The mobile grocery experience
May 13, 2019
Grocers are digitizing food shopping, removing friction from the trip and providing added value to the customer.
THE world has become digitally connected by mobile devices. The technology has been with us for a while now, but only recently has it been leveraged by forward thinking grocers to offer the promise of a transformative new experience. It’s no secret that the digital evolution is changing everything around us. The grocery industry is no different. Mobile devices mean we are interacting with grocers more frequently and in new ways, sometimes from the comfort of our couch and sometimes even as we roll a cart through a store filling it with foodstuffs. This new reality is resulting in an evolution in the shopping experience and in the ways grocery retailers provide customer service.
Slow online growth
First, let’s look at some metadata to put things in perspective. Online grocery shopping has received a lot of attention in recent years. But currently it remains a relatively small proportion of total grocery sales in Canada. Total online grocery expenditure is estimated at approximately $2 billion, with growth predicted to climb to almost $4 billion in the next couple of years, with the current activity largely focused in and around the Greater Toronto and Vancouver areas.
That’s a tiny portion of an annual retail food market of almost $100 billion, $80 billion of which is focused on traditional grocery stores. It’s also a figure that is dwarfed by online grocery shopping in the United States where it represents four per cent of total food purchases and is expected to grow to 20 per cent by 2025. In many European markets, notably Great Britain, the numbers are even higher.
“In our survey, 32 per cent of respondents felt that quick and easy payment methods—including mobile and contactless payments— were an important part of their in-store experience.”
ANITA MCOUAT
PwC Canada
The Canadian market is relatively late to the online grocery game with Canadians slowly embracing the concept. This is in part due to the fact that Canadians are simply much less likely to shop online than Americans. Estimates of online shopping range from 2.5 per cent to 6.5 per cent of total retail sales, whereas in the United States it’s closer to 10 per cent. At the same time, as the PwC Canadian Consumer Insight Survey 2019 reveals, Canadians prefer to shop for their food in stores. “While online grocery options are expanding in Canada, the majority of Canadians still go to the store for groceries and, in fact, our survey found that 70 per cent of those that prefer going to the store do it because they prefer to see and touch the products,” explains Anita McOuat, National Industry Leader, TMT & Consumer Markets, PwC Canada.
Other reports show that while globally 70 per cent of consumers prefer to shop for their food in brick-and-mortar stores, that number is over 80 per cent in Canada. “There is no doubt that Canadians have been less quick to rush online than Americans, and it’s been even slower in the grocery arena,” agrees Michael Von Massow, OAC Chair in Food System Leadership at University of Guelph. “We have an emotional attachment to eating and as a result we enjoy shopping for food—we want to squeeze tomatoes and pick up apples to inspect them.”
“Additionally,” continues Von Massow, “executing online sales is difficult—it’s easier to buy a book or t-shirt online than it is food. Grocery retailing is a relatively low-margin business, and there are costs associated with online shopping and home delivery, especially the “last mile”—the final leg of the delivery to the customer’s door. In this light, it’s perhaps hardly surprising that until now retailers have not made expansion to online shopping a priority.”
After all, why would Canadian grocers expand into the costly and difficult realm of online grocery shopping when Canadians consumers aren’t screaming for it?
THE MOBILE REVOLUTION
80%
While 70 percent of global consumers prefer to shop for their food in brick-and-mortar stores, that number is over 80 per cent in Canada.10%
About 1 in 10 Canadians surveyed do daily or even more frequent micro-trips to a grocery store, 26 per cent go 2-3 times a week for a microtrip, and 23 per cent make weekly micro-trips.32%
Source: PwC Canadian Consumer Insight Survey 2019
Nearly a third of respondents feel that quick and easy payment methods—including mobile and contactless payments—are an important part of their in-store experience.
Embracing mobile technology
That said, there is considerable growth in this segment of the market and retailers are taking prudent steps to embrace it. Order sizes for groceries are likely to be bigger, and more regular, than for other items you might purchase online (such as books, clothing, and electronics). Pressure is coming from some of the other available methods of purchase, such as Amazon’s online and home delivery options. Such threats are helping to drive traditional grocers to increase online offerings and embrace mobile technology.
Perhaps more critically, grocers are recognizing that mobile technology can be used to great effect to enhance the in-store experience.
“About 10 per cent of Canadians surveyed do daily or even more frequent micro-trips (defined as trips that take less than 5 minutes in-store) to a grocery store, 26 per cent go 2-3 times a week for a micro-trip, and 23 per cent make weekly micro-trips,” explains McOuat. “As a result, anything a grocer can do to make the experience ‘frictionless’ (meaning convenient, fast, and stress-free) is very appealing. In our survey, 32 per cent of respondents felt that quick and easy payment methods—including mobile and contactless payments—were an important part of their in-store experience.”
The invisible checkout—a store without cashiers or physical checkout lanes—made its North American grocery debut at the Amazon Go store in Seattle in 2018 (it was already common practice in some Asian stores for several years prior). Upon entering, customers launch the app on their smartphone, which stores the user’s credit or debit card information in digital form. They then shop for their groceries, and when done simply walk out the door. Sensors and cameras keep track of purchases, which are then automatically charged to the shopper’s Amazon account as they leave. There’s no frustrating standing in line at a checkout—it’s seamless, quick, and convenient.
Grocery chains immediately took note of the innovations unveiled at Amazon Go (and with good reason: while mobile wallets have been slow to catch on in Canada, its estimated that the global number of “mobile contactless” users will exceed 760 million by 2020, up from an estimated 440 million in 2018).
“Many [grocers] are investing in mobile, scan-and-go, and other frictionless payment options in-store so customers don’t have to stand in line.”
ANITA MCOUAT PwC Canada
“Canadian grocery chains are aware the technology exists and they’re thinking about how they’re going to respond,” explains McOuat “Many are investing in mobile, scan-and-go, and other frictionless payment options in-store so customers don’t have to stand in line.”
Beyond the checkout
There are obvious advantages to doing so. For starters, there is demand for it: 43 per cent of respondents in the PwC Survey said they would be interested in invisible checkout services such as those offered by Amazon Go. Additionally, invisible checkouts can potentially generate cost savings in terms of labour (no cashier) and would allow companies to redeploy staff to provide a better experience through enhanced customer service.
But, as always, cost is a mitigating factor. “The investment that’s required to implement something like Amazon Go could be prohibitive for many retailers, especially as the grocery industry is challenged right now in terms of pressure on margins,” offers McOuat. To accept mobile wallets such as Apple Pay and Google Pay, retailers’ POS terminals need to be contactless and NFC-enabled (which stands for “near field communication,” referring to a technology where devices in close proximity to each other can communicate). “The ultimate question is: how can you set up the store and the shopping experience so the time spent instore—however long it may be, and evidence shows it is getting shorter—is spent interacting with products rather than standing in line.”
Von Massow agrees. “Anything retailers can do to allow people to skip the lines is welcome to shoppers, especially young shoppers in the 18-34 years range where we see the greatest adoption of mobile shopping technology.”
Similarly frustrating to time-conscious customers is time spent—or in their minds time wasted—walking up and down aisles in search of items they need (often referred to as ‘the search cost’). Indeed, the PwC Survey shows that 52 per cent of respondents felt that it is important to easily navigate a store. “Retailers are already showing they understand this in terms of store layout and product placement. We’re starting to see customer-focused instead of product-focused aisles—like health food aisles, or healthy breakfast sections with yogurt beside the granola. It’s about making it easier for an improved shopping experience,” explains Von Massow. “Mobile technology can be used to make the shopping experience even easier and faster—apps that tell you exactly where a product is located for example, or the ability to speak virtually to an associate who can help find an item, rather than having to physically track down the associate on the sales floor.”
Apps represent an opportunity to provide better, more personal customer service. “We used to talk about ‘The Consumer’, but there’s no such thing as ‘The Consumer’ anymore,” says Von Massow. “Every customer has to be treated as individuals and that changes how we deliver the experience.” By using retail apps, shoppers can receive added value with additional in-app features. Starbucks is a mobile payment leader and offers the road forward. Its digital wallet is about much more than simply frictionless payment; the app provides Starbucks customers with rewards for their brand loyalty and personalized suggestions based on past purchases. Some grocery retailers in the U.S. are already following suit. In 2016, Walmart launched Walmart Pay at all of its America-based stores. And more recently, Target introduced their own digital wallet in the Target app.
Tapping into mobile adoption
Data shows that 35 per cent of grocery consumers use loyalty programs, which are typically accessed via an app on the phone, so it’s clear that Canadian consumers are comfortable with the technology and the concept of using mobile devices in-store. This suggests opportunities that retailers can exploit moving forward, according to McOuat. “As a result of high smartphone penetration and comfort in the use of apps, Canadians are seen as open to in-store displays that connect with the mobile device for a heightened experience,” she explains.
But, as Von Massow hastens to point out, mobile technology brings with it challenges that retailers need to overcome. “From the customer perspective, technology is making shopping more efficient. But from a store perspective, it’s taking a degree of spontaneity or impulse out of shopping,” he says.
This is problematic for grocers. With the introduction of mobile technology, shopping could be as simple as an app saying, ‘here are items you’ve bought before: do you want to reorder?’ It can be done in five minutes without even looking for anything else. Similarly, the more mobile technology speeds our visits to brick-and-mortar stores, the fewer products we’ll pass by and be exposed to.
“The trick moving forward is to maintain a balance between reducing the search cost while at the same time exposing customers to products that grow the basket.”
MICHAEL VON MASSOW
University of Guelph
“The search cost is reduced, but so too are the options. This will affect all retailers, but the grocery industry most of all because grocers have traditionally been focused on building the size of the basket through impulse buys,” Von Massow explains. “We’ll need to find new ways and work harder to introduce products to customers as technology enables a much more habitual shopping experience. The trick moving forward is to maintain a balance between reducing the search cost while at the same time exposing customers to products that grow the basket.”
MAKING IT QUICK AND EASY
760M
The estimated number of global “mobile contactless” users by 2020, up from an estimated 440 million in 2018.43%
Nearly half of respondents say they would be interested in invisible checkout services such as those offered by Amazon Go.52%
Source: PwC Canadian Consumer Insight Survey 2019
More than half of respondents feel that it’s important to easily navigate a store.
Mobile technology is transforming how we shop for groceries. An increasing number of customers admit to abandoning a purchase, either in store or online, as a result of “friction” at checkout caused by something slowing down a payment. Conversely, companies that have embraced mobile technology to reduce friction and enhance shopping efficiency have been experiencing revenue growth and profit margin increases above 5 per cent for the past few years, according to PwC.
The adoption of mobile technology by consumers is largely a reflection of changing customer demands: customers are now expecting businesses to take the hassle out of the shopping experience by offering greater convenience.
“The takeaway from the PwC Canadian Consumer Insight Survey 2019 is that mobile is here to stay and is a growing segment of the industry. Retailers in the brickand-mortar world need to have an online option or a physical experience that is really strong,” explains McOuat. “But I think it’s important that retailers don’t just jump on the latest trend. They need to look at their business model, look at their customers, and create a holistic approach to see how best to invest in technology.”
BY ANDREW HIND
