Sainsbury's and Tesco are battling it out to win the hearts and
minds of the UK's online grocery shoppers. They outlined their CRM
strategies last month at the Efficient Consumer Response show in
Glasgow, Toby Poston reports
Sainsbury's
Supermarket chain Sainsbury's believes that
online grocery shopping has the potential to achieve 10% of market
share by 2010. The company's online customers are divided into
'foodies' - sophisticated upmarket people; and 'cash rich, time
poor families' - wealthy, hard working households with adventurous
food tastes and modern attitudes.
"We're targeting these people and are building up a highly
profitable consumer base that shops at least three times a month,
has a basket size of more than £90 and that buys products with a
rich margin," said new business development manager, Jennifer
Baker-Hirst.
The company is adamant that it was not looking to take the lead in
the online grocery shopping market. Baker-Hirst described the four
areas of long-term profit creation as:
- Cultivating long-term relationships with Sainsbury's most
valuable consumers, online and offline.
- Positioning the Sainsbury's brand and sub brands coherently in
the niche food and drink online arena. "We don't want to compete
with the likes of AOL." Transforming the firm's operating cost
structure, with the key opportunities being e-fulfilment and
consumer self management.
- Offering marketing services to suppliers and partners that
leverage Sainsbury's consumer understanding across store, Internet
and TV assets.
Sainsbury's has decided to take a hybrid approach to fulfilment,
using a network of dedicated picking warehouses with hub and spoke
delivery to serve the major urban areas, supporting these with
stores picking and delivering orders in the less densely populated
areas.
The company has gone back to basics and rebuilt its Internet shop,
under orders from consumers who had told the grocer that they
looked for ease and convenience before they looked for inspiration.
"We have built an interactive TV prototype and are iterating the
design with our consumers - we could have our Internet presence
through the television now, but this is not what our target
consumers tell us they want.
Tesco
They want ease and enjoyment, for example to help
to compile shopping lists quickly and easily, but with this medium
they also want more inspiration and entertainment," said
Baker-Hirst.
Tesco launched its first website in 1995, and is now on its sixth
version. The latest site has more information per page, more
activities and more items to buy. However, the company still feels
that it needs to do more in the area of promotions, special needs
and seasonal impulse marketing.
According to Tesco.com chairman Tim Mason, the online grocer faces
three key challenges: delivering what people want when they want
it; improving the shopping experience and developing the skills to
get people to shop across the different channels.
The store chain recently canvassed Tesco.com users on the quality
of fulfilment of their orders. Ninety percent were satisfied, 89%
said their groceries arrived when promised and 30% said that they
had three or more substitutions per order.
"The statistics demonstrate an acceptable state. Customers aren't
complaining, but as home shopping becomes more commonplace we will
have to get better," said Mason.
"These are new skills. They are not the skills of running a
self-service retail business, more like an airline. Capacity
management and planning for growth are the relevant skills that we
are learning," he added.
Tesco.com wants its non-food business to be as large as its food
division. It is beginning to do this by learning how to market to
the traffic passing through its stores. For instance, thanks to
using in-store media, direct mail and the Internet, Tesco now gives
20% of motor insurance quotes over the Net.
Mason said that consumers are asking for more and more from the
brands that they purchase. In order to meet these requirements,
brands need to learn more about their customers so that they can be
relevant to them. Tesco uses its Clubcard loyalty scheme to capture
customer data, which it uses to help with pricing, availability,
promotions and targeting. It has also used lifestyle magazines to
help its suppliers communicate more directly with their target
market.
Mason used the example of the Tesco Baby Club. Its 500,000 members
receive six magazines timed to be relevant through pregnancy to 24
months. The magazine features relevant articles and suggests
products and promotional offers. The Baby Club is also being
extended to the Internet.
"This small example starts to illustrate the massive opportunities
of this new channel and how it will make our best marketing
programme significantly better," said Mason.
Food for thought: Sainsbury's
UK online grocery ranking: 2
World online grocery ranking: 4
Average online shopping basket size: £90
Average frequency of online shoppers: 20 times a year
Fulfilment strategy: Hybrid approach - dedicated picking warehouses
in West London and Manchester, 33 stores that also pick and deliver
online orders
Key Ventures: Sainsbury's to You online grocery service; Taste for
Wine online service; The Taste Network online and TV food and drink
network (joint venture with Carlton media group)
Food for thought: Tesco
UK online grocery ranking: 1
World online grocery ranking: 1
Customers: 1 million (70% market share)
Profitable?: Yes
Fulfilment strategy: store based model from around 230
locations
Key ventures: Tesco.com; ivillage.co.uk (leading women's portal,
joint venture with ivillage.com)