Test-and-learns are a common feature of grocery retail and online grocery is no exception. In fact, given the relative newness of the channel for many operators, it would be surprising were we not to see a vast amount of experimentation. With the coronavirus pandemic driving unprecedented uptake for grocery ecommerce, there has never been a better moment to trial variants on a theme. This is exemplified by two recent contrasting initiatives from the Netherlands and Russia.
Exploring the middle ground
Ahold Delhaize banner Albert Heijn’s AH Compact service looks to capture spend from non-standard households that might otherwise be averse to the weekly full-basket typical online grocery shop. Albert Heijn says it developed the service to cater to both young and old shoppers as opposed to families and businesses that regularly use its ecommerce offer. To this end, it has created a standalone AH Compact app that offers a curated 5,000-SKU assortment as opposed to the 27,000 SKUs available on the full-range AH.nl offer.
The Dutch supermarket is a pioneer in European e-grocery, and this initiative indicates it has detected a gap in its coverage it is minded not to leave exposed. It will perhaps also be aware of the growth currently being enjoyed by local pureplayer Picnic, which scores highly with younger demographics due to its eco-friendly stance and high service levels.
With single-occupancy households increasing across Europe, there is a need for services that do not demand family-sized shops each time. AH Compact’s free fulfilment begins at EUR35 (the same as charged by Picnic), a very low charge that is no barrier to any single shopper compiling a basket of weekly grocery essentials.
The downside is fewer delivery slots and the much-reduced choice. The former may be less of an issue right now, given many will be either young professionals working from home or senior shoppers ill-disposed to venture away from home at present. For both groups, the simplified selection should make the process easier and quicker without the need to browse a huge assortment to arrive at their choice. Albert Heijn emphasized that prices are the same as via AH.nl and that offers like Price Favorites and Bonus will feature as part of the Compact offer.
Going supersized in Russia
Coronavirus has spurred grocery ecommerce in almost every European market, but Russia has witnessed phenomenal growth during the past months. As detailed in our recent monthly Russia Retail digests, new online and digital initiatives are being launched almost daily. At the forefront of many of these is leading grocery operator X5 Retail Group.
In August, X5 launched ‘Perekrestok Vprok (Forward)’ a new ecommerce service that expanded its online service way beyond the supermarket-sized Perekrestok.ru offer to a hypermarket-style selection of a planned 50,000 SKUs. X5 does operate a big-box format, Karusel, but this has no online offer and the company is actually in the process of winding down the physical banner itself.
In complete contrast to, for example, highly limited intermediary options like Deliveroo and Uber Eats, Vprok allows for basket-building on a colossal scale, the upper limit being “half a ton” with next-day delivery. X5 has allocated five dark store DCs to service the offer, which it obviously views as an opportunity to capture not only large households, second-home estates and special occasions, but also B2B clients like workplaces and food service. That said, minimum order level in Moscow is a mere RUB1,000 (USD13), so how many half-ton deliveries it expects to make must be open to question.
Kantar’s Point of View:
In recent months we have seen a plethora of new online grocery initiatives across multiple markets and numerous retailers. Innovations like curated food boxes have added extra layers of complexity to the ecommerce equation for brands, and it seems unlikely that FMCGs will be able to determine clear and obvious strategies any time soon. What is obvious, though, is that online is now completely embedded as a key grocery channel and that retailers will look to maximize all opportunities this brings.
Once the initial tremors of the 2020 ‘emergency response’ diminish and operations normalize, retailers will quickly begin examining their offer to ensure all potential touchpoints are covered off. AH Compact will prove an illuminating study, particularly in how assortment is ranged. As might be expected, own brands and fresh feature heavily, which will leave less space for A-brands within the 5,000-SKU selection. This is further reduced by its Bonus promo items (usually branded) also being included in Compact. The focus appears to be on value, likely to appeal to senior shoppers and frugal younger singles. We have to assume Albert Heijn is crunching its data to determine an assortment that will work for Gen Z and Silver Surfers, which is where brands can gain an edge with their own shopper insights to lobby to be part of such an offer.
We should assume there will be much more data-driven refinement of online assortments as retailers sift the mountain of information harvested from their new online customers. It can also be expected that over time many leading retailers will look to diversify their ecommerce strategies away from a single mass-market offer towards targeting specific consumer groups or demographics. Brands should already be looking at their portfolios as regards their online relevance, but now should also begin leveraging their own data to formulate strategies to capture non-mass consumer groups in areas like value-focused, seniors and occasion-specific. The ask will be to determine which customer will work best in which particular online aspect and to choose your battles accordingly.