Marielle Fong, Engage3 Director of Marketing, sat down with Bill Bishop, Brick Meets Click Chief Architect, to discuss: 1) his calculations on what the online grocery shopping retention rate will be in the near future, 2) which retailer is impressing him nowadays, 3) how Shipt and Instacart will evolve, and 4) his thoughts on whether retailers should pay more attention to shipping fees or prices. Listen now or read the transcript of their conversation below.
You can also download the podcast HERE.
Listen to “Engage3 Insider Track Podcast: An Online Grocery Update From Bill Bishop.”
Online Grocery Growth
So there’s been back and forth about whether online grocery shopping will have staying power. What do you expect the retention rate will be for shoppers who are new, or just started to purchase their groceries online — specifically because of the restrictions of the pandemic?
We think about retention rates in the early half of the pandemic — the first half of last year — that redemption was probably less than 50%. There were some bad experiences. A lot of people were sort of draftees in the process, but now I think people who are joining today — that the retention rate is going to be comfortably over 75%. We’re seeing this in our own research, plus the government research, and a lot of other numbers — that frankly it’s taking off faster than we’d expected. So that’s why I’m comfortable telling you that. I think the retention rate will be at least 75% and they will only get higher now — it’ll be over 75%. Now within the base of people who are shopping online, they’re shopping more frequently, they’re buying smaller orders, which indicate to me that they are doing both their stock-up shopping and some fill-in shopping. So I think what that’s probably leading to is a greater share of shopping. And that’s what’s giving us these big total dollars, right? So you’ve got more people doing it. You’ve got more people buying more frequently, admittedly smaller basket sizes, but wouldn’t buy it all together. The sales are, you know, just as high as, frankly, the sales online that we are just picking up now. As high as they were at the peak of the pandemic, which was high.
Who is Leading in Grocery e-Commerce
Right, okay. Are there any retailers you’re particularly impressed with with respect to how they’ve handled COVID-19 and their aggressive shift to e-commerce?
Well, I think there’s one company that stands out. It’s not a grocery though, but they sell a lot of grocery products and that’s Target. Target has done a tremendous job moving their business online and they’ve done it with, primarily, with one approach, which is sort of the drive-up pick-up approach. You don’t go inside, you just drive up and the people bring the product out to you.
So Bill, what was it that they did in particular that was impressive?
First and foremost, Target has added people, so they’re not constrained by staff. In addition to that, they’ve added technology; it increased productivity of the people. So for example, they have technology now that allows them — if you order through their app to track how far you are to forecast when you’re likely to get to the store. They have other technology that kind of trips a switch when you come on to their parking lot, so you’ve got 20 or 30 seconds before you pull into their area for people to be prepared. If you see instances where, because they bring out multiple orders at the same time, your order is there when you stop your car. So if normal pickup and click and collect might have a three to five minute wait, can you imagine having virtually zero wait. Co they’ve really, I think, maxed out customer satisfaction in that regard. And they’ve also done a really good job of marketing it. While it’s only one approach, people say: “Well, you ought to give people a way to shop whenever they want, wherever they want, however they want.” That’s not what they’re doing here. They’re doing one job exceptionally well and encouraging folks to do it. So to me, that’s very impressive. There’s certainly other people who are doing a decent job or a good job, but that they probably stand alone.
I think I mentioned this to you before, but I actually joined Sam’s Club Plus’ membership, and they actually have that too. When I walk in or not even, you know, when I’m close and they say: “Hey, we know that you’re at Sam’s Club, are you here to shop?” Same thing with the gas station, so that’s really, really amazing.
And you know, that’s the way the technology is going today. While that’s not the same thing as an online shopping experience, I mean, it does make a huge difference in terms of convenience. And you know, you’re mentioning it as if a friend’s said it, too. That makes it different.
Personalization on a different level. Right. “We know you’re here, so welcome.”
Exactly. And if it’s a robot, it’s a robot. Right.
And the other thing is Target has Instagram shopping. I don’t know if you read about that, but you can actually shop through Instagram. So you know that Instagram uses pictures, right? It’s like Pinterest — but from there, you can actually buy items right there, which is amazing for millennials, right? I mean, my kids would look at it like, you know, this is something that I could buy at Target and you can buy it right there. I mean, the convenience is amazing. Awesome.
Yeah. Eliminating just one click over time. Makes huge difference.
For Online Grocery – Focus on Market Share or Profitability?
Bill, do you think retailers should be focused on market share or profitability when it relates to e-commerce?
That’s a delicate balance and they really have to be, I know it’s difficult, but they’ve got to be doing both at the same time. If they’re not focusing on market share, they’re not focusing on growth and they’ve got to grow fast to get to full scale, get to be efficient. And efficiency is one of the keys to the other part of it, which is profitability. So they’ve got to sort of carry water on both shoulders here. I really think it can be done, but it’s a delicate balancing act.
Right, but if they only had one choice, which one should they focus on first? It depends who you are, I’m sure.
If you only could do one thing, I think the first thing to focus on is profitability. Because once you achieve profitability, your confidence goes up and you can go ahead and scale and grow share faster. But if you don’t have profitability and you’re growing, it’s kind of a very nerve-wracking situation.
Right. Unless you have, you know, like here, like Amazon, so they don’t care about profitability at first, right?
How Shipt and Instacart Will Evolve
So how do you expect the relationship between Instacart and Shipt marketplaces and their retail partnerships? How are they going to evolve?
I think Shipt is pretty well positioned. They’ve got a lot going and retailers need a third-party player to help them. They can’t do it all themselves. I mean, it’s very specialized and again Instacart is in a different situation in the sense that while they were the go-to solution for so many people back in the day and in the early part of the pandemic, a number of people have felt that the constraints that Instacart on them today have got to be relaxed. And so I think you’re going to find a number of people looking at a number of retailers looking to reduce their dependency, not necessarily eliminate, but reduce their dependency on Instacart. It’ll be a tale of two different services in terms of that Shipt and Instacart.
Charge Fees or Raise Prices?
Right. Okay, do you believe that retailers should have the same or different prices between their online and in-store channels?
Well, again, it really depends on what the retailer’s strategy is. But I think in general, what we’re seeing is that consumers are actually paying more attention to fees than they are prices online. So if you’re going to make up some profitability and do a little bit better online — and your choices, either charge fees or raise prices — it’s the second one that makes the most sense. And what’s quite amazing to me is that, the retailers who are marking up today themselves, raising prices are sometimes marking up in the neighborhood of 15% — that doesn’t seem to discourage their business. So this is probably a reflection of customers being a little less price sensitive when they’re buying this convenience. And eventually competition will probably back people off that position, but right now I think it’s prices.
Buying Local Trend
So this was promoted at the Super Bowl and at one of your webinars that I attended. A lot of industry thought leaders are promoting buying local. What are your thoughts on that concept, and will people heed the call?
I do think there’s a real appeal associated with buying local that motivates people. When we were in Australia a number of years ago, that was really an extraordinarily important part of sustainability, the way they thought about supporting their community. And I don’t think we have, in the early days, that much of support your community thought process in the US, but I think there’s much more of it today.
Great. Well, thank you again for joining us. We’ll see you next time!