Digital Disruption in Grocery Industry

14 May 2020
6 min read

The way that we shop is constantly evolving. In the past decade, the UK population has gradually moved towards more online orders. In February 2020, about 7% of all grocery shops were done online, by the end of the year, the expected growth is around 25% with more than one in ten grocery shops happening online.

The factors behind the digital disruption in the grocery industry

While the Covid-19 pandemic is certainly one reason why there has been a large shift from the mainstream in-shop experience to a consumer population more likely to buy online, there are other reasons.

Social behaviours are dictating that consumers spend more time online. 

There has also been a significant increase in the number of businesses offering grocery services online from traditional style shops to food subscriptions services. Food subscription services have seen a significant growth in past years. There are more than two million households with some form of food subscription in the UK and it is expected that the numbers will rise further.

What does this mean for retail?

As there are changes in consumer shopping behaviours, there will be changes forced on retail companies. This will include how businesses interact with their customers online, from their first communication to purchasing and beyond. And this means that eCommerce now needs to embrace omni-channel practices to secure revenue.

And this has been seen in America.

When Amazon acquired Whole Foods Market in 2017, they gained significant credibility in fresh grocery and it allowed them to expand the reach of Amazon Fresh. Other brands have also increased their online shopping experiences for customers, with Walmart now offering same-day delivery from more than 1,600 of their stores, while customers can pick up orders made online from 3,100 stores.

By moving to a more omni-channel approach, retailers can be rewarded by consumers spending more with them.

What does omni-channel mean?

Omni-channel is the process of meeting customers on numerous shopping channels and providing a consistent brand experience across all platforms. 

And omni-channel operations aren’t limited to the digital world. Physical, real-world, interactions should be included within your strategy. This allows retailers to make point and the main message more coherent. This leads to a higher level of conversion, less consumer confusion and more brand loyalty.

It’s all about the experience

The digital disruption has therefore changed the power in the eCommerce and retail industry. Companies can no longer market using their campaigns and hope that customers see a commercial and then make the decision to purchase. Now, consumers have more power. They want to have a better experience with the brands that they interact with and this will drive them towards certain brands.

If customers are happy, then they will shop with your brand. If customers are unhappy, or are getting confused about messages being consumed on social media, they may abandon your brand altogether.

How to embrace omni-channel ecosystem into your retail businesses?

If you want to embrace the future and maintain a loyal core of customers, you’re going to have to adapt to the disruption. There are several aspects to this that you must follow in order to thrive.

1. Aspirational vision

The first thing you will need to do is create a cohesive aspirational vision for your customer proposition that’s shared across your organisation. This should be done using data-driven fact, based on your target market. For instance, your customers might not be interested in the best price, but be more concerned with the best quality. Therefore, your value proposition should be concentrating on quality.

By determining the core elements and how your business is different to competitors, you can start to formulate how you can communicate this customer promise to your audience. But you have to be sure that you’re willing to deliver on that promise.

2. Robust demand-forecasting

You need to know what your current and future market demand is going to be and therefore you need to forecast the demand. This should be done in two groups: the entire trade’s demand and your share of the market. There are specific modelling techniques that can help you determine the future demand for your services.

For example, when determining the demands for in-store, delivery and click and collect settings you can use geospatial-analytic techniques.

3. Fulfilment model

It is useless to have a value proposition in place if you cannot deliver on it. Customers will become annoyed if they order groceries from you only for half of their items to be missing. While some stores do offer substitutions, this isn’t always an ideal solution. Customers can be very loyal to certain products and if they can’t get them from you, they might go elsewhere.

Therefore you need to determine the best fulfilment model for your organisation. It is highly likely that you will need something that is bimodal. And you will need to identify a technology that can help you with picking.

4. Build a strong IT infrastructure

Omni-channel technology requires you to have a strong IT infrastructure that can analyse and deliver data that can help you manage the day-to-day running of your grocery stores. The IT plan for your business should be able to support you in delivering the value proposition that you offer customers and select which partners (vendors, suppliers, etc.) that can help you deliver that.

IT infrastructure should also be flexible. Recent events have shown that there can be sudden surges in demands and you don’t want your network offline just when customers need you the most.

5. Modify organisational structure

You also need to modify your organisation and operating model. At the core of the operations should be your digital operations. Therefore, all reporting structures need to align on the eCommerce element of your business and you need to have a policy on who makes the decisions and how the teams work together to deliver on promises.

You will need to ensure that there are robust human-capital and talent plans/strategies developed for your business. The Covid-19 pandemic showed how many grocery stores were unable to cope with a higher demand, right when they too had high absenteeism due to sickness and self-isolation. Should there be another spike in demand, you should have the slack within the business to be able to cope.

Omni-channel is an important part of the retail landscape and even more so now for grocery stores. If you’re able to implement a strong, robust and comprehensive set of processes within your business you can be better placed to lead the market. As research has shown, the early adopters are benefiting more now than those that are delayed in their omni-channel approach.

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