The dunnhumby Quarterly
eCommerce Edition
Welcome to the first edition of The dunnhumby Quarterly
Every few months, we’ll help grocery retailers understand who’s winning in the market and why, by uniting insights from: economic trends, customer needs, competitive positioning of the 60 to 70 largest retailers in the U.S. grocery market, and the perspectives of our battle tested grocery industry consultants. Also, each edition will dive deep into a different theme. This quarter, the theme uniting all our content will be “eCommerce”.
If you don’t have time to read through all of the content in one sitting, here are the key data points you need to know:
- Those who win in eCommerce (with the exception of pure plays) already tend to have winning value propositions and strong relationships with shoppers through their brick-and-mortar channel. They then continue to nurture those relationships in the eCommerce channel by owning the end-to-end online shopping experience in the minds of shoppers and by making that experience as easy as possible for them. (Click here to read for more information.)
- H-E-B, in a surprise photo finish, edges Amazon and Amazon Fresh in the strength of their grocery eCommerce value proposition. They provide a case study for other traditional, regional retailers in how to beat even the eCommerce goliaths in an omnichannel world. (Click here to read more information.)
- Amazon’s long-term growth in grocery ultimately depends on its success in brick and mortar. Amazon Fresh has strong brand equity with its pureplay shopper base, and its move into brick and mortar has had some early success. However, it has also stumbled in some critical areas that traditional, regional grocers can lean into and exploit. (Click here to read more information.)
- The U.S. is a nation nearly equally divided into omnichannel and brick and mortar only shoppers, and those brick and mortar only shoppers are stubborn in their adherence to single channel buying. (Click here to read more information.)
- Covid accelerated grocery growth for eCommerce, but it may have just brought the grocery sector closer to its eCommerce sales ceiling at a faster rate, rather than raised the height of that ceiling. Also, inflation, Covid vaccines and treatments, as well as increased consumer mobility are putting the brakes on eCommerce growth. (Click here to read more information.)
- The needs of omnichannel shoppers look very different than brick and mortar only shoppers, driven by differences in levels of caregiving (more pets and children = more omnichannel shopping). To oversimplify the differences in their needs, omnichannel shoppers prioritize ease in both the in-store and online experience, while brick and mortar only shoppers prioritize getting their preferred balance of product quality and product prices. (Click here to read more information.)
In light of the above, here are some action items for your retail organization and your eCommerce roadmap:
- Merge clickstream and offline data, so you can understand how to personalize the online shopping experience in the most relevant way possible, using all online personalization levers at your disposal (site layout, category display, products featured/recommended, communications, promotion/offers, etc.). This will deliver the ease that the omnichannel shopper desires
- Take steps to own the eCommerce ordering and delivery experiences, at least in the mind of the customer, even if you partner with a 3rd party. Stay close to how those 3rd parties are executing, and remain accountable for customer satisfaction with those 3rd party experiences. This will ensure that the equity you’ve built with your shopper through the brick and mortar channel gets transferred to the eCommerce experience.
- Take a holistic, long-term, customer point-of-view on profitability. Profitability in eCommerce grocery is hard to come by (even for Amazon, a world class eComm operator). However, eCommerce shoppers are a less price sensitive shopper in general, likely meaning they are a more profitable shopper from a gross margin perspective, and they still spend most of their dollars in brick and mortar.
- In the near-term, to support profitability, accelerate pursuit of shopper insight and media monetization. While standing up and scaling the right fulfillment and delivery operations for your geography and customer base and waiting for those capital investments to provide a return, accelerate pursuit of shopper insight and media dollars from your supplier partners.
- Double down on the basics of brick-and-mortar store operations: keep shelves stocked, make sure prices and promotions ring as advertised, keep stores clean and well-organized. As a rule in the grocery industry, we see these things suffer as eCommerce penetration with a shopper base increases. H-E-B, not coincidentally, provides the strongest exception to this rule. Keeping your eye on the in-store experience will deliver the consistency the omnichannel shopper wants across channels, and it also will provide a stark point of differentiation from an expanding Amazon Fresh, which is bottom of the market in customer perception of out-of-stocks and availability.
- To eavesdrop on a roundtable discussion dunnhumby consultants had on many of the points above, click here.
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eCommerce Retailer Preference Index
Inspired by the Retailer Preference Index: U.S. Grocery Channel Edition (RPI) — the industry’s first annual ranking of retailers based both on financial performance and Customer sentiment— our eCommerce Retail Preference Index (eCommerce RPI) establishes which retailer's eCommerce value proposition is best positioned to win with online Customers. Our ranking is the result of a statistical model that predicts how retailer execution on various online Customer needs – Preference Drivers – impacts both emotional bonds formed with Customers and eCommerce Performance.
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Retailer Spotlight
In this article, we look at things from a different angle, offering grocers aspiring to beat Amazon a close analysis of why Amazon is winning and what makes it vulnerable. (After all, there are more retailers out there interested in beating Amazon than in competing against H-E-B). More importantly, this is perhaps the first detailed look at the rising omnichannel threat posed by Amazon Fresh.
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Consumer Trends Tracker
This article provides top-line context to the eCommerce shopper and how they interact with different channels. As we collect future waves of data, customer insights will be trended over time, not just relating to eCommerce, but for all nine areas mentioned in the introduction. Next quarter’s feature article will be focused on another pressing topic.
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Eyes on the Economy
In this article, we take a close look at how eCommerce has progressed at a great time of disruption. While a number of other developments command the attention of grocers — most notably inflation, there are a number of economic trends worth noting as grocers commit further to an omnichannel strategy.
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dhVoice – A Roundtable Discussion with dunnhumby Thought Leaders
With regard to eCommerce, what should grocers be thinking about in mid-2022? We’ve gathered a panel of experts at dunnhumby to break it down for us. What should grocery retailers prioritize? What should they understand about the competition? How can grocers level the playing field by adopting the Customer data science that can support eCommerce growth?
