Morrisons and Ocado

I have got to say that I am struggling to get my head around the Ocado/Morrisons tie up.

So what are the possible options (well at least the ones I can think of!)?

Option 1 - Ocado deliver for Morrisons – Instantly gives national logistical coverage, and Morrisons trade on the good reputation of Ocado’s service standards.

Option 2 – Morrisons use Ocado hubs and employs their own drivers – again instant coverage, without leveraging Ocado’s reputation.

Option 3 – Morrisons plugs into Ocado’s technology – using an existing platform that works could prevent teething problems.

Option 4 – A combination of the above.

The first thing that is causing me confusion is the livery on the vans themselves if any part of option 1 is used, are they going to say Ocado? If so why would Morrisons want to have a competitor’s van delivering their produce and causing confusion (and indeed add marketing value for Ocado) for the shopper?

Now of course I can understand that the cost saving (Capex) of using an existing fleet - even if that fleet would need a large expansion in numbers to cope with the predicted volume increase.  But for me, it seems like Morrisons are surely just kicking the ball down the road on this one (unless of course they opt for option 2).  Now I am sure if asked they would say that their core competence is supply chain not home deliveries, so therefore aren’t they already pretty knowledgeable in logistics?  It seems to me they are trying to enter the market on the cheap, and although we know that Morrisons have said that they only enter the online market if it was profitable almost immediately…is this really the right option?

Now don’t get me wrong, I have never thought that Morrisons should rush to enter the online market just because their competitors do it! Unlike almost every other commentator! Market Share isn’t everything…turnover for vanity, profit for sanity.   I agree that any business unit (or channel in this case) should be profitable by itself, but they have taken an awful long time to come to a decision, which in reality doesn’t appear to be much of a commitment to online (I have been critical of how slow they have been to embrace the convenience channel, but more of that for another day!!).

There is also the problem with Waitrose (or Waitrose having a problem with the tie-up to be precise), and how close to breaching the Waitrose/ Ocado agreement does this come, if not in law, in principle.  This can only end badly for some or all the players.

I am a great advocate to organic growth in business, rather than trying to run too early.  Morrisons have done some trialling on fresh in the Greater London area (Fresh being a poor penetration category online currently this seems sensible), but there is a significant difference between that and a full SKU level model nationwide. 

For me I think I would have been more tempted to concentrate on trialling to my shopper heartland (for us up’t north!) on a selected area basis.  These shoppers may be more forgiving early on, and accept that there may be the odd hiccup along the way…..but of course option 3 should prevent any of these issues…..I wait with baited breath!

Craig Bradley

The Rise and Rise of Online Grocery Shopping

Our monthly shopper survey monitors the purchasing behaviour of various retail categories online during the previous month made by a household’s primary food and grocery shopper.

March saw the most dramatic rise in online shopping behaviour since we started collecting data, and with an amazing 34% of shoppers buying some food & grocery items online, demonstrates just how fast the market is changing.  Now of course, we have seen that the high street foot fall had been effected considerably by the recent snow, but is that really the only reason? And notwithstanding that, will shoppers change their habits to embrace online more in the future?.....or is it just a blip? I think not!

Three categories saw a distinct rise in online activity during March (Cosmetics, Clothing/Shoes and Food & Grocery), with food & grocery seeing the greatest percentage increase at 21% (28 to 34% penetration).  Yes, I know that online sales only make up around 5% of total spend, but we could soon be getting to a tipping point where previously estimated growth could be woefully low!

This will no doubt be cause for some head scratching within the effected retailers, with their estates of larger format supermarkets, are they really fulfilling the current needs of shoppers for flexibility and convenience? 

Of course ‘Click & Collect’ is definitely part of the solution moving forward, as seen, for example, in the French market (although a less mature online market overall), where over 50% items are ordered online, and then collected from the store car park (or dark store)!  This allows shoppers to be more in control when it comes to timings, as well as only needing to order 2 hours in advance.  So imagine ordering during the afternoon at work, and picking up on your way home.

The effect of this rise in online shoppers within the food & grocery sector isn’t quite as straight forward, as the same retailers are getting the sales one way or another (in-store & online). We are also seeing the rise of shoppers using non-standard channel such as Amazon to fulfil their needs across a wide range of categories.  The advantages to shoppers are obvious, no minimum orders, lower or no delivery charges, different SKUs available, not to mention the ease of order other categories at the same time as the penetration of accounts is generally higher than the standard retailers.

It really is time for both retailers and FMCGs to grasp the opportunity that online has to offer, as we have seen recently from the client work we carry out in this area, there’s lots of work to do, and small improvements can yield great results!

Craig Bradley

Evolution Insights 

The Best Food & Grocery Retailer Award!

We have recently undertaken the largest study into shoppers’ attitudes about the largest food & grocery retailers in the UK, and having seen many different rankings recently, we felt we were in a great position to offer our take on which retailers are doing what shoppers really want!

By understanding what a shopper requires from a shop across 4 key criteria (Price, Quality, Value & Range), and then crossing this with what shoppers felt that the supermarkets they use regularly do the best…and then adding a qualitative comments index from our the sample of 5000 primary household shoppers (in relation to Price, Range, Service, Value, Store, Stock & Quality), we were able to give a fully rounded view to who shoppers felt was the best all-around store.

And the overall winner was….Waitrose!

Rank	Supermarket	Quantitative index	Qualitative index	Overall Rating
1	Waitrose	94	133	227
2	Morrisons	104	121	225
3	Aldi	106	108	214
4	Lidl	104	108	212
5	Marks and Spencer	92	118	209
6	Asda	110	94	204
7	Sainsbury’s	99	102	201
8	Tesco	102	75	177
9	Iceland	102	75	177
10	Co-op	87	67	154

Although Waitrose were only ranked 8^th when it came to the quantitative index, they achieved far and away the greatest qualitative score based on comments by their shoppers, so although they didn’t rank well on Price or Value, shoppers loved the overall experienced (plus Quality & Range) which more than made up for this. This further demonstrates that price may be important to some, but the whole store experience should not be ignored.

Morrisons’ second placed ranking was also bolstered by a high qualitative score and a satisfactory quantitative ranking, whilst two discounters (Aldi & Lidl) performed well on both metrics. Asda were the top supermarket when only taking into consideration their quantitative score as shoppers felt their proposition best matched their expectations, but were slightly let down by some in-store issues on their qualitative index.

Sainsbury’s was close behind Asda, but the news is not so good for Tesco, whose shoppers had some serious issues with the brand and store, and only just headed Iceland. The Co-operative appears to be failing to win the hearts and minds of their shoppers, ranking bottom on both indexes.

For more detailed analysis on all the retailers mentioned, please see our Retailer Series of reports which are launched this week.

Craig Bradley

Omni-Channel; the Future

The demise (predicted by many) of the Bricks & Mortar retailer may be premature even if there is a rise (seen in our latest research) in showrooming across lots of categories.  And although the art of showrooming takes hold for many looking for online bargains and convenience, they often still require the re-assurance of seeing the real thing!

With nearly a third of shoppers already admitting to showrooming, it is vital that retailers react positively to ensure it is a competitive advantage to embrace the concept.  Price is the key driver to online shopping, and the high street must accept that the cost of carrying stock on the high street where rents are high is a big competitive issue against online retailers.  Beyond price though, the need for a shopper to actually see and touch the product ensures that there is still a place in retail for ‘real’ stores.  We have already seen shops in the US popping up where no product can be taken away from store, but merely viewed and then ordered for home delivery.

Food retailers have an opportunity to develop propositions around what we call ‘Now & Later’, where shoppers do their shop in-store, selecting which items they take with them, and scanning those they wish to be delivered later.  This negates the perceived issues with fresh amongst irregular online shoppers, and introduces those that enjoy the in-store experience to the convenience of home delivery and increased basket sizes.

It is virtually impossible for a shopper to be able to survive effectively without visiting a store at some time or another, indeed in our last online report only 0.4% of primary shoppers say they never visit a store in person.  The potential rise of ‘Click and Collect’ and something similar to our ‘Now & Later’ proposition make stores fully relevant moving forward and not necessarily the ‘Ball & Chain’ that many feel large store estates will become.  Throw into the mix a good spread of Virtual Reality where space is an issue, and I think we are seeing what the future may hold!

See our latest report on Showrooming here.

Showrooming

The standard definition of Showrooming is when a shopper visits a store to check out a product, but then goes on to buy the same item online. Here, we will take a deeper look into Showrooming and consider when the moment the need/want occurs (the moment of intention), Active vs. Passive Showrooming and the Path to Purchase.

A key question as to whether someone has Showroomed regards their intent.  If a shopper just happens to see something in a shop and then buys that same item online at a later date, is this Showrooming? Does the shopper need to have the intention of going on to buy that product online? When does the need/want occur (moment of intention)? Before going to the physical store? In the store? On the way home? Or can it be at any time up to the point of purchase? 

Does a transaction have to take place? At Evolution, we believe that for an item to have been Showroomed, the shopper simply has to purchase an item online having previously viewed it in-store, regardless of when the intention occurs. Of course, a shopper may intend to Showroom but for whatever reason, does not make the final purchase. We are not considering these shoppers here - we only take into account those that made a transaction, because if no sale was made, we cannot consider that the physical store lost out to a virtual store.              

    

Showrooming can be Active or Passive. Active Showrooming (Type 1) occurs when the shopper already has in mind an item they are interested in buying (driven by recommendations, ATL advertising etc.), and enters a physical store with the intention of using it to gain information (in its various forms) on a product but has no intention of purchasing it from the store itself. So, to fit a Type 1 methodology, the intention to buy has to occur prior to entering the store.

Passive Showrooming (Type 2) therefore is when the intention to buy occurs either whilst in the store, or after the shopper has left. The shopper has already (at this time), seen an item that they are interested in, and have gained some information on it from the store. After this, the shopper then goes on to buy the item online. Without prior intention, the shopper used the store to gain information (passively) on a product which was then subsequently bought online.

 Neither road to Showrooming necessarily involves a moment of intention right up to the point the transaction takes place. But both an active and passive approach can, in hindsight, be defined under the broader definition of Showrooming.

As we have mentioned, the intention to buy an item can occur at any point up to the point of purchase – but it not until this intention occurs that the shopper begins on their Path to Purchase.

For more information on Showrooming, see our report into the subject. Read more here.

Are You Paying Too Little for Your Grocery Delivery?

It is estimated that we spend roughly £136 per household, per year on delivery charges, it may be that we are paying too little. Though shoppers tend to be of the opinion that delivery charges are too high, retailers may actually be footing the majority of the bill, especially when it comes to grocery.

Sainsbury’s for example, currently charge between £2.75 and £6.95 for a grocery delivery, with Tesco similarly charging between £3-6. However according to analysts Shore Capital Stockbrokers, the process of choosing your items, bagging them and delivering them to your door costs closer to £20. They believe that the service is seen as more of a gimmick for retailers rather than a way to make a profit; in order for the service to become profitable, retailers would need to charge closer to £15 per delivery.



Dislikes of online grocery shopping among online grocery shoppers - 2011

With the number of shoppers who are opting for online delivery for their main shop increasing year-on-year (over half or all shoppers now shop online at least occasionally), analysts claim that in-store shoppers are subsidising the retailers loss in revenue by increasing the cost of the food itself.

Of course if this is the case and retailers do increase their delivery changes substantially (which is unlikely in the near future), the retailers that do not increase their delivery charges will likely see an increase in orders with shoppers switching their loyalties. Currently, half on online shoppers cite the cost of delivery as their biggest dislike of online shopping (see graph), and 80% say that free delivery would increase their frequency of use of this channel.

We investigate online shopper loyalty, the barriers to online shopping, and much more in our upcoming report ‘Online Food & Grocery: The Shoppers Perspective 2012’.

Actions Speak Louder Than Words for Lunch On-the-go Shoppers

UK workers work an average of 36.3 hours a week (ONS).  This leaves them time poor when it comes to their lunch break.  As such, consumers need convenient food which fits in around their busy lifestyle, driving the out of home market. Consumers are actively looking for food which they can eat on-the-go and which will keep them fuller for longer whilst they are busy at work.

When considering what factors are important to shoppers when they are choosing their lunch on the go ‘Taste’ and ‘Fill me up’ are ranked as the highest drivers to item choice.  Lunch on the go shoppers ultimately want something they will enjoy but will also fill them up so they won’t snack during the afternoon.

Price as a driver was ranked third with health in final place rated 60 out of 100.  However, these ratings and rankings were recorded directly after a shoppers trip, reflecting their actual behaviour.  When we compare this to shoppers’ opinions and how they think they choose their lunch on-the-go items a different picture appears for health.

Shoppers rated health at 78, almost 20 points above the rating given when recorded immediately after purchase.  This actually places health above price as a driver of item choice for lunch on-the-go.  This shows how there are discrepancies between how shoppers think they act and how they actually act.  Shoppers like to think they are choosing healthy items whereas when they are actually in the time pressured situation health takes a back seat.

It is important to use a range of different research methods to capture these differences between opinions and actions.  Our Smartphone diary method allows for the capture of data immediately after purchase whereas a qualitative survey gives a retrospective account of how a shopper believes they act in a certain situation.  Both are valuable pieces of information which allow for these differences in beliefs and actions to be highlighted.