As the world contemplates a return to the new normal on the horizon, the online grocery frenzy of early- to mid-2020 can seem like a distant memory. At first, the massive spikes in demand seemed temporary, pushing grocers to come up with near-term solutions to meet their customers’ needs. A year later, there’s growing evidence that the shift to online grocery is a permanent one.
According to a December 2020 Forrester report, about half of Generation Z (56%) and Millennials (48%) say they’re likely to continue buying groceries online post-pandemic, and a third of Generation X consumers (34%) say the same. Grocers like British online supermarket Ocado report that they expect the online share of the overall grocery market to continue growing, even when the COVID-19 pandemic recedes.
These data are a glimpse into the future – and market leaders in grocery are aggressively responding with investments in a comprehensive omnichannel grocery experience. Over the past few months, household names including The Kroger Co. and Walmart in the U.S., Waitrose in the U.K., and Carrefour in France have made headlines alongside digital giants like Amazon for their investments in online grocery.
Online marketplaces offer crucial scalability, operational efficiency, and profitability for grocery, creating a narrow window of opportunity for businesses to seize a competitive advantage in this new environment. But not all marketplaces are created equal. To realize the full benefits of online grocery marketplaces, grocers must steer away from the pitfalls that can hamper marketplace success.
1. Your marketplace must be integrated with your core online grocery experience.
Online marketplaces are a departure from the traditional grocery business model, requiring you to balance the needs of sellers, buyers, partners, and your own business with an ecosystem approach. Even so, the marketplace must be treated as an integrated part of your eCommerce experience – not a standalone initiative.
Launching your marketplace as a separate business, with a separate checkout experience, introduces friction into the purchasing process and forces you to develop a new digital marketing strategy from scratch. Successful grocery marketplaces incorporate third-party offerings into the existing first-party online shopping experience. By doing so, you’ll be able to hit the ground running and quickly identify the marketplace offerings that resonate most with your customers. Your marketplace sellers will be quick to see value, strengthening their affinity for your marketplace. Ultimately – and most importantly – your business will gain incremental revenue from month one.
2. You need to work with marketplace sellers to solve the fulfillment puzzle.
The economics of shipping groceries straight to customers’ doors is a challenge – and keeping fulfillment and shipping costs down for sellers and customers is necessary for your marketplace to grow. Successful grocery marketplaces offer “fulfillment by operator,” giving sellers the option of leveraging your existing distribution networks for an additional fee. (As an added benefit, this supports omnichannel strategies like ship-to-store at a lower cost.)
Another option is to negotiate preferred shipping rates for sellers, as French grocer Pour de Bon has done. When marketplace orders are placed, they are collected and distributed by ChronoFresh, a subsidiary of Groupe La Poste, which delivers the groceries directly to households.
3. You should look at categories beyond traditional grocery.
With an online marketplace, you can think outside the box (or should we say outside the shelf?) and grow in new categories with little risk. Consider Kroger’s ship-to-home marketplace offering, which launched at the end of 2020, targeting categories like toys and homewares in addition to international foods and specialty food items. Because you never take ownership of the inventory, a marketplace gives you the freedom and flexibility to test out new categories and learn what resonates most with your customers – all while earning incremental revenue.
4. Your marketplace has to be treated as a pillar of your omnichannel strategy.
Even in the new digital-first age, where eCommerce is king, grocery shoppers’ habits are still closely linked with their local stores – and your marketplace must be, as well, in order for it to thrive. This means enabling in-store pickup for marketplace products, as well as making it easy for shoppers to order marketplace products while shopping in-store.
Consider the shot across the bow that was Amazon’s acquisition of Whole Foods in 2017. The mega-marketplace’s first entry into grocery involved offering grocery goods for purchase on Amazon.com. Even with its strong existing customer base, it ultimately realized that a distributed network of stores was essential to growing in the space – and it purchased Whole Foods to make that happen. Now, it’s also building high-tech brick-and-mortar grocery storefronts of its own, both in the U.S. and internationally.
Maximize the impact of your marketplace strategy with buy-in from your entire organization
We’ve said before, and will say again, that the marketplace model is transformational – it’s not a side project, it's your business. Ensuring that key stakeholders across your entire business are bought into your marketplace strategy is essential to achieving the famous “flywheel effect” that powers marketplace success. This virtuous cycle of growth leads to more sellers, more customers, and more marketplace sales – setting your business on a growth trajectory that simply isn’t achievable through the traditional grocery model.
A successful marketplace doesn’t just “extend the aisle” for your customers online. It puts you at the forefront of the future of grocery.
Written by Tzipi Avioz
Executive Vice President, Customer Success at Mirakl