E-Commerce Dollars Only Tip of Sales Technology Iceberg

From the Food Institute Report this week, “Grocers have far fewer online visitors as e-commerce has yet to play a significant role in food retail,” notes a recent report from CITI RESEARCH.

January 17, 2013

From the Food Institute Report this week,  “Grocers have far fewer online visitors as e-commerce has yet to play a significant role in food retail,” notes a recent report from CITI RESEARCH. And that is certainly the case as THE FOOD INSTITUTE has reported each month in its retail sales updates based on COMMERCE DEPARTMENT data showing food and beverage sales account for less than 1.5% of all e-commerce/mail order sales and totaled only about $5.1 billion for all of 2012.

That $5.1 billion in internet sales is less than 1% of the $530 billion in sales at supermarket checkouts last year. Looking forward, e-commerce food sales are seen growing 72.5% by 2016, to $8.8 billion – a significant percentage growth but only another $3.7 billion in sales – still only a fraction of overall food sales and overall e-commerce sales. But this number is for sales actually made electronically, outside of the brick “and” mortar locations.

Still, do not think internet and mobile technology are not important to food retailers as Citi Research points out. For example, SAFEWAY’S digital loyalty Just For U (J4U) program completed its national rollout in July of last year, and the chain expects participating households will represent 65% to 70% of its total customer households over the next two to three years as there are already 4.5 million registrants. 

And that impact is seen in rising web traffic at all of Safeway’s five banners, led by VONS, which saw traffic grow 236%, and RANDALLS up 202% in December 2012 compared with a year earlier.

Thus, there are numerous opportunities for retailers on the internet and technology front and CitiResearch include “Big Data” among them.

One food retailer that has already embraced this arena is KROGER, which first began implementation of customer analytics in 2003 by partnering with DUNNHUMBY , the U.K.-based firm that specializes in database management, analytical services, and data mining. Dunnhumby gained fame working with TESCO’s Clubcard and evolution of analyzing data gained through loyalty card programs, compiling a database of customer “DNA” that gave Tesco and suppliers insight to tailor prices, optimize promotions, and cater to its most-valued customers Kroger saw this as an opportunity, acquiring a 50% stake in dunnhumby U.S.A., making it the only food retailer in the U.S. with whom dunnhumby U.S.A can work.

This implementation gave the supermarket chain the ability to design customized offerings to various customer segments and to target its promotional spending and pricing investments toward more profitable customers, “while its direct supermarket competitors have had difficulties keeping pace.”

The Harvard Business Review (January-February) reports Tesco is planning to roll out a service that will provide customers who use its loyalty cards with simple access to their own shopping history and provide planning and goal setting functions. It is expected to be available via proprietary smartphone apps initially.

Meanwhile, CitiResearch expects to see more and more retailers experimenting with and implementing customer analytics as they attempt to tailor product offerings, build loyalty and drive sales. 

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