Even though some of the trends between the US market and the European seem to overlap, there is still a huge difference between both markets. Boris Lokschin, CEO of Spryker, talks about key lessons US marketers can learn to build loyalty.Â
Groceries are big businesses. And increasingly, it is digital commerce that is expected to get goods into the homes of consumers. According to a study by Mercatus and IncisivOpens a new window , the global market for these services is predicted to exceed $250bn by 2025, a figure up more than 60% over pre-pandemic estimates. However, the US market is still an outlier, paling compared to more mature markets in Europe.
The good news is that there’s plenty of opportunity for marketers to capture US customer hearts and minds. Especially for smaller and more locally focused online grocery retailers. There is enormous growth potential if retailers find the right combination of engaging online experiences. To do this, they’ve got to be able to respond rapidly to changing market demands. This is where composable commerce comes in, enabling retailers to select modular best-of-breed capabilities.
See More: Spending to Save: The Cost Conundrum for Small RetailersOpens a new window
Some Way To Go
While there’s much that separates Europe and the US markets, not least their relative size, some comparisons are useful. Recent research revealsOpens a new window that the UK leads the way in customer penetration, with almost two-thirds (61%) of British shoppers buying at least some of their food online. That compares with less than half (47%) of US shoppers. The UK’s big four supermarkets — Asda, Tesco, Sainsbury’s and Morrisons — enjoy sky-high popularity, along with other big-name high street stores. In fact, nearly 83% of UK shoppers enjoy visiting supermarkets, a figure much higher than those in Germany (71%) and the US (55%).
These high-street retailers have also become the best-known online food delivery services in the UK. This is in marked contrast to Germany, where the online grocery market was spearheaded by mainly new players. The same is true of the US, where established food retailers need to capitalize faster. Rather than Costco, Walmart or Krogers, it is start-up quick commerce (Q-commerce) providers like DoorDash that have become among the most recognized e-grocery brands. Grubhub, Instacart and Postmates also rank highly in consumer awareness in the US.
This should be music to the ears of ambitious US grocery retailers, as no single supplier dominates the market. So there’s an opportunity to seize a portion of the market share. Plus, US customers have an appetite for online food shopping. In fact, 21% of US consumers plan to do all their grocery shopping online in the next two years — not far behind the figure for UK consumers (28%). It’s not hard to understand why; nearly half of Americans view in-person grocery shopping as a chore, far higher than the figure for the UK (18%). If US grocery retailers can make the online experience engaging, they stand to capitalize on this sentiment and forge ahead in the retailers’ race.
Where Next for US Grocery Retail?
Yet, as always, the devil is in the details. And having just an online presence may not be enough. The market may be relatively immature, but US consumers know what they want, and they understand what makes a compelling digital experience, thanks to the legacy of Amazon Prime and its closest competitors. Despite this, not even retail behemoth Amazon has been able to break into the online grocery space, despite heavy investment. Along with its bricks-and-mortar store brand Amazon Go, the firm’s online services, Amazon Fresh and Amazon Prime Now comprise just 1% of the US grocery market. That’s compared to 18% for Walmart.
So, what does success look like? Seven in 10 US consumers cite shopping experience and ease of use as critical factors when choosing an online grocery provider. Retailers who fail to deliver easy and engaging shopping experiences will soon be beaten to the chase by rivals more prepared to invest online, including Q-commerce firms creeping up on the sector.
Local Heroes Might Steal the Show
Amazon may have underwhelmed after a decade of investment in online grocery, but who will prevail? Instead of seeing the market dominated by a single nationwide giant, we might witness the emergence of a new type of player focused on local markets and more efficient business processes.
This alternative delivery model has already taken parts of Europe by storm. It follows what’s known as the “milkman principle.†That is, designated pickers collect stock from a local distribution center and then run a regular delivery route like a milkman would in days gone by. This delivery system is faster and more efficient, enabling short delivery lead times of just a few hours. It is also cheaper to operate.
Providers like Dutch innovator Picnic operate from a small number of distribution centers, freeing them from the expense of running a large network of bricks and mortar stores, with all the attendant staffing and running costs. Running a regular route is also cheaper than the on-demand routes many food delivery services offer. These savings can be passed on to customers in the form of lower prices and/or free delivery.
See More: How Do E-commerce Marketers Invest in Technology?
Unlocking Value From Digital Commerce
Whether the future of the US online grocery market will be dominated by the usual names, or a new breed of local heroes, the key to delivering the experiences customers crave will be through new composable commerce offerings. The old monolithic digital commerce platforms are no longer fit for purpose in a rapidly maturing and growing market like online grocery. They lock retailers into a single ecosystem, making it harder to adapt to changing consumer demands and retain control of customer relationships. This means innovation happens at the platform provider’s pace, not at the rate the market is demanding.
Composable commerce allows retailers to pick and choose capabilities from a range of third-party providers, customizing the experience for their business and adding new features with ease, as and when required. It makes for a lower cost of ownership, seamless scale, and higher return on investment. With no clear leader, US grocery retail is in an exciting place. Those who move decisively now may find themselves in the driver’s seat.
What do you think about how US Grocers can build loyalty programs like European marketers? Share with us on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window .
Image Source: Shutterstock