The future online grocery shopping experience
The grocery wars are heating up, and my local grocery (Loblaws) is going ecommerce, which means times are about to get more exciting.
WHAT’S WRONG WITH THE GROCERY STORE?
Grocery stores are essentially warehouses that sell raw materials (meat, vegetables, fruits e.t.c). The function of acquiring groceries is to create an experience (food that looks good, tastes great and makes people happy).
The problem is that most of the value of grocery shopping lies in the end experience (the food we make from the grocery) which grocery store’s leave up to individuals and others.
We live in an era where value means delivering experiences, not simply selling product.
WHAT CONSTITUTES AN EXPERIENCE?
Restaurants and fast-food chains capitalize on the “experience” end of grocery shopping by specializing in:
- Serving quality “restaurant grade” meals
- Offering a wide array of delicacies for discovery and inspiration
- Fast-food specializes in food you can eat now
- Many fast-food’s as-well as restaurants compete on delivering you these experiences at affordable prices
These are the experiences grocery shoppers hope to replicate at home by going grocery shopping. The fact that they can’t is a problem that once solved will separate the new grocery shopping experience from the old. I believe that groceries in Canada like Loblaws are well positioned to exploit this market which I will detail further down.
THE MODEL FOR A NEW GROCERY SHOPPING EXPERIENCE EXISTS
The past 3 years have seen the rise and growth of “meal delivery” services that deliver pre-portioned meal ingredients with recipes to cook restaurant quality meals. I love this service for multiple reasons:
- It teaches and inspires you to cook quality food (empowering)
- It enables you to discover and try new things
- It structures your eating habits
- It’s fun and exciting and the meals are supposedly quick to make (30 minutes or so)
The main problem I have with these services are that they are structured as an alternative to eating out. Whereas the main purpose of grocery shopping is to acquire enough food to last X number of days, weeks e.t.c. I believe this model only scratches the surface and grocery stores like Loblaws have the potential to exploit it’s full potential at a greater scale.
HOW CAN GROCERY AND ECOMMERCE WORK TOGETHER?
The promise of ecommerce is that it enables you to develop experiences that you couldn’t before. It is therefore necessary to develop proprietary experiences in order to maximize value to consumers. Andy Dunn, CEO of Bonobos mentioned four strategies to create value in ecommerce: proprietary pricing, proprietary selection, proprietary experience, and proprietary merchandise.
Meal delivery services such as Plated and Blue Apron are wonderful experiences that groceries should expand on to control the grocery shopping experience of their customers (Except I prefer a pickup model). Most individuals eat 3 meals a day and shop at-least once a week. How amazing would it be to acquire an entire week’s worth of meals at once, rich with choices of different breakfast, lunch and dinner meals for each day at a price that is sustainable every week.
“Proprietary selection is a strategy about being narrow and deep for a particular audience.” This is where a lot of opportunity resides, segmenting customers by lifestyle.
Experiences are usually built to support and enhance existing lifestyles. Fitness for example is a lucrative group of consumers who are religious about their eating habits. They usually structure their meal portions and eat only certain types of foods. A proprietary meal service experience would be very lucrative and energizing for this lucrative market.
It’s hard to differentiate in the grocery industry because a majority of the inventory carried by a given retailer is also carried by another. A meal service model mitigates this problem by creating it’s own proprietary merchandise in the form of branded meals/recipes. This exclusivity builds an ecosystem of dependance where you don’t have to compete with other grocery retailers directly. This would allow a grocery retailer to control their costs and overall margin.
When your business model is engineered to deliver an experience, pricing becomes an art. Of course competing on price is a losing game, but the way you price your products determines the type of experience you wish to deliver. These days I’m a fan of a one price model for a given group of product regardless of differing design, variables, attributes e.t.c. (e.g. Warby Parker $95 for all frames. Blue Apron $9.99 per any meal). This model reduces friction in the customer’s discision making. It changes the conversation from what can I afford to which one do I want. Most of all it promotes structure, especially for a meal service that would feed someone for a week.
WHY LOBLAWS IS WELL POSITIONED TO EXPLOIT THIS NEW MODEL
I believe that Loblaws is well positioned to exploit this new model because:
- As Canada’s largest food distributor, they operate at a scale that would make a meal service that provides an affordable weekly meal plan economically feasible.
- Loblaws looks to already have an ecommerce infrastructure that can support this model as well as a dedicated ecommerce team
- Their move to launch a click-and-collect model will aid in getting customers accustomed to purchasing groceries online (very big problem to overcome)
- Ecommerce data will provide a wealth of information
- Loblaws’ ecommerce site already provides recipes and other meal inspirations but lacks a call to action. A meal service would act as that call to action which will move inventory
Overall, I’m interested to see how the meal delivery model evolves and excited to see how Loblaws’ ecommerce initiatives take off.