strict privacy protocols are adhered to and shoppers understand exactly what information they’re providing and what it’s being used for. A well-established set of principles should always be applied in these cases, namely Transparency, Added Value, Control and Trust (TACT). Retailers that visibly apply these TACT principles can be sure of continuing customer trust.

    Ultimately, bringing together related but seemingly disparate data sets to create accurate data models is becoming increasingly possible, and the technology exists to mine and refine it successfully to mutual benefit, with the customer at the center. It’s possible to build up a complete picture of the shopper – and U.S. retailers are in a powerful position to capitalize on this to offer premium services like click-and-collect.

    Companies like Peapod (in partnership with Stop & Shop) have already expanded into the click-and-collect space, but the question is which other traditional U.S. brick-and-mortar retailers are savvy enough and bold enough to join them?

    David Buckingham is president of U.S. region ISS at Montreal-based Aimia, helping retailers and CPG companies on their journey to customer-centricity.

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