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Online Grocery Pricing 2023 – Custom Research and Roadmap

Exclusive Report Release

In this exclusive TopShelf Spotlight, we are proud to announce the release of a custom research, report and roadmap for regional grocers, commissioned by Mercatus and completed by Brick Meets Clicks.

The report is titled Pricing’s Potential: Roles for Improving Online Grocery Performance for Regional Grocers. The content offers unparalleled insights into the online grocery pricing landscape in 2023. It provides stark realities, a roadmap to enhance online grocery performance, and recommendations on how to adapt strategy to win against Mass merchants like Walmart.The never before study equips regional grocers with data and suggestions to navigate the rapidly shifting landscape of online grocery pricing. The research phase of the report included a two-pronged approach, crafted to yield the most comprehensive analysis:

1) An In-depth Market Pricing Examination

The groundbreaking pricing study was set in the city of Plano, Texas, and scrutinized the online and in-store pricing of 40 popular products across eight major retailers (Aldi, Costco, HEB, Kroger, Market Street, Target, Tom Thumb, and Walmart). Over a month-long period in 2023, we dissected daily price fluctuations, closely reviewed promotional offers, and even unveiled the often overlooked, concealed costs associated with pickup orders.

A significant revelation from the research was that contrary to the widely accepted notion, consumers perceive online and in-store pricing differently. The convenience and time-saving aspect of online shopping possibly make consumers willing to pay a premium. These findings challenge the conventional wisdom of parity between online and in-store prices.

2) Extensive Consumer Behavior Investigation

Simultaneously, we undertook a comprehensive online survey that spanned a wide demographic of 1,946 adults. These individuals are active participants in their household’s grocery shopping decisions.

The primary aim was to understand the shopping habits and preferences of contemporary consumers. It was revealed that consumers aren’t as sensitive to price differences between online and in-store shopping as previously thought. Factors like convenience and features might trump pricing when it comes to online shopping.

Furthermore, the research unraveled that consumers usually pay higher on third-party marketplaces compared to first-party platforms. Even with a slight markup on the first-party site, they would still be spending less than on the marketplace.

Profitability Paradox in Online Channels

The urgency to go online, spurred by Amazon’s acquisition of Whole Foods and later amplified by the COVID-19 pandemic, led to an unprecedented surge in online grocery shopping. While revenue growth was the primary focus, the profitability of these channels often fell by the wayside.

The research posits that many retailers overlook the profitability aspect while trying to gain a substantial market share. The focus remains on customer acquisition, often neglecting customer retention. Viewing online as a “loss leader” might not be a sustainable business model, especially for regional retailers.

The Waterfall Analysis

The report presents a “waterfall analysis,” comparing regional grocers’ ability to offset direct labor costs of fulfilling an online pickup order to that of Walmart’s. As per the analysis, Walmart efficiently offsets costs through assembly, service fees, retail media monies, and increased distribution efficiency due to high volume. The challenge for regional grocers is to explore ancillary areas and implement innovative strategies to offset the costs associated with their online operations.

The Three-Stage Framework

The research introduces a comprehensive three-stage framework to help regional grocers adapt to the shift towards online retail.

  1. Establish the Baseline – This involves quantifying the direct labor cost of fulfilling an online order, forecasting sales levels for the next few years, and estimating the impact of retail media money.
  2. Model the Enhancements – This stage includes improving order distribution using a tiered fee structure, reducing the unit cost of assembling an order, and considering potential markup to cover the remaining costs.
  3. Determine the Details – This stage entails decision-making around messaging and positioning, pricing sensitivity, and the role of first-party platforms in relation to third-party marketplaces.

The framework promotes cross-departmental collaboration, ensuring decisions made are in the best interest of both the grocery business and the customers.
A Roadmap for Winning Against Mass Merchants
Understanding the current market realities and strategizing accordingly is critical for regional grocers to remain competitive.

With over 40 unique data points, the research provides a roadmap for competing and winning against Every Day Low Price retailers like Walmart.

By implementing a customer-centric online shopping experience, regional grocers can not only enhance the customer experience but also increase profitability and customer retention. Achieving a sustainable path to compete online is vital to outmaneuver national rivals.

Final Thoughts

Standing out from the competition is a worthy and challenging task. Regional grocers need to adapt to the changing dynamics and make informed decisions to stay ahead. The insights from this research can be instrumental developing an effective online pricing strategy and ensuring sustainable grocery profits.

➡️ Immerse yourself in our comprehensive report: Pricing’s Potential: Roles for Improving Online Grocery Performance for Regional Grocers.

Uncover data-driven research insights and an invaluable online grocery pricing roadmap, created with precision and depth.

Empower yourself to reshape your strategies, augmenting them with fresh perspectives to increase both profitability and customer satisfaction.

Get ready to make informed, insightful decisions that not only resonate with today’s customers but also propel your grocery business towards more successful outcomes. This isn’t just about surviving; it’s about thriving, leading, and redefining success in the eGrocery space. Take this journey with us and emerge as a winner in this highly competitive landscape.

Read Mercatus’ Online Grocery Pricing Research 2023 now!


David Bishop

David Bishop

Partner, Brick Meets Click