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Making online grocery click

How grocers can use data and analytics to grow their online channel

Online grocery and alcohol sales already top $6 billion in Canada. When it comes to online shopping, the only thing Canadians spend more on is apparel. That’s pretty impressive, considering many of the major players in the grocery world have only started making serious investments in this nascent part of their business.

Yet, those billions in revenue represent less than 5% of all spending in the category, making it an expensive channel to maintain considering the high logistics, staff and marketing costs involved. It’s a calculated risk, but one with a potentially massive upside if the adoption rates in Canada follow the pattern in places like the United Kingdom and South Korea, where the channel is more developed. It will take time before it becomes a significant revenue stream, but there is a lot the industry can do in the interim to maximize its return.

For starters, grocers should focus efforts on the types of consumers most willing to buy groceries online. Based on public statements from grocers, it would seem most companies are targeting online sales to young, time-pressed families because they’re the biggest purchasers of groceries. These companies appear convinced these same families will welcome the convenience of having groceries delivered to their doors or trunks of their cars. This may sound like a reasonable approach, but is it the correct one?

To answer that question, grocers must figure out the “why behind the buy” by taking an analytical approach to understanding what is driving consumers to this channel. Are they motivated by convenience or pricing? Do they have to have a certain comfort level with technology? Are they targeting early adopters, or are they attracting people who like the novelty of buying groceries online but could revert to old habits when that feeling wears off?

There is data available that can answer these questions, and some grocers may want to tweak their approach when they learn the answers. While grocers are correct to target families, they may not be targeting the right ones. Interestingly, the typical time-strapped, younger families are not the biggest market for online grocery shopping; it’s the suburban families with above-average incomes and older kids. These are the families you’d expect to find in large homes, in leafy neighbourhoods outside of the downtown cores of Toronto, Montreal and Quebec City.

While the convenience of online groceries is appealing to these families, their high income is another key driver that shouldn’t be overlooked. A broader analysis supports this; families with similar demographics, but with incomes closer to the national average are less likely to order groceries online. This is important because both family types are often present in the same market.

A grocer may find that one neighbourhood might embrace the convenience of online groceries, while another area, a short distance away, may appeal to consumers who prefer to select their own apples and cuts of meat. Knowing this will help grocers target their message and direct resources.

Grocers may also want to consider expanding their focus beyond families. Young, tech-savvy singles living in apartments have shown a willingness to buy groceries online. It’s important to recognize there is no one-size-fits-all approach to finding and communicating with these different consumer groups.

Where to focus marketing and rollout efforts is just as important as who is targeted. A good place to begin is to analyze online shopping behaviour from a macro market perspective to better understand which parts of the country, province or city already have a higher level of online spending on groceries. Online spending on groceries and alcohol per household, for example, is higher in Ottawa than in Quebec City or St. John’s, N.L. And in the Greater Toronto Area, Halton Region might be a better market than Durham.

To succeed in this growing channel, grocers should focus on regions where there is a stronger desire to make online purchases, including groceries. They will also want to reach out to those wealthier urban consumers who are adopters of online shopping. Grocers that take the time to leverage data and analytics to understand their market will be rewarded for their efforts.

Joshua Levi is a vice-president at Environics Analytics who focuses on the grocery sector and consumer packaged goods.

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