the on-line grocery inflection point - pmmi · pdf file• webvan –i think we can...
TRANSCRIPT
On-Line GroceryInflection Point ?!?
SCOTT DEGRAEVE CONSULTING, LLC
MARCH 9, 2017
SCOTT DEGRAEVE CONSULTING, LLC 1
Interactive Discussion Areas
SCOTT DEGRAEVE CONSULTING, LLC 2
Background perspective
Why now, when grocery has lagged behind for so long?
What is the state of affairs?
What are the different models?
Fulfillment and Distribution methods
Who are and who will be the key players?
Ideas / Questions for CPG companies to probe
School of hard knocks!
SCOTT DEGRAEVE CONSULTING, LLC 3
• Webvan – I think we can finally stop talking about this flameout!
• Pure play is where things started, omni-channel is where things are headed
• The issues of on-line grocery over the years: “It’s going to be huge!” Heard this year after year not to materialize “Aren’t we just cannibalizing the stores?” “Why move profitable store customers to unprofitable on-line customers?” “Customers will never allow you to pick their produce” “You are just stealing deal dollars from the fixed bucket of CPG promotion buckets”
• On-line, a small % of total revenue, becomes significant to grocers in terms of $ growth The organization gets interested; reshaping thinking
• Fulfillment, distribution models are really all over the place in a forming stage!
Are we really at an inflection point?
SCOTT DEGRAEVE CONSULTING, LLC 4
• AT Kearney predicts 2023 on-line grocery sales 12-16%“On-line Grocery is finally reaching an inflection point” (AT Kearney study)
• Brick Meets Click predicts 2023 on-line grocery sales 11-17%
• IRI predicts 10% on-line grocery sales by 2022
SCOTT DEGRAEVE CONSULTING, LLC 5
– Nielsen/FMI study: The ecommerce imperative
20% of grocery could be sold on-line by 2025 40% of center store could be sold on-line by 2025
CPG Growth is Strong
SCOTT DEGRAEVE CONSULTING, LLC 6
Amazon Pantry, Boxed, Jet major contributors
Source: 1010Data-Online CPG Industry Report
What’s Driving the Growth?
SCOTT DEGRAEVE CONSULTING, LLC 7
• Amazon
• Opportunity / Fear for Retailers
• Technology
• Availability
Many retailers jump in expanding coverage
3rd party providers enable retailers to quickly have an offering
• Awareness
• Millennials
• Amazon!
The Framework of Selling on-line grocery and related products
SCOTT DEGRAEVE CONSULTING, LLC 8
CPG
• Amazon• Fresh Direct• Jet• Boxed• Thrive• Door to Door• Meal Kits
• Kroger• Peapod• Shop Rite• HyVee• Walmart• Safeway• Lowe’s Foods
• Instacart• Shipt• Google Express• Rosie• Deliv• Uber
• P&G – Tide Pods• Unilever (Dollar
Shave Club)• Mondelez• General Mills • Nestle• Campbells• Pepsi
Amazon Prime in nearly half of US Households
SCOTT DEGRAEVE CONSULTING, LLC 10
Less than 20% Prime HH in Aug ‘13 to 44% Prime HH in Aug’ 16
Prime skews somewhat younger, but still good representation throughout
Amazon “Prime Now” has high penetration of grocery purchase
SCOTT DEGRAEVE CONSULTING, LLC 11
Grocery is highest sales category for Prime Now Prime Now continues to expand coverage
Overall grocery growth curve is steep for Amazon
SCOTT DEGRAEVE CONSULTING, LLC 12
Amazon projected to grow from 21st largest grocer to 7th largest grocer in 5 years (22% CAGR vs 2.6% total market)
Prime HH are grocery buying HH
Omni-Channel
SCOTT DEGRAEVE CONSULTING, LLC 13
Source: Willard Bishop and eMarketer 2015
Source: Intelligrated
On-line orders are stock up orders
SCOTT DEGRAEVE CONSULTING, LLC 14
• Much narrower distribution of purchase
• Big basket sizes often in the $150 range (45-50 items)
• Private label has lagged on-line but is growing
On-line
In-store
>35K SKUs offered on-line
3rd Party is an “enabler”
SCOTT DEGRAEVE CONSULTING, LLC 15
• More than 130 retailers• More than 1,500 stores
Instacart, Shipt, Rosie and others are enabling retailers who do not have the expertise, tools, or resources to quickly push out an effective on-line offering
There are challenges for retailers to give up the customer experience and data with this model It is expected the model will evolve to better serve retailers needs in an omni-channel requirement
How are grocery e-commerce orders fulfilled
SCOTT DEGRAEVE CONSULTING, LLC 16
In-store pick
Wareroom
• This is where most retailers start; fastest, lowest risk, lowest cost
• Challenges as volume grows: Productivity Out of stocks Traffic in store
• Dedicated fulfillment space at the store An area segmented off; a mezzanine above receiving
• Still uses fresh departments and some slow movers off of floor• Improves the in-store challenges listed above• Relatively low capex, but can run out of capacity fairly quickly
How are grocery e-commerce orders fulfilled
SCOTT DEGRAEVE CONSULTING, LLC 17
Dark Store
Warehouse
• Dedicated fulfillment center away from the store• Higher capacity than warerooms• Typically manual methods, capex still reasonable• Productivity is good• Outbound docks can be a challenge
• High levels of capacity• High productivity, automation employed• Capex is high• Fixed costs leverage with high volume• Getting proper labor force can be a challenge
Packing and Staging Inconsistent
SCOTT DEGRAEVE CONSULTING, LLC 20
Refrigerated totes with dry ice for frozen and ice paks for chilled
Orders can be staged in a variety of approaches
Things to think about
SCOTT DEGRAEVE CONSULTING, LLC 22
• Millennials
• Automated Replenishment
• Product content and transparency
• Packaging
Proprietary & Confidential
58 percent of Millennials agree that where you buy your groceries reflects your personal values, compared to 28% of non-Millennials
Amanda Topper, Mintel
Millennials are frequent on-line shoppers
SCOTT DEGRAEVE CONSULTING, LLC 24
Amanda Topper, Food Analyst at Mintel
“With growing distrust and a greater desire for transparency from food manufacturers, Millennials want brands to form a genuine, authentic connection with them and brands should recognize the impact Millennials have on their businesses.”
Consumer Values are Evolving
SCOTT DEGRAEVE CONSULTING, LLC 25
59 percent of Millennials will stop buying a certain brand’s products if they believe the brand is unethical
43% of US Millennials agree they do not trust large food manufacturers compared to just 18% of non-Millennials
SCOTT DEGRAEVE CONSULTING, LLC 26
Automated Replenishment may affect where consumers buy
• Nearly three in five Millennials (57 percent) say they only shop the fresh sections of grocery stores (e.g. produce, meat and deli) compared to just 30 percent of non-Millennials
• Automated replenishment is appealing to them
The Tools for Automated Replenishment have momentum
SCOTT DEGRAEVE CONSULTING, LLC 27
HikuFethchIt
SubscriptionServices
Devices, software, appliances, internet of things
Product Images and Transparency are critical
SCOTT DEGRAEVE CONSULTING, LLC 28
• On-line shoppers are much more likely to buy a product if it has images and nutritionals
• The integrity of the data is critical in an age of full transparency and product skepticism
• Having full nutritional and ingredients allow consumers to be able to effectively sort
• Ensure retailers are displaying your latest packaging and labels
• Recognize the need for images in mobile settings
Mobile Images – eCommerce testing shows dedicated mobile
images sell 15% more
Smart Label – supporting brands with creation, management and
serving an industry initiative
SCOTT DEGRAEVE CONSULTING, LLC 29
Brand activation ensures that the manufacturer has reviewed and verified the quality and accuracy of the images and data
Work with a focused content provider
Focus on packaging for e-commerce
SCOTT DEGRAEVE CONSULTING, LLC 30
“People aren’t buying products anymore, they are buying solutions” Tony Stallone
• Focus on “dedicated fulfillment” as it relates to ecommerce creativity for biggest payback
Significantly more retailers will be moving e-comm to a dedicated space as volume grows
• Look at your portfolio, which of those products have the most upside for e-commerce
• Make your packaging more efficient for fulfillment centers
“Shippers” are of no value in a fulfillment center
Make packages “pick ready” when they come into the facility
(e.g. serrated smile in front of pack)
(e.g. banana boxes come in with no lid, pick straight from the box
Can case sizes be smaller so they fit better in a primary pick slot?
Create bar coding so products can be sold as a “unit” or as a “case”
HBC products, receive a “sleeve” by scanning a bar code, instead of individual items
Focus on packaging for e-commerce
SCOTT DEGRAEVE CONSULTING, LLC 31
• Basket builders and customer satisfaction improvement ideas
Make multi packs to sell in multiples (e.g. HBC products come in sleeves, maybe sell like that)
Look at your products, can you bundle them together and sell as a “solution”
Creates efficiency and is a basket builder
Unique ecommerce sizes – is that possible so their can be unique pricing and better margin opportunity
• Make packaging lighter and safer
Glass is not good in any of the distribution methods described
Shipping protection; think about how product is moving and what it is packed with, protective shells
Ecommerce shipping package: the box prevents damage to the fragile product
Summary
SCOTT DEGRAEVE CONSULTING, LLC 32
Omni-channel is here to stay. Stores are not going away, but some of them likely will
?
Everyone has a part to play in this “(r)evolution”
SCOTT DEGRAEVE CONSULTING, LLC 33
• Think with the new environment in mind
• Collaborate
• Get into the field, into the ecommerce fulfillment centers and experience it
• Setup share groups with e-retailers to help each other
• Become a champion for driving these important changes!
Questions?
SCOTT DEGRAEVE CONSULTING, LLC 34
Bio: Scott DeGraeve is an experienced practitioner in the on-line grocery space. He
has 20+ years of hands-on experience, and continues to be one of the thought leaders
in the development of this channel. He started his own company in the early evolution
of on-line ordering, and after several years of rapid growth, sold the company to
Peapod. He spent 15 years on the executive team there and has been instrumental in
Peapod evolving to it’s leading position in multiple markets. Scott now has his own
consulting company and is building on the breadth of his experiences to help retailers
and manufacturing companies:
Evaluate and evolve their current on-line capabilities
Develop plans and roadmaps to enhance sales and profitability
Improve their operational execution
Identify organizational needs to be successful
Contact info:[email protected](847) 309-7142