This is part one of a six-part series on building a successful e-commerce grocery business, providing a comprehensive view of all considerations that a grocery retailer should evaluate to ensure profitability and sustainability.
Many grocery retailers get started with e-commerce by making the mistake of building without a well-defined strategy. This would never fly if a retailer were launching a brick-and-mortar store—e-commerce is worthy and deserving of the same level of planning and consideration. E-commerce grocery is not a one-size-fits-all game, and every retailer requires a unique approach that fits their brand, meets customer demand and expectation for the segment and geography served, and paves a path to profitability.
In short, retailers must define their e-commerce strategy, which requires deliberate planning in the areas of customer acquisition, order fulfillment, digital merchandising, click and collect, delivery, digital media strategy, and KPI monitoring.
I believe that for best results, the key topics mentioned above should be evaluated by a team of internal and external stakeholders. Internal stakeholders should be responsible for ensuring that the e-commerce business serves as a natural extension of the in-store experience, effectively maintaining the retailer’s brand promise. External stakeholders should be utilized in order to ensure that the retailer has extensive e-commerce grocery experience at their disposal and industry best practices are maintained.
All of the content included in this series is based on my 15 years of e-commerce grocery operating experience, including an on-demand delivery service with fulfillment from a micro-fulfillment center serving a largely millennial customer base and curbside pickup and local delivery with fulfillment from the largest grocery stores in North America. I’m currently CEO of a grocery technology and operations company, partnering with leading regional and independent grocery chains throughout the U.S. and Canada. This is what I’ve learned during my time in the industry.
Let’s start by zooming in to customer acquisition and retention.
Customer Acquisition And Retention
Starting an e-commerce grocery business without a formal plan for how you will acquire and retain customers is a recipe for failure. Standing up an e-commerce site is simply a step in the process of achieving success. It’s imperative that a retailer determine a comprehensive acquisition strategy consisting of digital marketing, in-store signage and traditional media.
Equally (if not more) important is a strategy to retain customers. After all, there’s a wealth of data that demonstrates the relatively high customer lifetime value, or CLV, of e-commerce grocery customers, with even higher CLV for omnichannel shoppers. In my experience, once customers place several subsequent orders after that first purchase, it’s likely that you’ve won the customer’s e-commerce grocery loyalty for the long haul.
• Digital Marketing Channels And Strategy
Given that an e-commerce grocery business often doesn’t have a recognizable physical presence, it’s critical to proactively make current and prospective customers aware of this new shopping channel. Typically, I’d suggest beginning with a paid search campaign. This provides an e-commerce grocery business with visibility into when prospective customers are searching Google (and other major search engines) for ways to order their groceries.
It’s important to bid on common phrases (i.e., “online grocery shopping”), but it’s equally important to “defend” against competitors by bidding on “branded” keywords such as phrases that include other retailer’s names. The intent with paid search is to be both proactive, gaining visibility among prospects, and reactive, defending existing customers against competitors’ e-commerce offering. Paid social campaigns (targeted ads on Facebook and other social channels) can be a great complement to paid search campaigns.
• Leveraging Existing Channels
When e-commerce is introduced as a new channel, there’s an opportunity to gain incremental visits (and a greater share of wallet). For this reason, e-commerce should be included in all existing traditional marketing materials (newspaper ads, radio, print and digital circulars, etc.) and in-store signage.
• First-Time Customer Offer
Creating visibility for an e-commerce grocery business is just a start. It’s imperative to direct current and prospective customers to an offer that entices them to place their first order (and eventually several more). A great first-time customer offer reduces friction, making the decision for a customer to place their first order easier. Additionally, the offer should spread benefits across at least the first three or four orders. There’s a wealth of data indicating that an e-commerce grocery customer is highly likely to remain loyal once they place this amount of orders.
• Store Rollout Plan
When a retailer first launches an e-commerce business, it’s common to not make it available to all customers. It’s important to proactively indicate when new stores and services will be launched in addition to collecting information from customers interested in e-commerce who aren’t able to order due to the service not being available to them yet.
• Membership And Subscription
After getting the basics right, retailers can leverage more sophisticated strategies such as a membership model and subscription programs. Membership models (i.e., $99 a year for free delivery) can dramatically improve retention by gaining a commitment from the customer. Subscription programs improve retention by allowing consumers to save on their favorite items by agreeing to purchase them on a defined cadence (i.e., every four weeks).
Once a retailer has a comprehensive plan to acquire and retain customers, the focus shifts to efficiently fulfilling orders and delivering a great experience. In part two of this series, we will take a closer look at order fulfillment, sharing proven e-commerce grocery fulfillment models that lead to operational excellence and e-commerce grocery industry best customer experiences.