Data control, user experience, brand reputation and high order fees are some of the reasons why many stores are rethinking their partnerships with most delivery giants.
Although the e-commerce trend had been growing in recent years, the current situation considerably accelerated the growth expectations of even the most optimistic experts. Dimas Gimeno, founder and executive president of the consulting firm Skintelligence -and former general manager of El Corte Inglés- assures that “before the crisis, the balance sheet continued to be very favorable to the physical channel: 85% versus approximately 15%. Now some experts already predict that in less than 5 years the proportion could be 50-50%.”
Specifically, in the last few months, delivery apps in Latin America have seen +100% growth in supermarket orders. What should be encouraging news is still a concern for supermarkets, inviting them to prioritize the development of their own delivery channel in parallel.
A Fragmented User Experience
Even though supermarkets do their best to provide satisfactory shopping experiences by outsourcing much of the process, many aspects are left out of their control, including one of the most critical ones, the product delivery. It is very difficult for users to separate which part of the service is provided by the supermarket and which one by the marketplace app, which can negatively impact brand perception.
Imagine that you’ve just ordered one at your favorite supermarket from one of these apps, the order arrives, but the tomatoes you ordered are in bad condition. You complain with support, but the problem takes days to resolve and in the meantime, you couldn’t make the lunch you had planned. Would this change your perception of the app? and of the supermarket? When problems occur it is very easy to point fingers, and the risk is very high when 51% of customers say they will never buy from a company again after having a negative experience.
Zero Focus on Customer Loyalty
Research by Barclays Investment Bank revealed disturbing numbers associated with the offering of options on these applications.
Forty-three percent of Instacart users (US supermarket delivery application) stated that if their favorite supermarket was not available on the platform, they would have no problem leaving it and choosing any other option available on the platform.
The delivery app’s goal is to keep users using their service and not necessarily to keep them ordering from the same supermarket. In this case, competition takes on much greater proportions, while loyalty suffers. Without direct incentives to keep buying from the same supermarket, dozens of options in the palm of your hand and the ability to make instant comparisons, customer retention becomes very complicated, directly affecting their LTV (lifetime value).
The Power of Data
We live in a world where information is power and whoever controls the data has the ability to make much better and impactful decisions. In this sense, giving much of the control of the operation to an external application, results in the transfer of customer data, and therefore, all the intelligence that this entails, to that platform. ‘Your customers’ are no longer really yours, and the closeness that you manage to build day by day in the store, becomes increasingly difficult to transfer to the digital world. Customer interactions occur 100% outside the supermarket’s brand, thus losing the key insights from these exchanges.
Unsustainable Commission Fees
The economic impact that these applications have on their members finances may be unsustainable, even considering the benefits they offer in terms of visibility and volume. In the words of the president of an important trade association in Argentina, in many cases the disadvantages outweigh the benefits, “The positive part is that they give product exposure, but then they are very problematic due to the percentages they charge and the way they pay: it can take over 30 days, even if the customer has paid in cash.”
Currently, commissions are between 8 and 15%, depending on several factors such as the number of outlets and the order volume of each retailer. A clear example of this are the numbers recently revealed by Cornershop in Chile, where they will apply a 15% commission to purchases made in Supermercado Lider (Grupo Walmart), after closing a strategic alliance with its competitor, Cencosud. Considering that, on average, a supermarket’s gross margins are around 25-30%, it is very difficult to sustain such high commissions. So, although in the short term it may seem as the easier and least expensive option to go online, it can severly affect profitability in the medium to long term.
Launching Your Own Delivery Channel
There is a clear opportunity for supermarkets: to bring the traditional channel experience into the digital world. But how to accomplish this? In order to nail the digital channel experience, retailers must effectively manage in-house operations. Although it may seem overwhelming at first, technological and logistical tools offered by solutions such as Instaleap, can help. Many supermarkets of all sizes, are betting on this digital transformation model to face the new reality and regain control of their customer data and the experiences associated with their brand.
In the last four months alone, Instaleap’s platform has achieved + 550% growth in number of orders processed. This shows that there is great demand in owned digital channels. With powerful software that synchronizes the digital commerce operation from start to finish, including last mile logistics, any supermarket can run an efficient and highly satisfactory operation for its customers.
