The future of online grocery shopping


“What if AH would use the accumulated ‘Bonuskaart’ data to truly stand out from its competitors?”
ah-gratis-bezorgingonder
In this blog post, I would like to share with you a service AH could implement in an effort to regain its relevance. I am curious to hear what you think!

The grocery sector has been lagging behind in terms of its online presence (online grocery accounts for 1.3% of the total Dutch grocery sector, compared to 25% for sectors such as electronics and fashion), but the emergence of aggressive competition is accelerating the online channel development. Market leader Albert Heijn (AH) is facing intensifying competitive pressure. Offline, the company has to deal with increasing popularity of low(er)-cost competitors such as Jumbo and Lidl. Online, there is a threat from traditional players as well as new entrants (Hello Fresh, Picnic) with innovative business models. It is clear that AH should respond before its position further deteriorates.

As you may know, AH uses a personal customer loyalty card called ‘Bonuskaart’ to gather data on its customers’ shopping behavior. With these data, AH is able to better understand its customers and provide them with personalized offers. This is nice, but does not lead to a unique value proposition. But what if AH would use the accumulated data to truly stand out from its competitors?

AH could introduce a ‘personal grocery prediction’ service. By using the latest analytic technologies, each customer’s shopping behavior can be analyzed so that patterns appear. Based on these patterns, an algorithm could generate a personal grocery list for every customer that requests one on the AH website. If needed, customers can adapt this grocery list in order to make sure it completely fulfills their needs, and click ‘order’. In combination with the current AH online shopping infrastructure, which includes pick-up points and delivery, this could provide customers with a convenient and time-efficient grocery shopping experience.

A number of additional services could make this service even more appealing. Think of adding a ‘discover new meals’ option, in which the system suggests recipes from the Allerhande recipe database and automatically adds the products to the customer’s grocery list. The better the service gets to know each customer’s preferences (by improving the algorithm and observing adaptations customers make to the proposed grocery list), the better the predicted lists will become. In the ultimate situation, AH could offer an ‘automatic order and delivery’ option, which would basically turn the service into a personalized version of Hello Fresh’ meal box, but then also including products that are not related to dinner, such as cereals and toilet paper.

What do you think of this idea? Is it feasible? Would you use this service if AH would offer it? Or do you know people who would? Let me know!

In case you were wondering: yes, we used this idea in our DBA assignments, so credit goes to 356849mm, 362278cl, 414788cl, and 418375nl.

Sources:
– Syndy (2015) The State of Online Grocery Retail in Europe. Available at: http://syndy.com/knowledge-center/
– Keswiel, M. (2015) Waarom Michiel Muller AH en Jumbo wél aankan met Picnic. Available at: http://www.sprout.nl/artikel/e-commerce/waarom-michiel-muller-ah-en-jumbo-w%C3%A9l-aankan-met-picnic
– Smit, J. (2015) Waar ging het mis bij Albert Heijn? In: HP De Tijd. Available at: http://www.hpdetijd.nl/2015-04-18/ging-mis-albert-heijn/

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3 responses to “The future of online grocery shopping”

  1. 437682et says :

    As this idea was under consideration for DBA project in my group as well it definitely appeals to me. In my opinion AH does not fully tap into benefits arising from the bonuskaart. The bonuskaart could leverage the AH online grocery shopping with all the gathered customer data. Based on each customer shopping pattern the AH could create ready to use shopping list for every customer and use it to persuade customers to switch from offline to online. In this case switching costs for customer would be none since there is no need to browse, tap and click on the AH online shopping website, everything is done for you and only what needs to be done is one-time payment form filling. Personally, as a regular buyer of AH I am waiting for the day when AH will finally offer it. Coming up with grocery shopping list every time i go there is a bit time-consuming and annoying because I always miss some items on the list. And this case of “missing items” gives an opportunity for more advanced BI that AH could apply. So my idea is that those data-based suggested shopping list could accommodate purchase frequency of each item what in practice means that if customer buys e.g. coffee every three weeks the AH website includes this item into his shopping list in this interval. With this solution a customer will never run out of toilet paper or coffee ever again. It could be also a sort of AH’s equivalent to Amazon Dash which basically address the same problem. As Google and Amazon tap into online grocery market it means that online groceries are the next big thing in e-commerce and if AH wants to keep up with the trend it should turn your idea into reality.

    • 343244jp says :

      Thanks for your reply! Funny that you came up with the idea as well, apparently it’s a clear opportunity for AH.
      We made a distinction between repetitive and non-repetitive groceries: while repetitive groceries are needed on a fixed basis and don’t require any variety (toilet-paper, bread, and even pizza if someone likes to eat that on a fixed basis), non-repetitive groceries (typically products for dinner) do require some variety. For the latter category, the ‘discover new meals’ option could be used.

      I fully agree with the benefits you mention. Apart from those, think of the power AH would get if it could influence their customers’ grocery lists. Of course, they do this already through promotions and discounts, but this service would take that to another level!

      • 437682et says :

        I agree with the point you raised regarding ‘discover new meals’ but as we were investigating the online grocery market we discovered that AH offers this service already. However, apart from this measure AH could influence a customer grocery list with customised offers and prices so for example only customers who buy lavazza coffee would be offered with a discount on illy coffee. this way discounts would not be granted to customers who would buy a given product anyway. These ‘customised discounts’ are not feasible offline but the online grocery service creates a good space for that.

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