5 Benefits of Channel Optimization in the Digital Grocery Industry

Traditionally, grocers depended predominantly on a physical brick-and-mortar model as they slowly increased their digital firepower. The pandemic, however, threw gas on grocers’ digital slow burn, quickly driving digital sales. As pandemic-related restrictions eased, footfall and sales in physical grocery stores returned, but they have not reached pre-pandemic levels. The digital transformation and changes in consumer behavior brought on by the pandemic are here to stay. 

Customers expect a seamless and safe path to purchase and choose in-store, online, or omnichannel shopping channels based on what is most convenient. Channel optimization has been thrust to the forefront as grocers keep up with the changing customer expectations and overall behavior. Channel optimization includes techniques for improving key performance indicators (KPIs) across all marketing channels. Below we explore some of the benefits of channel optimization in the digital grocery industry:

‍Expand to new customer segments

As grocery retailers expand their channel offerings, they can tap into markets that were previously challenging to penetrate. Since reaching new customers is pivotal to growth and expansion, adopting channel optimization becomes equally essential for leading grocers and smaller players. As per McKinsey, customer preference for online and delivery orders rose by about 50% during the pandemic and is anticipated to grow further in 2022. The report also suggests that while there was a 14% decrease in customer preference towards physical stores during the pandemic, no further change was anticipated in 2022. To keep up with the changing customer preferences and tap into newer markets, it is essential for grocers to build a more seamless omnichannel experience.   

Enhance customer experience

An Incisiv report indicates that 89% of shoppers are more likely to make another purchase after a positive customer experience. According to SymphonyAI, 50% of the shoppers deserted the digital channel after a single purchase. However, the ones who stayed engaged became loyal customers. Since most grocery retailers have small profit margins, they must find strategies to increase their share of wallets while cultivating customer loyalty. While most grocers have already begun providing an omnichannel experience, building a more robust experience can be a crucial differentiator. Grocers need to focus on a complete purchase journey and customer lifecycle while emphasizing building long-term customer engagement.

‍Personalized customer engagement

According to Segment’s 2021 State of Personalization Report, 61% of consumers in the U.S. expect a consistent and personal customer experience across channels. Customer engagement has changed drastically over the past few years, with customers spontaneously choosing the preferred medium they would like to interact with. As part of a multi-channel or omnichannel strategy, grocers must continually analyze the channel preference of their target audience and devise channel optimization strategies accordingly to engage with them. 

‍Increase in sales

According to Cardlytics, 75.1% of customers only shop in-store; converting these customers through an omnichannel grocery strategy to adopting online channels may open up new revenue lanes. Furthermore, the study observed online basket ranges over $15, more significant than the usual in-store basket size. This indicates that consumers now use online retailers to stock up on every day or repeat items. Despite sizeable financial investment involved in channel optimization, grocers can gain substantial economic value.   

Boost inventory turnover

An Incisiv report suggests that 71% of retailers have cited real-time inventory call-outs as a major hurdle in onsite inventory management. Many grocery retailers have suffered minor or significant losses due to poor inventory management, especially when items are out of stock. However, with a channel optimization strategy, this might end. Such a strategy will offer businesses a more holistic overview of the inventory, enabling them to fulfill orders from just about anywhere.

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