Imagine a grocery store where you can receive personal recommendations and offers the moment you step in the store; where checkout takes seconds and you can pay for groceries without ever taking out your wallet or leaving your front door. Sound far-fetched? It’s closer than you think.
Over the past few years, the rise of digital has redefined what it means to “go” shopping in Australia. Lines between physical and digital worlds are blurring. In a market where growth outside of inflation has been stagnant, the future of the Australian grocery industry hinges on, among other factors, retailers and manufacturers leveraging technology to satisfy shoppers however, wherever and whenever they want to shop.
Online grocery shopping in Australia is still relatively small and presents a real opportunity to drive growth in this sector. Compared to the rest of the world and the Asia Pacific region, Australia trails behind when it comes to online ordering and delivery of grocery products. Just 12% of Australian consumers say they already use e-commerce services to order groceries online and have it delivered to their home – this is 13 points lower than the global average of 25% and well behind the Asia Pacific regional average of 37%. Encouragingly, however, more than half (55%) of Australian consumers say it is a service they are willing to use.
An even smaller number of consumers are using the “Click & Collect” services that retailers like Coles and Woolworths readily offer for grocery purchases. Just 5% of Australian consumers say they order groceries online and pick them using a drive-thru service. More than half, however, are willing to use this option in the future (53%).
The Australian landscape and lifestyle is more complex to other markets, with many consumers living a reasonable distance from retail stores and many not being at home to accept grocery deliveries. Advances in technology are providing greater flexibility for shoppers, and offers like click and collect and, more recently, bundles to overcome individual delivery fees are introducing new ways to overcome barriers for online grocery shopping. The delivery fee bundling offer is very exciting and we’re watching this space closely.
Nielsen’s e-commerce read from our Homescan Shopper Panel shows that while online represented just 1.9% of all grocery sales in Australia for the year ending June 2015, growth is substantial – up by 29.3% for the year. A similar trend is evident when looking at dollar growth by key department (see chart below); making it clear that online really is key to boosting growth in a relatively stagnant grocery market. The exception to this is Health and Beauty, not surprising given it is a high involvement category and also faces intense competition from the likes of department stores, pharmacies and other online beauty retailers.
As smartphone ownership and usage reaches saturation point in Australia, mobile commerce opportunities will continue to thrive and have a flow on effect on grocery sales. In the recent article published on ‘Uneven Growth in Retail’, we predicted the online channel will be responsible for over $1 billion of sales growth the industry is likely to see over the next five years.
Given the relatively slow uptake in the online grocery space to date, retailers who will win the most of this prize are those that will leverage technology to enhance the existing shopping experience and meet consumers’ evolving desires with a trustworthy service and by offering real convenience.
CONNECTED COMMERCE: BRIDGING DIGITAL WTH THE IN-STORE EXPERIENCE
The good news for traditional supermarket stores is that clicks won’t be replacing bricks any time soon.
Online shopping has a number of benefits, but physical stores also have strong key advantages over e-commerce—especially for grocery products. In fact, almost half (49%) of Australian consumers reported that going to the grocery store is an enjoyable and engaging experience; while 37% said grocery shopping in a retail store is a fun day out for the family.
However, in a competitive retail environment differentiation is key. Retailers and manufacturers can add value by providing digital tools to help consumers take control of their shopping experience while also increasing sales potential. Mobile in particular can tip the scales in favour of increased shopper control, empowering them to shape the shopping experience more than ever before.
The table below highlights that retailers have a lot of room to grow when it comes to in-store digital enablement options, with the majority of Australian consumers open to various options that can bring ease, convenience and personalisation. Instituting digital strategies into the in-store experience is not just a nice-to-have—these options can increase dwell time, engagement levels, basket size and shopper satisfaction.
While digital is here to stay, the majority of consumers will continue to shop for the bulk of their purchases in store—even if the channels they’re using are changing. Shoppers will use whatever format best suits their needs for convenience, choice and value. Therefore, it is critical that retailers and manufacturers leverage physical and digital assets to optimise the in-store experience.
ABOUT THE NIELSEN GLOBAL E-COMMERCE AND THE NEW RETAIL SURVEY
The Nielsen Global E-commerce and the New Retail Survey was conducted between Aug. 13, 2014, and Sept. 5, 2014. The question about drivers of grocery store switching was taken from the Nielsen Global Survey of E-commerce, conducted between Feb. 17 and March 7, 2014. Both surveys polled more than 30,000 consumers in 60 countries throughout Asia-Pacific, Europe, Latin America, the Middle East, Africa and North America. The sample has quotas based on age and sex for each country based on its Internet users and is weighted to be representative of Internet consumers. It has a margin of error of ±0.6%. This Nielsen survey is based only on the behavior of respondents with online access. Internet penetration rates vary by country. Nielsen uses a minimum reporting standard of 60% Internet penetration or an online population of 10 million for survey inclusion. The Nielsen Global Survey, which includes the Global Consumer Confidence Index, was established in 2005.