A New Era of Grocery Shopping Centered on Personalization

Grocery shoppers are more clued in than ever to dietary preferences, allergens, and food sourcing, as evidenced by the burgeoning categories of health & wellness, specialty, and local foods, as well as the sprawling industry around dietary research & advice. Although grocery retailers have been keen to join in on this trend by stocking and promoting a diverse set of products, there are major structural issues preventing them from realizing substantial value via segment-of-one personalization. We predict that over the next 5-10 years, customers will come to expect that their grocery retailers deeply understand their family's particular needs and can directly tailor a shopping experience to them.

There are 3 primary challenges that grocery retailers are experiencing:

  1. Physical limitations of brick and mortar stores - it is near impossible to tailor a store layout, and to find shelf space, for so many different customer needs

  2. Lack of flexibility in most eGrocery platforms - today's eGrocery sites were designed to mimic traditional eCommerce shopping experiences, even though shopping for groceries is very different from shopping for other types of products

  3. An under-investment in organizing, mining, and displaying grocery data - personalization requires a deep connection between the attributes of products and the preferences of customers, but most retailers are behind in investing in both areas

Over the years of building and operating the locai platform (and including our experiences at Fresh Direct, Peapod, Relay Foods, Door to Door Organics, and elsewhere), we have talked to many consumers, run a multitude of data driven experiments, and partnered with a variety of businesses in the space. We've felt the pain points and directly seen the challenges that stem from any eGrocery operation, but also know the impact of investing in the customer shopping experience upfront.  To speak to each of the three challenges above:

Physical limitations of stores

Online sales currently make up 5% of the overall grocery market in the United States, with projections indicating that this number will approach 20% within the next 5 years. A reason for this projected growth is the inherent disadvantages of a physical grocery store in terms of shopping convenience (online = from your couch vs. in store = walking the aisles) and configurability (online = “your aisle” for each customer vs. in store = every customer has same set of aisles).  To be able to facilitate this rapid evolution from in store to online shopping, retailers will need to embrace an omni-channel solution where customers can shop online or in store as part of a single unified experience.

At locai, we have experimented with an approach that fuses together the concept of an online cart and a standard grocery list.  Customers put together one shopping list for the week and can then choose which subset of that list gets purchased online and which subset is available via a mobile list interface for shopping in store. When coupled with store layout data, this allows grocery retailers to guide the customer to the products in the store that they are looking for, meanwhile calling out items along the way that are promoted in a segment-of-one way given preferences, sales, and other types of information.

Lack of flexibility in eGrocery platforms

Selling food is a very different process than selling other types of products, yet most eGrocery platforms reuse existing eCommerce structures/designs and paradigms. To highlight this difference, consider that the typical eCommerce customer shops infrequently and creates orders with only a handful of items, all of which are shelf-stable and none of which they have previously purchased. That same customer, when shopping on an eGrocery website, shops every 1-2 weeks and creates orders with 30 - 50 items, many of which have been purchased before and/or are unavailable due to perishability and inventory management constraints. Furthermore, because customers are forgoing two key food senses — touch and smell, they require a high level of trust to be pre-established with the retailer in order to feel comfortable purchasing food online, as compared to other types of products that are mass produced, easily returnable, and/or less critical to basic human needs.

Yet, because most eGrocery platforms are designed from and/or inspired by typical eCommerce platforms, these key differences get ignored. As a result, personalization within most eGrocery platforms comprises a single page of previously purchased items, a few product recommendation widgets, and a series of self-serve navigation links for finding areas of the site with potential items of interest.

In comparison, because the locai eGrocery platform was built with personalization as a core tenet, it permeates throughout the customer experience. Search results, rich content (i.e. banners, videos, posts, etc.), promotions, recipes, and more are tailored to each individual customer's preferences - both explicitly using customer inputted dietary preferences, allergens, and likes/dislikes, and implicitly, using purchase data and shopping behavior. These capabilities are made possible by two innovations: searchandising (search driven merchandising) and meal planning. The former is a search engine that combines a merchandiser driven grocery taxonomy with a data driven learning algorithm to craft a rich content and personalized discovery experience. The latter is a recipe engine that intelligently combines any given recipe catalog & product catalog with a customer's preferences, current cart contents, and much more to enable 1 click add-to-cart, reuse of ingredients across dishes, and more.

Under-investment in grocery data

At Door to Door Organics, we ran a periodic survey asking prospect/active/lapsed customers about their food preferences. Each time we ran it, a whopping ~60-70% said they were following a certain dietary guideline at the time. Relatedly, the last time we asked "What types of recipes would you like to see more of?", the 2nd most popular answer was "More specific dietary styles", and the last time we asked "How can we improve our meal planning functionality?", the top answer was "Better nutritional information for recipes." Suffice to say, customers continually pushed us to do better by them in addressing the unique needs of their particular families.

However, up until recently, the core building block of personalization—rich and accurate product attributes—was difficult to come by, making it a real challenge for any grocery retailer to meet customer demands on this front. Relay Foods, along with its partner Label Insight, put in a lot of manual data entry work to overcome this deficiency and get out ahead of the rest of the market. Locai is excited (not to mention thankful) to build upon that experience base by partnering with ItemMaster, which offers a dizzying array of product attributes across hundreds of thousands of products.

Finally, as the number of products within grocery catalogs increase, along with the number of attributes for each, it will become more and more difficult to navigate the digital grocery store. As a result, it will become crucial for grocery retailers to make it a priority to invest in new ways of leveraging and displaying it in intuitive ways. As inspiration, in 2014, Relay Foods launched a fresh approach to the antiquated nutrition label:

The Future of Grocery is Personalization

The members of the locai team have spent the better part of the past decade operating online grocery stores and consulting with a diverse set of classic grocery retailers. As a result, we understand how taxing yet rewarding the industry is, as well as how difficult it can be to plan for an unknown future.

To that end, we are currently seeing a major disconnect between the importance of personalization to grocery shoppers, and the extent to which grocery retailers are investing in that area. We believe that this represents a huge opportunity for retailers looking to build trust with consumers and stand out in the grocery industry's ever-changing competitive landscape.

Want to learn more about our solution and how it could enhance your current eGrocery experience? Drop us a line in our Contact section, and we’ll be in touch shortly!

Jeff Bordogna is an adviser at locai, was VP of Product & Technology at Relay Foods and Door to Door Organics, and is now a product strategy consultant at Night Train. This post expands upon his personal blog post—Reimagining the Nutrition Label.