Why Your CPG Brand Needs an Ahold Delhaize E-commerce Strategy
Pop quiz time: Which large retail portfolio has been involved in online grocery in the United States the longest? Here’s a hint: Grocery Dive recently named this company its e-commerce player of the year.
Through its investment in and eventual acquisition of Peapod in 2001, Ahold Delhaize can lay claim to having roots in online grocery since 1989. Those roots have evolved into a U.S. e-commerce business that grew 26.3% year over year according to its latest quarterly financial report. With confidence building from this recent success, and with increased competition in the space, Ahold Delhaize USA is investing heavily to ensure it will be a major player in online grocery for years to come.
These investments include an independent e-commerce division, seamless omnichannel fulfillment services, advanced supply-chain infrastructure and technology, and new store concepts to support its network of supermarket chains, including Food Lion, Giant Food, Giant/Martin’s, Hannaford and Stop & Shop, as well as the aforementioned online grocery service Peapod.
Just like fine wine, Ahold Delhaize’s online grocery strategy is getting better by the year. Here are five reasons every CPG brand needs a dedicated Ahold Delhaize USA e-commerce strategy.
Peapod Digital Labs
To compete in today’s online grocery market, you can no longer play it slow or safe. That’s why Ahold Delhaize launched Peapod Digital Labs in mid-2018 as a standalone division to drive its digital innovation. U.S. CEO Kevin Holt described Peapod Digital Labs as “the engine that powers our e-commerce and digital strategies.”
Peapod Digital Labs has focused on developing a proprietary single platform that can be leveraged to support multiple brands. This allows Ahold Delhaize USA to offer individually branded omnichannel fulfillment services for all of its local supermarket banners without having to develop a unique back-end system for each.
Peapod Digital Labs has also played a fundamental role in Ahold Delhaize’s “Leading Together” strategy, helping accelerate technological investments in areas like artificial intelligence and robotics, as well as developing tools that provide a more convenient, personalized shopping experience.
Locally Branded Grocery Delivery
Ahold Delhaize’s oldest e-commerce asset is also one of the major reasons it isn’t overly worried about the competition. Most grocery retailers have to lean on third-party services such as Shipt and Instacart for delivery of online orders. Though Shipt and Instacart have become household names themselves, Bain and Company reported that 96% of consumers would prefer to shop from a traditional brick and mortar grocer when trying grocery delivery for the first time.
Thanks to Peapod, Ahold Delhaize can leverage its local supermarket banners to offer a grocery delivery product that is more familiar to customers. For example, Giant Food Stores recently began rolling out its Giant Direct grocery delivery and pickup services with the slogan “Direct from us, to you.”
Large (and Targeted) Network of Stores
While other large grocery retail portfolios, such as Kroger and Albertsons, have supermarket banners spread coast to coast, Ahold Delhaize USA has a targeted geographical network of chains in the Eastern third of the United States. This allows the company to better centralize resources and optimize cost structure, which is necessary to compete in today’s ultra-competitive, low-margin omnichannel grocery market.
While it may have been previously viewed as a liability, Ahold Delhaize’s vast network of 2,000 supermarkets across 23 states is one of its most valuable online grocery assets. According to Nielsen, click and collect now accounts for 11% of all CPG e-commerce sales, up from just 4% two years ago. In response to this growing consumer demand, Ahold Delhaize has aggressively expanded its click and collect services, which are now available at close to 600 locations. As with its grocery delivery offerings, the company can market these services under its trusted local supermarket banners, such as Food Lion To-Go.
Supply Chain Advancements
While most customers only see the store-level effects of retailers’ omnichannel investments, the real action is behind the scenes. To power all of its new offerings and stay ahead of the digital commerce curve, Ahold Delhaize has had to invest heavily into its supply-chain infrastructure and technology. Currently, the company owns more than a dozen traditional and e-commerce distribution centers, but that number is expected to grow to over 20 by 2023.
Growth in its large-format warehouse footprint is important, but to stay competitive against Amazon, Walmart and Kroger, Ahold Delhaize must also leverage the best in automation and technology. As a result, the company’s Stop & Shop banner has opened several automated micro-fulfillment facilities to handle the picking and packing of online grocery orders.
As all grocery retailers race towards providing a frictionless omnichannel shopping experience, most analysts stare straight in the direction of Amazon to get a glimpse into how that future might look. This focus on Amazon and its Amazon Go stores provides the perfect opportunity for Ahold Delhaize to stealthily work on its own “store of the future” concept. Currently being piloted at the Quincy, Massachusetts, office of its Retail Business Services (RBS) arm, Lunchbox is a small-format store concept that uses proprietary cashierless shopping technology. Utilizing a unique smartphone app combined with artificial intelligence, Lunchbox automatically detects the items that are removed from store shelves and charges the customer through the app’s wallet integrations.
If that sounds a bit too “Jetsons” for you, the company is also expanding its SCAN IT! mobile checkout solution. This allows customers to scan product barcodes with their smartphones as they shop in stores and exit through a designated cashierless checkout lane that approves the transaction.
With its long history and steady e-commerce growth, Ahold Delhaize USA has established itself as one of the most important online partners for CPG brands today. To take advantage of this opportunity, brands need to work closely with the retailer’s various supermarket banners to ensure their products are available online and that their product listings are fully optimized for maximum search visibility and conversion – both on the specific grocers’ websites and Ahold Delhaize’s online delivery service Peapod. For brands, e-commerce success with Ahold Delhaize will ultimately require a deep understanding of its diverse customer bases and a willingness to work with them to provide the level of detail and service those customers expect to receive.
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