eGrocery USA - Online Grocery Shopping Solutions for eGrocers

EGROCERY FACTS & SUCCESS FACTORS

eGrocery Facts & Success Factors

Many companies in the US have made a success out of eGrocery. Although some start-up eGrocers without stores (e.g. Fresh Direct) claim to make a profit from eGrocery, the vast majority of profitable eGrocers are existing supermarket chains who use their existing assets to offer eGrocery to their customers. There are a number of factors which successful eGrocers manage to control so as to make an eGrocery venture profitable.

Successful management of these factors will increase revenues, reduce costs and ensure that your customers and your Director of Finance are both happy with the service.

Truck Utilization

No matter what leasing model you come up with, the delivery trucks are going to cost money and will depress your P&L if not managed astutely. However, if you can achieve approximately 50% utilization of your trucks i.e. all trucks go out at least

half-full of orders, then your trucks will pay for themselves. This is based upon a standard service fee of approximately $8.95 per order. Initiatives to improve truck utilization or at least balance against their cost are as follows:

1. Increase the service charge - some companies have experimented with $10.95 or even higher as a service charge. It would appear however, that the market will not stomach a ‘service charge’ much above $9.95, with $8.95 as the norm. Anything above $9.95 and your order rate starts to diminish.

2. Impose a minimum order level – Safeway, Fresh Direct and other US eGrocers insist upon a minimum order. This is meant to encourage larger orders to off-set the cost of the trucks, but often has the effect of making the customer feel restrained. The reality is that an average online basket varies between $105 and $145. This average online basket figure is up to five times higher than the average off-line basket value in a normal store.

People tend to spend more money when shopping for groceries online as their typical profile (affluent, family orientated) and the fact that they are charged a service fee creates an environment that is conducive to increased order values. Imposing a minimum order value against this background can be unnecessary and counter-productive.

3. Encourage the selection of more unpopular slots – evening and weekend delivery slots will always be near capacity and high utilization of trucks will therefore be achieved. The problem occurs with the more unpopular morning, afternoon and mid-week slots which need to be offered so as to provide choice and accommodate all customer-types. Offering a reduced service charge for the more unpopular slots will encourage their selection and increase truck utilization

4. Offer Workplace Shopping – this initiative is similar to No. 3 above, in that it seeks to promote the more unpopular days so as to try and increase the utilization of the delivery trucks. The employees of large companies or institutions are offered a reduced service charge for delivery to their company car park at the time that they finish work. The truck then need only do one delivery (to the company car park) at a pre-agreed time on a less popular mid-week day and customers are given their order from the back of the truck.

This is a popular and efficient way to increase truck utilization.

Picking Operation
An efficient and accurate picking operation has positive knock-on effects for the entire eGrocery business. Efficient, quality pickers results in orders being picked quicker and more accurately. This means that customers get what they ordered and in the delivery time slot selected and happy customers will recommend the service and use it again.

More efficient pickers equals less of a wage bill as fewer pickers are needed and this has a positive effect on the P&L. The cost of picking should not exceed 10% of the total eGrocery revenue in a well-run picking operation. Union and labor laws will impact on this figure.

The only way to achieve this is with continuous training and monitoring of each area. Slow or inaccurate picking should be identified immediately and actions taken to improve performance. A similar watchfulness will prevent any picking store/area from becoming under-resourced with pickers.

Out of Stocks
An eGrocery operation will highlight any out-of-stock issues that a company is having. Without eGrocery you have no way of knowing if a customer who walks into one of your stores leaves empty-handed or disappointed at having to substitute one item for a less favored one. However, with eGrocery you know exactly what a customer wants as they have selected their preferred products.

The difference between a customer’s order and what they receive equals the ‘Out of Stocks’ for that order. Anything below 2% of an order comprising ‘Out of Stocks’ is unacceptable and points to greater stock-control problems in a company. An eGrocery operation will truly highlight any Out of Stock issues that a company has.

Most websites allow customers to set up preferences for their order e.g. ‘Substitute’ or ‘Do Not Substitute’ and this can be set at a basket or at a product level. By allowing customers to authorize substitution you will help to alleviate Out of Stock issues. Ultimately, the only way to improve Out of Stock issues is to reduce the number of items offered on the website to those that are definitely in stock and/or sort out the replenishment system in the store that is causing the lack of products.

Design & Update of Website
A well-designed eGrocery website should be attractive, easy to use and quick to download. It should be functional, informative and visually appealing. A well-designed eGrocery website will encourage customers to spend more money through clever initiatives such as recipes, lists, suggested products or special offers and it will also encourage customers to return again and again. All types of customers should be catered for, from those customers who are looking for a bargain, to those customer who want to get in and out of the site

as quickly as possible right through to people who are using the site for the first time and don't know what they should be doing. Any successful site allows customers to view their previous orders and to use these previous orders to make future shops quick and easy. This personalization is extremely important as it ensures loyalty and helps to prevent customers from using other eGrocery sites as they would have to create a first time order from scratch.

A part-time content manager should be appointed whose job it is to update the website with content, recipes, lists and suggested products. Seasonal events (Halloween, Christmas, Summer etc) should be capitalized on to give the site immediacy and relevance.

Marketing
You may have the most attractive website and the smoothest running operational set-up, but if nobody knows about your website, it is all in vain. A successful marketing campaign need not be financially ruinous – in fact it is possible to conduct a marketing campaign with a small budget. The key messages to get across are convenience and the quality of products selected.

If the budget permits it, the more traditional media of T.V., radio and print will reach a large amount of people. When promoting an eGrocery service it is possible to be more jovial and light-hearted than a traditional advertising campaign. This can help you to break through to the potential eGrocery shopper through the fog of other advertising. Other more ‘non-traditional’ advertising methods may prove to be just as effective without the excessive cost of T.V., radio or print. They include, but are not limited to

1. Using the delivery trucks as mobile billboards - decorating them with corporate colors, images, logos, messages and the website address

2. Using the stores – thousands of shoppers pour through your doors every day. It is vital to make this captive audience aware of the benefits of shopping online through receipts, leaflets, posters and banners at the checkouts and at the entrance and exit.

3. Attach the URL to all literature – it sounds easier than it is, but the website address should be included on anything that the company produces – business cards, headed notepaper, inserts, specials, books, advertisements

4. Staff Uniforms – the pickers on the shop floor (if using an in-store picking model) should be visible and yet unobtrusive. Their uniforms and their picking carts should advertise what it is they are doing. Similarly, the drivers, as ambassadors for the service, should be presentable and act as conveyors of the corporate message.

5. Promote your service through organizations which represent those with physical disabilities. An eGrocery delivery service is extremely useful to those who can not leave their home.

6. Use local bulletin boards and community websites to let people know of the service

7. Build up a database of opt-in e-mail customers and communicate with them about special offers or items/areas that they have expressed an interest in receiving information about.