Supermarket giant Kroger is expanding its experiment with an online ordering service called ClickList that allows consumers to order groceries online and pick them up in stores. Kroger’s long-term ambition is to offer ClickList at up to 1,200 locations.[1] Kroger’s plans only confirm what Cooper Smith (@CooperASmith) observes about online grocery shopping. “Since the early days of the internet,” he writes, “entrepreneurs have dreamed of moving grocery shopping online. It’s finally starting to happen.”[2] To learn more about this trend, read my article entitled “Is Online Grocery Shopping Really About to Soar?” If you are wondering why Kroger and other retailers are pushing to develop an online business, you can probably thank Generation Y (so-called Millennials). Laurie Demeritt, CEO of The Hartman Group, explains, “Millennials’ strong ties to technology and new ways of engaging with food and beverage occasions make this generation’s shopping and dining habits worth watching, not just for clues about what young adults want but for ways that Millennials are influencing changes across generations.”[3] Kristen Cloud (@KCloudShelby) reports, “Revamped grocery store environments and new food shopping formats prove that Millennials are having a profound impact on the food shopping landscape. According to a new report, ‘Food Shopping in America,’ by MSLGroup and The Hartman Group, Millennials’ food purchase decisions are driven by their unique consumption patterns, constraints on budget and spontaneity. These factors differ from older generations and offer brands major challenges and big opportunities to attract these shoppers.”[4] Julie Quick, Head of Insights & Strategy at Shoptology, indicates that the growing online grocery shopping trend “has many CPG marketers lying awake at night.”[5] If you are wondering why, Quick explains:

“Because online grocery requires new skills for how to strategize, plan, and effectively compete in a digital environment. Consulting companies warned marketers years ago to have contingencies in place if a percentage of sales shifted to e-commerce. Few heeded that advice and are now just shy of panic as they try to play catch-up. The good news is that it’s easy to turn your greatest e-commerce fears into e-commerce competencies.”

Caroline Scott-Thomas reports that a study conducted by Sydny entitled “The State of Online Grocery Retail in Europe 2015” concluded, “The grocery industry is reaching a digital tipping point, with much of its growth expected to come from online. In fact, some FMCG [fast moving consumer goods] brands are already claiming 20-50% of sales from online purchases.”[6] Millennials aren’t just affecting online purchases; their penchant for using mobile devices while shopping has forced grocers to develop digital strategies for in-store shopping as well as for online shopping. Steve Banker (@steve_scm) reports, “According to Digitas’ Connected Commerce, 92 million adult Americans use smartphone apps while shopping in store.”[7] Steve Bryant, MSLGroup’s director of food and beverage marketing, insists, “Brands must adapt to connect directly with the Millennial shopper. Millennials value companies that are authentic and transparent, and are more willing to connect with companies that try to address their needs. Marketing efforts should focus on carefully tailored, personalized communications, with a focus on both convenience and affordability.”[8] MSL Group and The Hartman Group prepared the following infographic that provides an overview of the Millennial grocery shopper.

Perhaps the most important conclusion found in the MSL Group/Hartman Group study was: “Millennials are active and connected shoppers — most (70 percent) use their mobile devices while shopping for tasks like checking a shopping list kept online or on their device, contacting another family member, searching for a coupon and finding a recipe. This creates an opportunity for brands to connect with them via mobile commerce.” This is important because online grocery shopping remains relatively small when compared to in-store grocery shopping. As a result, Banker concludes, “Omni-channel has been all the rage. But for grocery chains and the brand owners that supply them, the demand driven supply chain for traditional in-store shopping may continue to offer the larger opportunity.” Simon Uwins (@SimonUwins), a loyalty expert, agrees with Banker that whether consumers are grocery shopping online or in stores, having a digital strategy for connecting with them is important for three reasons.[9] They are:

1. First, many customers say they go online before going shopping: to find information, ideas or coupons, or to consult their social network. If you don’t do a good job here, or your competitors do a better one, they may not even get to your store.
2. Second, customers increasingly use their mobile devices during shopping to go online, for similar reasons. If you’re not using the opportunity of mobile to help them with their shopping trip, then their attention — and ultimately their business — may go elsewhere.
3. Third, customers can easily share their experiences of shopping with you, which then influences potential customers, before you’ve even had a chance to communicate with them. You need to encourage loyal customers to share positive experiences, so that you build your reputation online.

Uwins concludes, “None of this, of course, replaces the importance of delivering a great shopping trip. But if customers vote for you with their fingers, then they’re more likely to vote for you with their feet.” This is especially true when it comes to Millennial shoppers.

Footnotes
[1] “Kroger takes online ordering to next level,” Cincinnati Business Courier, 11 August 2015.
[2] Cooper Smith, “How E-Commerce Is Finally Disrupting The Massive $600 Billion Grocery Industry,” Business Insider, 6 November 2014.
[3] Kristen Cloud, “Report: For Millennials, Mainstream Grocery’s Position Is Precarious,” The Shelby Report, 11 August 2015.
[4] Ibid.
[5] Julie Quick, “Why Many CPG Marketers Are Nervous About Online Grocery,” MediaPost, 15 July 2015.
[6] Caroline Scott-Thomas, “Grocery retail reaching ‘a digital tipping point’,” Food Navigator.com, 10 July 2015.
[7] Steve Banker, “In-store Shopping Apps and the New Grocery Supply Chain,” Logistics Viewpoints, 15 December 2014.
[8] Cloud, op. cit.
[9] Simon Uwins, “Customers vote with their fingers, as well as their feet,” Supermarket News, 11 November 2014.