In July 2017, I read in the Dutch financial newspaper FD that supermarket chain Dirk van den Broek would not go into online ordering and home delivery at this time. Why? Because the costs of home delivery are too high and will result in higher consumer prices in-store. It is indeed more profitable to continue to exploit the physical distribution channel than to offer a home delivery model. Margins are slim, and competition forces delivery costs to be low. But while delivering groceries will indeed cause profits to fall in the short term, I believe this is a short-sighted decision. The loss of customers will have a bigger impact in the long term.
The above is an example of how some retailers postpone decisions on ecommerce. But tomorrow is already here. Especially with regards to technology, supermarket chains seem to think the newest development will not affect them. Speech, AI, augmented reality...
Last month, Dutch supermarket Albert Heijn launched the Productscanner, a mobile app that allows in-store consumers to scan a product and receive enriched information on its origin and ingredients among other details. Last month, Amazon bought Whole Foods, showing its growing interest in groceries. Last quarter, the Netherlands’ first online supermarket Picnic received a 100 million Euro investment (notably from some traditional retail entrepreneurs!). Voice-ordering of groceries has been possible in some parts of the US for over a year now, and 2016 also saw tests with drone delivery.
In 2014, when online grocery shopping was just emerging, Christian Wanner, co-founder of one of Europe’s first and largest online grocery stores Leshop.ch/Migros had already recognized that the more profitable customers prefer online shopping. He had also suggested that these customers would be the ones whom supermarkets would lose first if they postpone ecommerce activities.
Fast forward 3 years. Considering that retail supermarkets see very tight margins, even the smallest drop in in-store shopping (resulting from customers switching to competitors with an online proposition) is significantly impacting overall profitability. As a result, we are seeing a digital divide in technical capabilities between ecommerce “pure-players” like Ocado, Picnic and Amazon and more traditionally focused grocery retailers. These pure-players keep investing in technology and continue to develop their platform. This divide is widening exponentially, making it increasingly difficult for grocery retailers without ecommerce to catch up. Not to mention, the resulting space is already being filled rapidly by newcomers and disruptive players like Hello Fresh. And their market share is growing.
Is it too late to act? Not if supermarkets join forces and start to cooperate.
At Mobiquity, we believe grocery chains across the industry can leverage a common platform to create an online community that is much more resilient to “tomorrow’s” technologies. A solid digital infrastructure makes it much easier to successfully implement new developments such as voice-to-order, predictive analytics, and new delivery solutions (as Ocado's example above) once they arrive.
We have built a solution, our Home Shopping Platform, an ecommerce platform developed specifically for grocery retailers. Whether or not you chose our technology, we encourage you to talk to us to learn more about our offering and trade market insights.
Of course, it is hard to think about the future when daily survival is at stake. That is why it absolutely necessary to lay a solid foundation for the future now, together. We are very interested to hear your thoughts on this, so please reach out or leave a comment below.
(Read the orginal blog post, click here.)
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