The retail landscape is changing, leaving retailers with a crucial decision: To embrace and develop an omnichannel approach, or to continue with business as usual, running the risk of becoming obsolete. This is especially important when considering the rise of the millennial shopper, who is digitally dependent.
It's likely that delivery always will be a prevalent online grocery model in key metro areas. However, the click-and-collect model, already accepted in several Western European countries and practiced by such U.S. retailers as Peapod, Shoprite and Walmart, allows retailers to better leverage existing physical assets, which provides more attractive economics for retailers and suppliers, according to "Online Grocery Business Models: Click & Collect and Drive," a June 2015 report developed in a partnership between the International Dairy Deli Bakery Association (IDDBA) and RetailNet Group.
"[Retailers] must not ignore their physical stores ... to lure shoppers through digital merchandising," says Alan Hiebert, IDDBA's senior education coordinator.
But while ordering nonperishables via click-and-collect is one thing, purchasing fresh foods is another. Shoppers are less likely to purchase dairy, deli, bakery, cheese, prepared and other fresh foods in a click-and-collect order than during an in-store shopping trip. However, this doesn't mean retailers shouldn't be pushing fresh offerings to market via click-and-collect; data show fresh departments around the perimeter as driving the most significant growth in stores, Hiebert states. Paired with the rise of omnichannel retail, this suggests that acceptance of buying fresh foods via click-and-collect could grow soon.
"So if [retailers] are focusing on their online selling at the expense of the fresh departments in their stores, they are going to lose out to their competitors," he explains.
Operating a click-and-collect program, however, typically brings about two pain points not often experienced in brick-and-mortar operations: reduced efficiency and fewer impulse purchases. Regarding efficiency, online-grocery economics are more challenging than those of store-based models, as the retailer requires additional labor to take care of the work typically performed by the consumer, such as picking and packing. If efficiency can be improved, then retailers may be able to serve more customers, all while improving convenience and the shopping experience. The report points to France-based grocer Auchan as an example of a retailer working to speed up efficiency, using finger scanners that help employees pick, scan and pack groceries faster.
"If [retailers] are focusing on their online selling at the expense of the fresh departments in their stores, they are going to lose out to their competitors."
As for impulse purchasing, having customers pay online doesn't allow retailers to merchandise add-on products as easily as the in-store experience does. The report uses Auchan again as an example, saying it operates a "destockage" shelf near the pickup location that offers fresh products close to expiring at discounted prices. This helps drive impulse purchases from shoppers who aren't entering a physical checkout aisle.
However, even with strong efficiency and impulse buying, retailers still need to make sure their ordering mechanisms are top-notch. Ordering apps, in particular, can be somewhat time-consuming for users to set up, Hiebert notes. But that's not necessarily a bad thing
"After the initial setup, the longer a shopper uses a particular app–and therefore, a particular store–the less likely that shopper will make the switch to another store and an unfamiliar app," he says.