Get ready for some big changes for grocery retail in 2016. The winners will be those retailers who understand that their success depends on the blended performance of their online and offline offerings, not one vs. the other. Moving forward, it will be crucial to reinvent the grocery retail model by leveraging all assets – digital and physical (including stores) – and this means putting online grocery within the context of the total business.

1. Guidance for 2016
Time to Put Online Grocery into Context
Embrace a blended business opportunity and listen to shoppers
March 2016
By Bill Bishop, Chief Architect
Brick Meets Click

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Overview
Moving forward, it will be crucial to reinvent the grocery retail model by leveraging all
assets – digital and physical – and this means putting online grocery within the context
of the total business.
“The winners will be those who
understand that their success
depends on the blended
performance of their online
and offline offerings,
not one vs. the other.”
Bill Bishop
Chief Architect, Brick Meets Click

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Contents
THE VIRTUOUS CYCLE > PAGE 4
The virtuous cycle for online grocery is in full effect
Consumer engagement and retailer investment
WHAT’S NEXT > PAGE 6
What comes next for online grocery?
Increased spending and fragmentation
WHAT TO DO > PAGE 8
Strategic guidance for 2016
Embrace the blended experience and listen to shoppers

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The virtuous cycle for online grocery is in full effect.
Shopper exposure and interest are driving retailer investment and retailer investment in turn
is driving shopper engagement and adoption.
Part 1: SHOPPER ENGAGEMENT
> Online grocery is no longer a niche behavior.
More than 40% of US households have now bought groceries online,1
and these experiences are
changing the way consumers shop. Access to information and new choices makes the path to
purchase more personal and the traditional “consumer decision tree” a much less useful guide for
presenting products.
> Shopper needs are being reshaped by digital options.
The needs that drive grocery trip missions have evolved as digital capabilities have become
ubiquitous. Today, meeting those shopper needs and winning the trip increasingly involves offering
online tools that make the trip more efficient and let the customer start their shopping/order
outside of the physical store.
1
2015 BMC research, see How Consumers Are Using Online Grocery and What It Means for Retailers in 2016

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Part 2: RETAILER INVESTMENT
> Increased investment is taking place across the board.
TRADITIONAL BIG PLAYERS
. . . like Kroger, Ahold, Whole
Foods and Walmart see online
services as increasingly essential
to serving their customers – and
as one of the keys to driving
increased sales.
BIG DIGITAL PLAYERS
. . . like Amazon and Google are disrupting the market
by approaching online grocery as a building block in
their broader business strategies rather than as a
business that must be profitable on its own.
REGIONAL CHAINS &
INDEPENDENTS
. . . like HyVee, Weis, Woodman’s
and Dashes are using online
services to increase their share
of customer spending.
SPECIALTY ONLINE RETAILERS
. . . like Door-to-Door Organics are bringing more
service value to consumers by aggregating desirable
products. Meal kit providers like Hello Fresh compete
in the meal solutions niche, often in new ways such as
partnering with other disruptive services like Uber.

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What comes next for online grocery?
The amount of online grocery spending will increase significantly, and the growing use of
digital shopping tools will further fragment the market.
> Big online spending increases.
We’re approaching an inflection point that will rapidly drive up the share of online grocery
spending, as shoppers increase their use of digital/online tools for full-basket shopping trips.
• Market after market will reach that inflection point as large traditional retailers roll out online
shopping options that make it a lot easier for consumers to get their broad grocery shopping
done at one online location – especially to serve the “shop when I want” and “stick to my
list/budget” trip missions.
• Many of today’s $25 to $35, three-to-five item orders for specialized items will grow to larger
$140 to $170 rings as households experience the convenience of shopping more broadly for
groceries online.

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> More fragmentation and touchpoints.
New platforms, the growing use of online shopping tools, and increased competition to serve the
digital needs expressed in the updated trip missions will increase customer satisfaction – but will
also further fragment the market and accelerate changes in how people shop for groceries.
New online platforms will offer new touchpoints
and impact how purchase decisions are made.
• Amazon’s Ask Alexa (via Echo) and other
evolving communication channels will offer
shopping shortcuts for finding and
replenishing products.
• Existing online platforms will continue to
make it easier for shoppers to move directly
from, for example, a recipe to an ecommerce
platform.

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Strategic guidance for 2016
1. Put online grocery within the context of the total business.
Traditional retailers will realize that while it’s critical to offer their customers an online shopping
option, their ultimate success will be determined by the combined performance of their online and
offline offerings, not one or the other. This means leveraging all assets – digital and physical
(including stores) – to come up with more meaningful and differentiated ways to:
• Become the destination of choice for trip missions that are important to core customers.
• Create fun and engaging shopping (online and offline) that appeals to feelings and emotions
in addition to providing access to products. (This isn’t a new idea, but it’s now become much
more important.)
• Fulfill orders in ways that fit comfortably into how consumers want to live their lives –
without a big upcharge for this service.

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2. Listen to local shoppers: They will tell you a lot
2. about what you should be doing.
Heads up! The approaching inflection point that will drive up the share of online spending and the
increasing market fragmentation won't happen uniformly across the country. It will take place
market by market, driven by the tools and services that are available and in use.
This local dynamic makes it essential for a retailer to understand what’s going on among the
shoppers in their area. In other words, you can learn a lot about what you need to be doing by
developing a good understanding of how your customers are using the new digital shopping tools
(particularly those offered by the competition) and where they are headed in terms of more
convenient shopping.

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Brick Meets Click
We make sense out of what's happening in
grocery retail, and provide guidance on how
to move forward.
Use our expertise to
> gain clarity about what’s happening in your market.
> identify key changes and anticipate what’s coming.
> evaluate your customers’ behavior on key benchmarks.
Check out our Offerings at brickmeetsclick.com or contact:
Steve Bishop, Managing Director
steve.bishop@brickmeetsclick.com
Finding growth
opportunities
in today’s
changing retail
environment.