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How to win in online grocery

Last week, Democracy headed south for a one-day conference hosted by industry food bible The Grocer.

The stellar line-up of speakers included Amazon, Google and Facebook – alongside Sainsbury’s, Ocado and Iceland. They covered everything from changing shopping behaviours to NPD.

The Grocer opened by describing online retail as a bit like teenage sex – everyone’s talking about it, everyone says they’re doing it, but for lots of businesses, there’s a lot of fumbling in the dark. Before two very contrasting businesses pitched their view of how smaller producers can win in online grocery against more established brands.

Amazon vs Ocado

Amazon was first up. It’s moving into grocery in a big way with Amazon Pantry (targeted at the traditional ‘big shop’), Amazon Fresh (selling local brands from niche retailers including farm shops and bakeries) and Amazon Now (for distress/ top up shopping – which represents two thirds of the market value).

James Bate, who was actively inviting approaches from both small and large businesses alike from the 150 delegates in the room who ranged from Diageo to Pooch and Mutt, explained: “We have unlimited shelf space – if it’s structurally profitable, then we want to sell it.”

When it comes to grocery, Amazon is still learning. The business is barely shifting the needle in terms of market share right now, but rapid growth is inevitable. Aided by its knowledge of big data, its insight into how people behave will create a highly personalised experience, identify the micromoments in people’s lives when they’re most open to shop.

Amazon talked through its leadership principles and outlined some of its most recent innovations. Subscribe and save offers Prime customers extra savings if they commit to a monthly delivery of five or more products. This encourages long term loyalty and resets customer expectations by anticipating rather than responding to their needs.

One hundred invited brands have signed up to Amazon’s Dash button scheme, allowing customers to quick order items that are important to everyday life, but may slip off the radar when shopping, e.g. razors and washing powder.

All of this felt a bit ‘one size fits all’ – you sign up for your Amazon page, tick the features you want and before you know it, you could be running your page as successfully as a top 100 brand on a quarter of the budget. Mmmm – too good to be true?

Later in the day, Sainsbury’s talked a little more about the realities that brands face when embarking in online retail. Clodagh Moriarity, online director, explains: “It’s tough to launch a new product online – people shop from favourites and it’s hard to drive change without spending a lot of money.”

Ocado, arguably the UK’s most successful online grocery shopping platform, painted a very different picture of working with brands online. Rose Price, head of buying, was joined onstage by Amelia Harvey, co-founder of The Collective, for a joint presentation on how Ocado can help to identify, educate and change behaviours for emerging brands.

online

The Collective is a company with a great story. Founded in New Zealand, it makes fresh, natural, vegetarian friendly yogurts with no nasties or other tricky stuff – no bull! (its line, not ours)

Ocado and The Collective have worked in close partnership creating a joint business plan. The Collective invested a third of its budget in a highly targeted sampling campaign to a small customer group within Ocado. Their efforts delivered quick customer feedback and allowed both parties full understanding of the cost versus the reward.

There was investment in banner advertising on the Ocado site – using lateral thinking to test ideas about what else shoppers might be purchasing and putting its brand front of mind, experimenting with search for everything from blueberries to ice cream.

The Collective supplemented the sampling campaign with an Instagram ambassador programme, driving links and traffic directly back to the Ocado site to boost brand awareness.

The investment from both parties has delivered significant growth for The Collective and fits with Ocado’s mission to offer exclusive products to customers (at least four per basket).

It’s highly tailored – and for a company new to retail (or new to the UK market) – felt closer to having an investment business partner with insider knowledge rather than the usual ‘them and us’ of supplier versus retailer.

The Collective raised frustrations that the rest of the online retailers weren’t as open to working together – an opportunity perhaps?

As an agency, we often meet potential clients who ask for strategic advice about launching into the market and the Ocado approach fits closer to our own.

It was a good day – the content was vast and I’m happy to share a more detailed summary with you next time I see you.

Jen

Some key outtakes

  •    The UK is significantly ahead of most of the rest of the world when it comes to shopping online. According to Kantar, 7.5% of UK shoppers (vs 19.7% in N Korea and just 1.5% in the US) are regularly shopping online.
  •    Growth is slowing but frequency of online purchase is increasing.
  •    Despite everything you’ve heard about people moving toward small basket shopping, 94% of people still do at least one big trolley shop every year.
  •    Top up shops are 2/3 of the market value and it’s here that the biggest opportunity for online retail lies – Amazon Now and Sainsbury’s same day services are all created to meet the needs of this market.
  •    According to MySupermarket, getting the key basics right is essential to being found in an online grocer. Good, clear images, informative text outlining pack size etc and making sure your product is in stock.
  •    Google reminded us that search is a great way to identify opportunities and growing trends to drive online retail. In March this year there were record searches for electric heaters and fan heaters in the UK
  •    Amazon – although keen to talk about grocery – was not keen to discuss Alexa and what this meant for online shopping and the power of brands. With Ocado and Morrisons now integrating with Alexa there was some debate in what this would mean for search. This felt like a bigger conversation, and really where we should have been focusing our attention – but maybe next year.

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