Regional Grocer Beats Amazon in a Photo-Finish in eCommerce Rankings
dunnhumby's first eCommerce Retailer Preference Index (RPI)
- dunnhumby’s first eCommerce Retailer Preference Index (RPI) ranks H-E-B, Amazon, Amazon Fresh, Walmart, and Sam's Club as the five best online grocers. Although the dominance of Amazon and Walmart in the online space might not come as a surprise, H-E-B stands out in first place, and it is worth highlighting the regional grocer has the best emotional connection and online share of wallet, among their customer base, out of all of the retailers in this study.
- This study reveals that the best-performing e-grocers are achieving their results by excelling at the two most important drivers of preference: Owned Digital Asset usage and Ease & Reliability. The first driver refers to the customer perception that they are purchasing through the retailer's owned app or website, rather than through a third-party intermediary (i.e. Instacart, Shipt, etc). Ease & Reliability, on the other hand, refers to the eCommerce basics: a smooth user experience combined with fast, convenient, and timely fulfillment.
- Retailers who lean more heavily on intermediaries — and who are less likely to own the eCommerce experience — have lower scores for ease/reliability, higher bounce rates, and fewer pages/visits. In these cases, Customer loyalty is with the retailer, not the intermediary. All three major intermediaries (Instacart, Shipt and Door Dash) had lower emotional connection than nearly every grocery retailer measured.
- Meanwhile, for assortment, online prices, variety, and quality perceptions demonstrate no clear pattern with eCommerce results. This means that grocers with weak online price perception are just as likely as grocers with strong online price perception to achieve a strong online share of wallet, visit growth, and emotional connection.
- This absence of connection between the perception of online prices, online assortment, and online customer success serves as evidence of two things: the importance of omnichannel brand equity, and the differences in needs between the omnichannel and brick-and- mortar only shoppers. Omnichannel shoppers are more time-starved than brick-and-mortar only shoppers. If a retailer delivers on ease/reliability of the eCommerce experience to save customers time, this positive online customer experience will likely leave a halo effect on online prices and product quality.
- Put another way, an omnichannel shopper likely began their relationship with a retailer in the brick and mortar channel, and they mostly bought into that retailer’s price/quality equation long before trying their eCommerce channel. They are venturing into that eCommerce channel for the benefit of time savings and are less likely to be critical of online prices and products than they are of online experience.
- In general, the online grocery shopper has a more focused mission when buying online than in-store, purchasing fewer categories, a characteristic that is even more pronounced in the top-performing e-grocers. Top performers' customers also tend to have a highly functional and straightforward interaction with their stores, which aligns with the importance placed on eCommerce basics – consistency, ease, and reliability of the experience – as a driver of choice.
- Third Tercile retailers’ shoppers over-index in automatic repurchases, personalized discounts and recommenders and getting informed on store initiatives. If grocers want to attract customers that look like First-Tercile customers, they should master the blocking and tackling of eCommerce first before embarking on other digital innovations around pricing, promotions, or new products. This heightens the importance of knowing the target shopper and being surgical in building channel experiences that aligns with their needs.
Some retailers struggled to keep pace with the initial surge of online visits, which resulted in many customers having less than satisfactory first experiences with the channel. This is a problem. Thanks to the strong growth rates over this time period, the eCommerce channel will be nearly as large of a source of new grocery revenue as the much larger brick and mortar channel.
eCommerce's share of total grocery sales more than doubled during the pandemic, from ~5% to ~10% of sales , forcing retailers to scale their capabilities quickly or lose their place in the historic step-change in demand. Some retailers struggled to keep pace with the initial surge of online visits, which resulted in many customers having less than satisfactory first experiences with the channel . Retailers were put on their back foot, and many are still feeling unsteady. A McKinsey survey of grocery executives recently found that only one in three feel well prepared to meet the omnichannel demand of the future.
Considering that many grocery industry analysts estimate that eCommerce share of total grocery industry sales will be ~20% in the next 5 years, double what it is today, this is a problem. dunnhumby is more conservative in its estimates, putting that number closer to 15%. Either way, thanks to the strong growth rates over this time period, the eCommerce channel will be nearly as large of a source of new grocery revenue as the much larger brick and mortar channel. The Covid-era has accelerated the need for grocery retailers to heighten their omnichannel offering, more so than simply their eCommerce or brick-and-mortar offering. Consumers are now more empowered than ever to choose how they want to shop for each particular shopping mission. The lessons drawn from this report that you are about to read help retailers assess their priorities around eCommerce and digital capabilities, in light of what matters in driving positive business results with customers.
The Preference Drivers
There are five primary drivers of customer preference online:
Owned Digital Assets
Perception of whether or not the customer purchases through retailer's website or app vs.intermediary (i.e. Instacart, Door Dash, Shipt).
Ease & Reliability
Correct charge, rarely goes down/freezes, easy to pay, easy to find what I need. Fast, orders delivered on time. Web/App looks and feels up-to-date, has convenient time slots available.
Right substitutes, does a good job of picking fruits/vegetables.
Get the correct ordered products, easy to return/refund. Feels personalized, easy to find new/different products. Has quality products and a variety of products.
Low base prices, low online fees, and online price is consistent with in-store price.
Besides capturing what drives Customer preference online, our approach also shows that what retailers do (according to preference drivers) has a significant impact on their outcomes in terms of the resulting eCommerce performance and emotional bond. Based on their final eCommerce RPI rankings, retailers can be grouped into three terciles: the first tercile is comprised of top performers, the second has middle-of-the-pack retailers, and the third has the bottom performers. Those who rank in the first tercile have an e-grocery share of wallet 2x higher than retailers in the third tercile. First tercile retailers also double those in the third tercile on overall grocery share of wallet.
In addition, first tercile retailers have a significantly higher emotional connection with their eComm shoppers; they outperform the rest of the banners on all three emotional connection attributes: Likelihood to Recommend, Trust, and Sad if the Store Closed.
Which Drivers Matter Most to A Retailer's Success Online and Emotional Bonds with Customers?
By definition, Usage of Owned Digital Asset and Ease & Reliability are the dominant preference drivers because they have the strongest positive correlation with customer sentiment and eCommerce performance metrics. This means that banners that scored highest on Owned Digital Asset usage and Ease & Reliability also had the strongest emotional and eCommerce performance in this study.
All Customer needs are important. But some are more important than others. In order of importance, the preference drivers are:
How did we conclude that using the Owned Digital Asset to transact is the most important need while Price is the least important? The answer is that Owned Digital Asset Usage demonstrates the clearest combined relationship to both emotional connection and eCommerce performance. In contrast, Price demonstrates the least clear relationship, as shown by the charts below.
By definition, Usage of Owned Digital Asset and Ease & Reliability are the dominant preference drivers because they have the strongest positive correlation with customer sentiment and eCommerce performance metrics. This means that banners that scored highest on Owned Digital Asset usage and Ease & Reliability also had the strongest emotional and eCommerce performance in this study. In contrast, a higher Product and Price score shows no clear relationship with eCommerce performance or emotional connection with shoppers. This doesn't mean that Price and Product are irrelevant. It just means for the omnichannel shopper, experience trumps assortment. The importance of the preference drivers should guide digital investment, prioritizing issues on the Store's digital platforms and ease and reliability before other digital innovations.
Who are the winners?
The banners in the top Tercile have well-established eCommerce capabilities, and most of them, like the Amazon and Walmart corporations, also have scale as a key competitive advantage. Scale allows them to have both operational efficiencies and dominate eCommerce sales. Despite the colossal size of those competitors, H-E-B beats them to the 1st spot based largely on the strength of their customer value proposition. To find out more about how H-E-B is competing with grocery eCommerce Goliaths, visit the H-E-B Case Study section of this report.
The retailers who have the best overall eCommerce value proposition, in the eyes of customers, are:
Pillar Performance by Terciles
Pillar Deep Dives
H-E-B Case Study
Through the years, H-E-B has been highlighted in the Grocery RPI for its strong customer value proposition with a favorable price to quality equation. It continuously scores highly on emotional connection, quality, operations, private brand, and assortment relevance.
Also, H-E-B had been strongly developing its digital capabilities and laying the ground at the perfect time before the pandemic's boost in online grocery. H-E-B began offering curbside pickup in 2015. Three years later, they acquired an Online Grocery Intermediary (OGI) which evolved into H-E-B's Tech Hub with 600 employees. And right at the end of 2019, three months before lockdowns, it launched My H-E-B app. In fact, H-E-B has increased its digital scores more than any retailer from 2018 to today.
As the headline notes, the 2022 eCommerce RPI reports that a regional grocer, beat the Amazon corporations by a nose. It was close. This is significant because the dominance of grocery giants like Amazon, Walmart and its subsidiaries is not absolute. This year’s RPI — the first for online grocery retail — shows ways grocers can not only survive but thrive in the new competitive landscape. While small in comparison to brick-and-mortar — eCommerce will continue to grow, and half of the grocery shopping population already buys online for grocery. We are entering a world where omnichannel shopping is the norm. All retailers will need to continually advance their eCommerce capabilities and experience in the years to come.
Retailers in this study
Retailers included in the RPI that are interested in receiving their individual banner profiles can speak with their dunnhumby account executive, or contact dunnhumby at: https://www.dunnhumby.com/contact/.
Stop & Shop
Super 1 Foods
Fry's Food Stores
Big Y Foods
The Fresh Market
The Fresh Market
Traditional Hi-Lo Banners
Traditional Hi-Lo Banners
Traditional Hi-Lo Banners
Traditional Hi-Lo Banners
Traditional Hi-Lo Banners