With the growing adoption of online grocery, in both home-delivery and Buy-Online-Pickup-In-Store, consumers are looking for additional features when choosing who to buy from. One way to measure a retailer’s online grocery experience is Digital IQ, a metric which Gartner uses for their L2 Digital IQ Index reports.
Gartner’s 2019 study took four factors into account: website/e-Commerce, digital marketing, mobile, and social media. Social media was 10% of the Digital IQ score, and the rest of the categories were weighted at 30% each. Retailers with a large social media presence but no online shopping platforms, such as Trader Joe’s and Lidl, fall lower on this scale because of the weighted categories. Stores are ranked with a focus on online capabilities over presentation.
The Digital IQ metric ranks food retailers into five categories: Genius, Gifted, Average, Challenged, and Feeble. These categories mirror the original categories for personal IQ developed over a century ago, and would normally follow a bell-shaped curve. One difference, though, is that for the Digital IQ study, 21% of retailers fell into the Feeble category.
By breaking down each category, we can start to see where retailers are succeeding in online grocery and where improvements can be made.
The Case for being “Feeble”
One of the biggest factors that placed retailers into this category was mobile app integration. Retailers who are in this category either had no mobile app, or had apps with limited functionality and generally poor customer reviews. Instead of facilitating in-store shopping, the apps from these retailers were difficult to use and left consumers with a less favorable impression of the store.
Mobile app integration may seem like an afterthought for customers of these banners, which include Smart & Final and Trader Joe’s, but it presents an opportunity to improve customer perception for those that want an integrated shopping experience. An app that takes too long to load or has limited list-building capability serves only to frustrate users. Bringing mobile apps up to at least a “neutral” standard is an investment that improves customer perception over time, and is relatively easy to implement with third-party software services.
For many of the banners found in the Feeble category, being on the bottom of the Digital IQ scale has little to no impact on their business strategy. These retailers tend to focus on in-store improvements and customer service, as is the case with Trader Joe’s which ended its grocery delivery program in January of this year. The California-based chain frequently tops lists of consumers’ favorite grocery stores, and their omission of self-checkout lanes–and now online delivery–acts as a selling point. Retailers in the next category up, however, are caught between trying to balance their online and in-store identities.
Other than the “Genius” category, “Challenged” retailers make up the smallest section of the Digital IQ study. The key feature missing from many of these retailers is an integrated online shopping platform, and as a result they have experienced growing pains from the shift towards an omni-channel grocery industry.
Aldi and Lidl, known for their hardline discounting, both fall into this category. By investing in lower prices over an online shopping experience, these retailers are extremely competitive in the markets they inhabit. In a previous study by Engage3, we noted that the presence of an Aldi store in Texas resulted in lower prices at Walmart stores throughout the region.
In the case of Lidl, the retailer has both a mobile app and a website, but outsources its online shopping platform to a third-party provider. A shopper is able to save Lidl products in a list on the website and view it on their phone, but cannot directly order items. Additionally, the online ordering system is not available in the U.S., making it difficult for consumers to buy Lidl products outside of a physical store. The workaround for this is ordering through Shipt, which was acquired by Target at the end of 2017.
The majority of the “Challenged” retailers have limited partnerships with online delivery services, and use their websites as digital catalogs instead of shopping platforms. The difference between “Challenged” and “Average” retailers typically comes down to how well their shopping platform is integrated into their brick-and-mortar business and the number of online delivery options available. Higher ranking, such as in the Gifted and Genius tiers, ties in directly with significant investments in e-Commerce infrastructure as seen in chains like Kroger and H-E-B.
Where to Look for Innovation
At the top of the Digital IQ scale, Amazon and Walmart have managed their enterprises to prioritize online integration. Amazon primarily does business as an e-Commerce retailer, while Walmart has migrated online from being a brick-and-mortar giant. By taking control of their supply chain, both retailers have transformed the retail landscape to their favor. Walmart in particular has seen continued success by focusing on expanding their Buy-Online-Pickup-In-Store program throughout the U.S.
Other retailers to note are Kroger and Target, who have expanded their digital capabilities by acquiring other companies. For Kroger, this ace-in-the-whole is Ocado, which is allowing them to build automated fulfillment centers. Their partnerships with Nuro (for self-driving delivery cars) and Microsoft (for digital shelf labels) are also expanding their influence as an omni-channel business.
Target’s acquisition of Shipt has put them in direct competition with Amazon and Whole Foods for online grocery, while also creating an alternative to Instacart for third-party grocery delivery. As mentioned earlier, more grocery chains like Lidl are starting to rely on Shipt to power their delivery services.
Digital IQ serves as a strong indicator of both a retailer’s online presence and their e-Commerce capabilities. For some stores, especially those which operate in a small area, online grocery is an afterthought to be considered after brick-and-mortar strategy. However, as we start to see more retailers reformulate their supply chains, online strategy will become just as important as in-store operations.
For more information on current trends in the retail industry, you can view our video on the rise of agent-based shopping here. To find out how grocery stores are standing out from the competition in unexpected ways, read through our list of America’s most unique supermarkets here.
To view the full Gartner report on Digital IQ, you can visit their site here.