San Jose, CA, US: Walmart, the largest US food retailer, is trialling home deliveries of groceries in California. For the test, Wal-Mart is shipping groceries from a San Jose store, packing them in tote bags and delivering them in temperature-controlled trucks that the company owns.
The company has been expanding its online options, including a nationwide rollout of a service that allows customers to order goods, excluding food, online for collection at a store the same day.
Other grocers, including Safeway and Peapod, which is affiliated with Giant Food, offer a similar service. Fresh Direct and AmazonFresh, also offer a grocery delivery service.
Craig Johnson, president of the consulting firm Customer Growth Partners, said that the move made some sense although he believes that Walmart needs to ask itself questions like how to deliver groceries on a wider scale and deciding whether to use its own trucks, rent a fleet, or use a third party delivery company.
“These are not simple operations to set up profitably, as Webvan (a company that failed in 2001) and a host of others have found out over the years,” Johnson said.
Home delivery leaders
The UK is home to one of the most advanced online grocery retailing markets in the world helped by a large population in a small geographic area. British shoppers are expected to spend US$12m (£7.2bn) buying groceries online in 2014, almost double what was spent in 2009.
And by 2025, 40% of grocery shopping is predicted to be online, according to research company OC&C. But despite its impressive growth, online retailing accounts for only 3% of sales of the total grocery sector, making it a niche channel in the broader context. Research by IDG shows 6% of shoppers mainly use online for their food and grocery shopping, and those that do buy groceries online typically place an order less than once a month.
Store-based grocers dominate the sector, Tesco alone generating more than two fifths of total sector sales. Ocado is the odd one out as the only pure-play internet grocer, capturing 12% of the sector to rub shoulders with the second- and third-largest UK food retailers, Asda (a Walmart subsidiary) and Sainsbury’s.
Upgrades and enhancements are a feature of the online marketplace and the leading grocery players have taken significant steps over the last year to make their internet propositions more appealing and user-friendly. For example, Ocado’s recent overhaul of its transactional website demonstrates how step changes can still be made, making products and promotions easier to find and improving the overall experience for online shoppers. Ocado is exclusively an in-line outlet.
Beyond websites, operators are also expanding their skills in other areas of the online proposition. Service levels are rising through a combination of improved delivery coverage, tighter delivery slots, and better store picking processes. This includes the opening of more ‘ghost stores’ – outlets that are not open to the public but dedicated exclusively to fulfilling online orders. The roll out ‘click and collect’ services offers customers greater flexibility in the way they shop and take delivery of their purchases. Tesco is currently trialling this service – a route to market that is already proving popular in France and has the added benefit of reducing the operators’ transportation costs.
Further uptake of smartphones will also play a key role in fuelling online sales, says IDG. “The mobile phone will increasingly become the ‘remote control’ of consumption for society, driven by the plethora of more affordable handsets and the continued development of smartphone applications,” its says. “Within a year of the launch of its ‘Ocado on the Go’ app, Ocado was already receiving more than 12% of orders through the platform, while Tesco has captured the public’s imagination with the UK’s first barcode scanning app,” says IDG.
Beyond the UK, retailers are already combining e-commerce with the growing taste for social interaction via the internet and using tools such as foursquare to reward loyalty and drive footfall in stores. So called ‘social commerce’, or s-commerce, could have a huge impact on the way retailers interact with customers in the future, says IDG.
Shoppers will continue to demand greater convenience and flexibility from grocery retailers and the online channel enables them to deliver both. Given the pace of technological development, much could change in the next five years, and even the strong growth forecasts currently being projected here could yet prove modest.
