Is food retail ready for 2023? Dr. Penelope Schoutteet shares her insights.
Food is the fastest growing sector in e-commerce. This is an exciting development that will greatly affect the customer journey for food retailers. To gain insights into where the sector is headed in 2023, we interviewed Dr. Penelope Schoutteet, an expert in consumer behavior, and one of the latest additions to our team at StriveCloud! To start, the sector is discovering the benefits of mobile app engagement, with market leaders investing in customer experience optimization – both offline and online.
The importance of an omnichannel story is just one of the insights that Dr. Penelope Schoutteet, a PhD holder in Business Engineering from the Free University of Brussels, will share. Omnichannel provides a seamless, continuous, and personalized customer experience across any device or location a customer wishes to shop on.
Her advice forms a handy guide to food retailers looking to inform themselves on what 2023 holds in store, as well as the best ways to adapt to those trends.
Where 2021 left the food retail market
Supermarkets easily claim the largest share of grocery sales, followed closely by large discounters like Aldi or Lidl. However, as Penelope notes, e-commerce is booming! More and more people are choosing e-commerce over supermarkets. Current forecasts estimate that e-commerce will balloon by €100 billion from 2021 to 2026. In contrast, supermarkets will see their share of the market fall.
So online food purchases are on the rise, but those impressive growth numbers reveal how low digital penetration currently is, especially in comparison to other sectors.
Dr. Penelope Schoutteet – “During the Covid period, food retailers were never closed, so, unlike other sectors, they did not have to reinvent themselves. Yet, because of Covid, less people were allowed in-store and part of the client base did not feel safe shopping. Thus, the boom in online shopping could be seen more as a revolution instead of an evolution.””
Unlike in fashion, for example, food retailers relied on brick-and-mortar stores throughout 2021. The fashion industry had no such luck, given the widespread closures, but the shock was not so severe because digitalization was already underway.
Before the pandemic boosted the number of people shopping online, retail brands like H&M already saw online sales increase by 24%. That was in 2019. In comparison, digital sales for many food retailers saw no rise that year. As a result, the competitive landscape in fashion allowed upstarts and digital-first disruptors like Zalando to thrive. In short, this embedded e-commerce in the sector.
For food, this was not the case. As Penelope notes, the market remained stable. So why is there an online push now, and how will this affect food retailers in 2023?
3 important insights into consumer behavior today
At first glance, there are some persistent barriers to consumers purchasing food online.
- Food relies on recurring purchases, which encourages habitual behavior
- Many customers feel the need to check fresh food for themselves
- Paying for and organizing delivery can be seen as an inconvenience
But consumer behavior is changing. The numbers show that the growth in e-commerce will boost total food retail revenue, rather than simply cannibalizing brick-and-mortar sales. That means that minds are being changed!
So what is the unprecedented shift taking place in consumers’ heads? Penelope shared some important insights into what we saw in 2022:
#1 Customers are sensitive to the nuances of delivery – but not so much about speed
While companies that sell impulse or exceptional purchases like Amazon might emphasize the fastest possible delivery time, the food sector works differently.
Dr. Penelope Schoutteet – “On delivery speed, on whether customers want their food to arrive the next day or not, it is not necessary. Since food is a recurring purchase, consumers know what they want ahead of time. 48 hours is actually a perfect time frame.”
In addition, Penelope notes that her research finds that click and collect and home delivery are nearly equally preferred – what customers actually do care about is price. Paying for delivery can lead to customers going in-store instead.
#2 Omnichannel retail is now a must-have
The shopping experience isn’t an offline OR online story. Most people combine both online and offline platforms to complete their shopping journey. One way this manifests for instance is ROPO, or ‘research online, purchase offline’. This concept is clearly visible in the mobile app engagement strategy of some retailers. Belgian giant Colruyt, for example, only lets app users browse and create lists, not purchase directly.
As a result of omnichannel consumer behavior, it is more important than ever to focus on customer experience optimization and provide your customers with an original story throughout all channels.
Dr. Penelope Schoutteet – “People prefer a combination of online and offline. When it comes to offline, we must consider travel time. [Store] proximity is key, seeing as food is bought very frequently. Therefore, data is key. You have to know where your customers live, how long it takes them to get to you.”
To support this point, research by McKinsey shows that the number 1 reason customers switch retailers is in fact store proximity. To improve your performance in this metric, user data can be easily collected through website and mobile app engagement, such as with the use of digital loyalty programs to further understand where your most loyal customers live.
On the whole, there needs to be a seamless journey between online and offline channels. Indeed, the benefits are impressive. Research shows that omnichannel grocery shoppers shop more often and spend up to 20% more compared to in-store-only shoppers.
#3 Successful online experiences build trust – and customers are more confident today than ever
In short, delivering food online is not so new anymore. The astronomical growth of meal kit providers like HelloFresh (whose revenue doubled from 2019 to 2020) has made the concept less foreign. As a result, more people now trust that the fresh veggies and meats they order are picked with quality in mind, just as if they themselves had chosen them.
How businesses can adapt by focusing on web & mobile app engagement
In 2023, the power of online channels like websites or mobile apps will continue to grow. Although, as Penelope points out, “the physical channel is still the most important”, the right app strategy can align you with your customers’ wants. As a result, providing you with another touchpoint to leverage.
Ultimately, food retailers can find growth through customer experience optimization.
Dr. Penelope Schoutteet – “It is not always possible to be close to your customers…but since physical stores are very important for food retailers, aligning all channels towards an optimal location strategy is key. If you do not offer online delivery, and customers need to collect, you can have a separate location next to the store to expedite the process.”
When it comes to click and collect, customer experience optimization relies on an omnichannel journey
Of course, easy-to-find and front-facing desks with ready-to-help assistance can go a long way to making online purchases more convenient. However, this strategy is optimized when partnered with online platforms like websites and mobile apps. A quick and handy digital ordering process combined with a quick physical collection will give your customers unparalleled value.
For example, web and mobile app engagement can help by giving customers key information before they engage in-store, such as by detailing when the store is at its busiest. This makes the whole process more convenient for the consumer and more efficient for the retailer!
Web & mobile app engagement can build and leverage existing customer loyalty
Food consumers are generally more loyal than those in other sectors. In short, the market is consolidated and alternatives are few. Given this, loyalty schemes have historically not been seen as a priority. But the world of food retail is now finding out that mobile can make customer loyalty stronger.
Simply put, buyer data gathered from mobile apps can better personalize and contextualize offers to users’ preferences. For example, when a user buys a non-food item, the app can assist by making the return policy clear with a push notification. Contextual notifications like this can create a closer brand relationship, and in turn, augment sales and boost loyalty. Efforts like this are an important element of customer experience optimization.
Gamification can leverage your touchpoints and make them more powerful
Gamification is the use of game-like elements in a non-game context. This can take the form of badges, points, and challenges, for example. 2022 could be the year that gamification becomes prevalent in food retail. Indeed, it is starting to gain steam:
500,000+ sign-ups for a fruit & veg challenge
In 2021, British retailer Sainsbury’s hosted the ‘Great Big Fruit & Veg challenge’, which challenged app users to set personal targets on healthy eating. Success was rewarded with loyalty card points, which can be used in exchange for discounts. The challenge encouraged over half a million Brits to sign up and resulted in a 9% boost to fresh food sales! By gamifying their customers’ food shop, Sainsbury’s showed a route to growth.
Healthy purchases earn users points (and free delivery)
Similar to Sainsbury’s, Belgian premium retailer Delhaize launched the Delhaize+ card which rewards the purchase of healthy food items with points. What differs here is the advertised possibility of using those points to get discounts with partners. It’s a great way to reward customers for their loyalty and keep them engaged with your brand.
To add to that, gamification can make delivery more convenient – for both the consumer and the retailer. Rewards such as free delivery or discounted items can push users to a delivery time that suits the store, i.e. when the van is full, or already headed in the user’s direction. As Penelope states, “that’s what customers want. They prefer free delivery”.
Of course, this is not always possible. However, consumer behavior can be influenced by leveraging a customer’s desire. With the right gamification strategy, you can optimize the customer experience to create life-long brand fans!
To conclude, food retail is going digital – but not every retailer is ready. Some retailers don’t even have mobile apps, and they will miss out on the growth in e-commerce. Others have an app, but fail to provide sufficient customer value.
Simply put, there are 3 crucial questions:
- Are you investing in customer experience optimization?
- Do you have an omnichannel story?
- Are you using every tool available to boost mobile app engagement?
Consumer behavior is shifting. In the coming years, more and more food retailers will explore the power that gamification has to inspire customer loyalty and engagement. A clever and flexible gamification strategy goes hand in hand with an omnichannel customer journey, ultimately boosting your service offering. This leads us to a final question: