By Darrell Sapp, Robert Berg and Mark Wright
Online shopping for CPG products is currently growing 12 to 15 percent per year, but it is also cannibalizing in-store trips. A share of online shopping is completed through “click & collect,” meaning consumers are choosing to order products online and then pick up their order at a store location.
Click & collect offers consumers a way to get their grocery needs met without the negative aspects of home delivery or in-store shopping. For retailers, it’s a way to leverage their brand and brick-and-mortar infrastructure. In fact, for both retailers and manufacturers, the opportunity to gain a disproportional amount of growth in this new buying behavior is promising and could serve as an important upward trend year-over-year until internet ordering stabilizes.
There is a widespread perspective that the investment in click & collect will ultimately fail to pay off. We don’t disagree with this assessment but believe that the conclusion is too sweeping. Too much investment is currently being made in locations that will ultimately fail because retailers are not choosing the right location from the outset. Click & collect is in a young stage, and not every consumer will be ready to change their behavior to click & collect for every trip. While there are many markets where the click & collect shopper is prevalent, in most markets the concentration of these households will not yet support a profitable click & collect service. Retailers need to carefully choose locations in areas that are well-supplied with households that are switching more and more of their behavior to “click” based options and provide a quality service to develop “collect” as the primary means to acquire the product.
Those retailers who start click & collect service in locations that have a large number of households with a propensity for click & collect will be able to build the service and infrastructure with the sales needed to support the costs. As more of the population becomes aware of and more receptive to this service, the infrastructure, process and personnel will be added to support the expansion and scaling of this service to meet its market needs.
The retailers who have this expertise – infrastructure, process, personnel – developed will have a significant advantage over those who need to develop, partner or purchase it. Assuming they choose the right stores, these retailers will gain a disproportional amount of click & collect total market spend as a result. There are retailers who will invest in click & deliver, which will expand the notion of trade area and provide either an alternative or augmentation to the click & collect model for shopper needs. We see examples where click & collect and click & deliver models (“click &”) can and will exist in the market.
The very first action a retailer must take is to evaluate the markets it is in to determine the propensity of the households to use “click &” in order to determine the level of risk and opportunity.
How can you identify click & collect stores? One way to accomplish this is by using U.S. household segmentations based on the purchasing and acquisition of groceries, and then mapping these segmentations to all U.S. households. At IRI, we use our 100,000 household panel, applying a propensity to shop a retailer to each segmentation group at the household level. This makes it easy to associate a U.S. household with its propensity to shop online and to shop a retailer given the proximity to the retailer and the choice of retailers in that household’s geography. Retailers and manufacturers can then engage with these households on a store-by-store or market-by-market basis.
Who is the click & collect shopper? Traditional targeting solutions do the best they can with the limitations of the data and methods used. They classify entire neighborhoods based on most prevalent demographics even if there is considerable diversity among the individual households. This is effective for large geographic areas, but smaller market or store-level tends to provide more directional insight that is not actionable. This leads to activation plans based primarily on the number of households with demographic attributes (not accounting for the associated behavior of those households), resulting in less efficient and more ineffective marketing and infrastructure spend.
With click & collect, retailers must consider all the household segments shopping within a store’s trade area. Those considering click & collect services need to identify the click & collect shopper specifically, in order to better plan media and retailer execution at individual store levels. This starts with identifying high-propensity shoppers who live in each store’s trading area, so you choose click & collect locations accordingly.
We believe that the best predictor of future behavior is past behavior. Households who have demonstrated higher than average click & behavior are more likely to demonstrate that behavior in the future. Using proven techniques to extend that insight to all U.S. households, you can gain visibility into which markets and store trade areas contain the highest incidence of high propensity click & collect households.
Retailers and manufacturers can align resources on the click & collect shoppers and the appropriate markets to make this a success. Retailers who understand the markets where click & collect could gain faster acceptance, and who provide a satisfactory service, will gain higher than their fair share of click & collect volume. Manufacturers who understand the needs of click & collect shoppers can provide the right product and messaging. Early movers will capture incremental volume that could increase their overall market share and more than replace the volume loss that is occurring with fewer in-store shopping trips.
Are you a retailer who would like to learn how to increase your click & collect opportunities by targeting the right locations and the right shoppers? Contact IRI at Darrell.Sapp@IRIworldwide.com, Mark.Wright@IRIworldwide.com or Robert.Berg@IRIworldwide.com.