Comment: Grocers and suppliers must combine to boost online growth

As Dave Lewis begins his new role as CEO of Tesco this month, one of his priorities will be finding new ways to maximise the growth from online grocery. IGD anticipates this will grow faster than any other channel in the UK, to account for 8.3% of sales by 2019.

As shoppers embrace online shopping more rapidly than ever before, grocers are looking for new ways to drive loyalty by making the experience faster, more convenient and more personal. Recent trends that are contributing to increased sales include:

But in order to maximise growth within the channel, retailers need to work closely with suppliers and rely on them to keep up with trends and drive innovation.

IGD Online Capability Survey

IGD has just published the results of its third annual Online Capability Survey, which collated information from eCommerce managers at 43 leading international grocery suppliers. The results show that the online channel is developing, with more companies at the top end of the transition curve than last year and fewer at the bottom. However, many still have a lot of work to do in order to maximise their online trading potential.

Dedicated online resource

One way in which suppliers are responding to online growth is by allocating dedicated online resource. Whereas previously this resource might have been part of a NAM or other employee's responsibilities, now 24% of suppliers say they have dedicated full-time headcount for the online channel, allowing them the time and expertise to fully focus on online initiatives and growth.

Rather than adopting a one-size-fits-all strategy to online, suppliers are beginning to introduce differentiated strategies with each major customer. Of those surveyed, 10% said that this was an established practice and 24% said they were part way there, with these individual strategies for online forming part of the annual joint business planning process with each retailer. Working in this way allows suppliers to exploit various opportunities offered by different retailers, such as category strengths, online offers and events, and allows them to better target their online presence to different shopper demographics.

The basics are in place, but how about mobile?

The majority of companies are mastering the basics online. Top capabilities from survey participants related to having images and taxonomy in place (98%) and an online strategy that forms part of joint business planning with retailers (80%). Many were also working at understanding category dynamics and the online shopper journey.

Yet while the basics now appear to be largely in place, there are gaps to fill, particularly in mobile. IGD's ShopperVista tracking data shows that 22% of online shoppers now use a smartphone and 27% a tablet device, yet only 10% of suppliers have a differentiated mobile strategy and real insight into how shoppers behave differently on these devices.

Different stages of the journey

It is natural for suppliers to be at different stages in the online journey. This often equates to the company's size and resources. However, leading international manufacturers are recognising the gaps in the market and working to maximise key opportunities.

Those with the highest online capability are prioritising future investment in mobile and new technology together with supply chain innovation. This puts them ahead of less developed peers, who are still working through, the following:

Retailers will work with the leaders

In IGD's conversations with retailers, we are hearing that the key focus for suppliers is to get the basics right, but that once this is in place retailers are looking to partner with leading suppliers to drive innovation and growth in the channel.

We can expect to see plenty of innovation in online grocery in the near future, including an increased focus on inspiring shoppers and personalising the shopping experience for those with time to browse.

Recent good examples of suppliers and retailers working together include the introduction of online-only offers and promotions, differentiated pack sizes for online and targeted marketing initiatives. 

Asda has worked with many suppliers to generate excitement around events and has several ‘shop-in shops’, including an old-fashioned Cadbury’s sweetshop within its online site. Sainsburys has worked with manufacturers to introduce sponsored recipes on its site and has a Cheers online microsite sponsored by Heineken. Meanwhile, Waitrose has introduced online-only promotions, including some involving collaboration between multiple suppliers.

Suppliers that prove themselves to fully understand the online channel and have the resource to support innovation can expect to be welcomed by retailers, which are looking for partners to work with them to drive growth within the channel. Suppliers can equally expect to benefit from their investment, as online sales continue to grow ahead of the market.

You can hear more from the UK’s leading online grocers, suppliers and thought leaders at IGD’s Online & Digital Summit, which takes place between 18-19 November, in London.

Lisa Byfield-Green is senior retail analyst for IGD, specialising in online and digital. She will be writing a regular column for Essential Retail over the coming months.

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