Customers Not Coming Back for More Online Groceries
Off or online, grocers face a perpetual struggle to keep customers coming back for more. However, research by Kingston University in the U.K. identified higher rates of attrition at supermarket websites than other types of retailers.
As researcher Dr. Chris Hand put it in a statement on Kingston University London’s website, “When someone starts buying books or music online they don’t normally stop and go back to bookshops or CD sellers. But that’s exactly what is happening with many online grocery shoppers.”
The first stage of their research used focus groups to discover the reasons for the adoption — and discontinuation — of online food shopping. Reasons for switching to the web included broken limbs, the arrival of children, moving to a new area where their favorite supermarket didn’t have a store nearby or elderly parents becoming housebound.
“We found that these ‘triggers’ often led to just a temporary change in behavior,” Dr. Dall’Olmo Riley said in the statement. “The adoption decision triggered by a specific situation is easily reversed when the situation changes again.”
However, once that situation has reversed, many consumers go back to shopping in-store due to a disappointing online experience.
“Many respondents felt online grocery providers could not be trusted to be reliable because products were regularly omitted from their delivery and substitute items were often considered unsuitable,” said Dr. Riley. “They also complained about late deliveries, bad picking and packing of goods and perishables being too near sell-by dates.”
Their recommendations for retaining online shoppers included both improving service quality and finding ways to commit customers, possibly by offering subscriptions instead of delivery charges or making exclusive offers for online shopping.
American grocers have tried varying approaches, including home delivery (Peapod, FreshDirect, Meijer DoorstepGrocer, etc.), curbside pickup (Publix Curbside, Harris Teeter Express Lane, etc.) and a combination of delivery and pickup (ShopRite from Home, Hy-Vee, etc.).
In a RetailWire story and discussion on Peapod last October, Mark Price, managing partner, M Squared Group and a BrainTrust panelest said, “In order to succeed at the grocery delivery business, you need efficient logistics, a customer centered business model and philosophy, and the ability to stick with a market until consumers expand their adoption of the grocery delivery service. It is possible, that ‘the ability to stick it out,’ is the greatest success factor of all.”
Results of various RetailWire polls on the subject of online grocery suggest opportunities exist, but that chances for success vary based on the retailer providing the service,
The Peapod-related poll found that 73 percent believed the potential for online grocery in the U.S. is medium or big. Respondents to a poll last year on the new Publix Curbside service found 40 percent seeing the potential for success as somewhat unlikely while 37 thought it somewhat likely.
- Meijer’s Online Grocery Knows No Borders – RetailWire
- Peapod Grows in Hoosier State – RetailWire
- Publix is Back Online – RetailWire
- Online Impulse Buys Depend On Speed of Delivery – RetailWire
- Study finds supermarkets could freshen up their home delivery services – Kingston University London
- Publix tests curbside service in Atlanta – The Atlanta Journal-Constitution
Discussion Questions
Discussion Questions: What does the Kingston University study reveal about the challenges of online grocery? How can shopper attrition rates be reduced?
Online grocery shopping will not catch on as fast as other types of e-commerce because many of the conveniences are offset by many inconveniences and impracticalities.
For most people, there is no need that is satisfied by online grocery. Not to be too simplistic, but the industry might be assuming that because it works for books and music, it ought to work for groceries. The reasons for online not working for groceries are far more numerous than the reasons why online should work.
As they do the things suggested to slow attrition, they are going to have to raise their prices–service comes at a cost. As they do that, they will create attrition for other reasons and retard trial at the same time.
I think the study shows that online grocery shopping doesn’t work and that’s why, for the most part, it’s unprofitable. I think more grocers have gotten out of online shopping that are currently doing it. No one is bragging about how much money they are making. Most grocers don’t need any detailed research to tell them what they have already experienced. There are a few exceptions in vertical population centers but in general, it doesn’t work.
The research shows that dissatisfied customers won’t come back. That’s true for online, and brick and mortar. Bottom line, no retailer should promise more than they can deliver. Unmet expectations are the cause behind all the complaints cited.
Substituting items is a very risky solution. If the customer doesn’t care for the substitution the “convenience” becomes an “inconvenience”.
I don’t see these insights as earth shattering. What I find surprising is that the retailer allowed its service (misnomer?) to be this bad in the first place.
The attrition rates noted are not genetic. Customers stopped shopping online because some part of the experience was less rewarding than a trip to the grocery store.
The issue of the “final mile” still needs to be addressed. The results of the Publix curbside delivery test should be studied.
In addition, food retailers can learn from Amazon, who focuses on making the experience easy and effective. In particular, Amazon’s “Subscribe and Save” program offers customers an extra 15% off and free automatic delivery. This is the standard that customers will use to judge food shopping online.
Grocery shopping is complex–you need a degree of menu planning, an overview of what is (and isn’t in your pantry) an idea of how busy your week is going to be (so you don’t buy perishables that perish) and considerable time online to get the order right. While the last item gets better the more lists and trips you build up, I think there’s an element of food shopping that is unlike buying a book or a pair of shoes. To over simplify there are list makers and there are item grabbers and it’s hard to turn a grabber into a list maker. At its core, I think online grocery seeks to drive pretty significant behavioral change among some segments. Doesn’t mean there isn’t a whole lot of growth left–especially if retailers and manufacturers can start to integrate coupons and create special offers for loyal shoppers–but it does present a higher hurdle for grocery than for some other online categories.
Demographic shifts of the population–shifts to suburban areas, lack of density offered in select urban areas, smaller households, etc., as well as the shifts consumer choices to dining out, offerings of prepared meals, etc.–offer consumers reasons to remain true to the in-store experience compared to online.
The repeat consumer and the ones that have an affinity for online are likely to be in neighborhood pockets within a city, working in affluent/time-filled positions, smaller households, and yet still enjoying the creative cooking time in the kitchen. If they don’t have the later, they’ll be dining out.
The grocery store and consumable marketplace are “experiences” that most Americans learn at an early age–they know how to navigate it. And, they are likely to remain here.
The online grocery experience that these people are talking about is not one that I have experienced with FreshDirect.
Products were regularly omitted from their delivery? Almost never!
Substitute items were often considered unsuitable? They never substitute.
Late deliveries? In the more than 5 years we have used FreshDirect we have NEVER had a late delivery. A few early deliveries, but never late!
Bad picking and packing of goods? Damaged goods are always credited without exception. One egg broken out of a dozen, you get credit for the dozen. Plus, depending on the problem, they give us an additional credit for the inconvenience without us even asking.
Perishables being too near sell-by dates? The milk is always fresher from Fresh Direct than from the supermarkets. In fact single source inventory almost always guarantees better date management than inventory dispersed throughout the chain’s stores.
The problems outlined in the discussion are all unacceptable. But they are not endemic to online grocery operations. They are unacceptable for any business operation. Fix the operation. Don’t go out of the online business.
Someone seeking a specific CD or book might look at others while online, but generally the shopper knows what it is they want. Grocery shopping is far more “I see, I think about, do I have, do I need, will this work with the other item I am buying?” type of process. This type of process is impossible to duplicate online.
To prompt people to shop in stores, supermarket retailers ensure product availability on the shelves, and they also market, merchandise, promote, advertise, highlight, etc. They burn the midnight oil studying shopper insights and they carefully set stores to reflect the customer base’s specific needs, behaviors, ethnicity, etc.
I sense from the U.K. study that none of the above took place at the retailers the survey respondents patronized. Shopping online is not just technology and logistics, although they have to be done right or the endeavor is pointless; it’s marketing and promotion to make it a regular part of the shopping experience. There should be clear-cut goals as to whether the retailer wants his customers to be either online or in-store, or a mix of both. Supermarkets are only a few years into using websites and online shopping. My guess is that we will see an evolution of how to market to the online shopper over the next several years.
People talk service, but most people buy price, especially when it comes to grocery shopping. Online grocery cannot compete on price and be profitable. Sure, there may be a niche for this service, but it is a small niche at best.
There are certain items, other than canned goods, that most shoppers want to see, touch and maybe sniff before deciding which to select. This does not happen with online shopping and never will. As others, including the author’s survey, this will end when the reason for it has passed.
I hate grocery shopping here in the boroughs of New York City. It’s a tolerable experience anyplace else but here. That’s why I love being able to shop for my groceries online and have them delivered to me in Brooklyn.
What I don’t like is the lack of selection offered. Waldbaums has no excuse in this department. Their inventory system should tell what is in the stores in Brooklyn and what are popular sellers. When I log on, the system should check my zip code see what all of the top selling items are in my area and make sure that I am able to select those items as it is reasonable that I most likely would wish to purchase them. A lot of major brand items are not offered on the website for purchase. They’re in the grocery store that you’re pulling my order from (not a distribution center) so I should be able to buy anything as if I was physically in the store.
Waldbaums’ personnel have been guilty of picking produce that was not quite up to par or beginning to spoil, but I think that may be be due to the young pickers not having a familiarity with certain items nor the knowledge necessary to properly pick in the first place. An hour or so familiarizing them with the various types of produce and when each is around its peak ripeness would do wonders.
I’ve also had to deal with late deliveries on occasion. The driver lives in Brooklyn but the deliveries are picked and shipped from one of the Long Island Waldbaums supermarket locations. He, therefore, thinks it’s okay for him to come to me last since he lives in my neighborhood. My last order was delivered on a hot day and I was not pleased with the way a number of items arrived.
Freshdirect.com is a much better experience, but it is severely lacking in brand availability. And why can’t I get a regular gallon of milk from them?! Half gallons only. What’s that about? Their specialty items are great and, I admit, I do tend to look forward to and purchase them on many occasions. If you’re interested in trying new and different foods and dishes, it’s definitely the place to shop online in this area.
Another problem with Freshdirect.com is that they don’t make enough delivery slots available in my section of Brooklyn, so I have to scramble if I want a delivery from them. I sometime have to wait a full seven days to get a delivery time that works and that will tend to make me back off using them.
My final issue with Freshdirect.com is their prices. They are much higher than the supermarkets and that’s with them charging a delivery fee and a gas surcharge. Waldbaums doesn’t charge the gas surcharge but the delivery fee is a little higher. The noticeable difference in the cost of food from Freshdirect.com definitely affects how much I purchase from them and how often. They really need to bring their prices more in line with other grocery delivery services in the area.
I’d love to purchase from PeaPod but they have yet to deliver in my area, despite the opening of various Stop ‘N Shop Locations in my general vicinity.
Yes, the online grocers still have a ways to go, but if they continue to work out the kinks, they’ll get many more like me that actually hate food shopping and they’ll win over the time pressed, too.
The Peapod poll, with 73% believe the potential for U.S. growth is medium or big, is the take away here.
Retailers should offer the service but not directly provide the service (expense). Focus on providing an online experience comparable to or better than an in-store experience.
Coupons, on-time deliveries, subscription fees, daily deals, comparison shopping, and mobile connectivity all are playing a larger role in improving the “last mile” experience.
Convenience and the capacity to provide that convenience will determine to a large part the success of the merchants’ online platform. The shortcomings from some merchants are opportunities for their competitors.
And if a poll showed 73% of people thought 2+2=7, would it be true ??
The reality is that while a great many people think online grocery “should” work, actual experience indicates it doesn’t … and doesn’t because the model itself isn’t workable. This study supports that point (even if it doesn’t – strictly speaking – prove it).
Behavioral researchers typically ignore one very important factor and that is a fundamental consumer desire for physical interaction with other homo sapiens! The shopping experience is one of those occasions. Online grocery shopping denies that experience and, as has been pointed out in other postings, consumer dissatisfaction with the delivered order (and price!) does not compensate for the illusion of convenience.
Yes, our culture has responded to the convenience of downloading entertainment from the Internet. However, movie house attendance have never been higher (human connectivity!) and the vending revenues of supermarket installed Redbox movie rentals has been inspiring.
Come to think about it, the more time folks spend online, the more they become inclined to seek out opportunities to “mix ‘n mingle” in the REAL world!
Habit is working against movement of grocery sales to online in a way that it never will for more occasional purchases. This fact is simply not addressed adequately in a strictly logistical approach, the usual, for FMCG/CPG.
The “chore” portion of in-store shopping is alleviated by habituation; a large part of it occurs on a relatively subconscious basis, on autopilot.
The “surprise/delight” portion is experiential and hardly duplicatable online. In fact, the “chore” portion has synergies with “surprise/delight” because the tedium creates psychic credit, permitting/encouraging a “surprise/delight” reward.
This leaves the “frustrating/necessity” purchases, which the shopper really needs (an ingredient, rare replacement, etc.) that MAY BE hard to find in the store, or unavailable. This is the angst-creating, negative part of grocery shopping.
The synergies of the first two components will continue to drive bricks-and-mortar retailing far into the future. However, both can be done better by managing them as distinct retailing activities. Mobile devices may help with the third, but online grocery shopping will NEVER play more than a supporting role for the general population. That doesn’t mean that a few fortunes can’t be made in online grocery. 😉
Both this topic and the comments are fascinating. Kingston’s critical study yields critical sentiment today about online grocery. In contrast, the optimistic October 21, 2010 RetailWire article about Peapod yielded optimistic assessments.
I’m perplexed by two things:
1. According to the Journal in which it was published, the Kingston study cited today was received in April 2007 and revised in March 2008. Thus it may not be as current as we assume.
2. The Peapod survey showing 73% percent believe in the potential for online grocery was conducted in this forum, and therefore not representative of typical shoppers.
As a result, I think these surveys need to be taken with a grain of salt. Fortunately, we have the opinions and personal experiences of this panel to put things in perspective!
I loved online grocery shopping (with tesco.com) when I lived in the UK.
Did I only shop online? No, I used it for certain trips/missions.
Did I work out how to use it optimally in my grocery-shopping mix first time? No, it took a few shops to work it out…in a very similar way to finding the right stores to shop at when you move house.
These are personal experiences not market trends. However, the growth of Tesco.com in the UK (and profitability) is surely testament to the fact that it can work: more customers are choosing it and clearly many are sticking with it.
I’d like to see this kind of research backed and driven by behavioral data…which should be relatively easy given that online retailing should have both great contact data and transaction data!
The research clearly shows the importance of trust for any retailer. Omitted products and unwanted substitutions don’t result in happy customers.