The $42B Click & Collect Opportunity

As manufacturers deal with flattening growth in overall consumer packaged goods (CPG) sales, they are increasingly seeking ways to leverage sectors of the economy that are still growing.

As manufacturers deal with flattening growth in overall consumer packaged goods (CPG) sales, they are increasingly seeking ways to leverage sectors of the economy that are still growing. More and more, that means looking to eCommerce. While global FMCG growth was a mere 1.3% overall in 2016, global CPG sales through online channels grew at a 26% rate in both 2015 and 2016.

Despite the rest of the world rapidly adapting to buying groceries online, the US market has lagged with online CPG growth at just 5% in 2016 – bringing total CPG eCommerce sales in the US to a relatively dismal 1.5% of all CPG sales.

But there is hope for strong CPG eCommerce growth in the US in the near future. US Retailers are investing heavily in the Click & Collect model of eCommerce service. US Retailers appear to be seeking to emulate the successes in the UK and France, where Click & Collect models are more mature, and where CPG eCommerce represents 7.3% and 5.5% of total sales, respectively.

France, in particular, has embraced Click & Collect. Is it possible that the Click & Collect model could take off at a similar rate in the US? If so, what might the total spend on Click & Collect in the US?

Click & Collect in France

The dawn of the Click & Collect model in France (where they refer to the system as “Drive”), occurred in 2004, with the opening of a pickup location for groceries ordered online by the internet pure-play retailer Chronodrive.

French shoppers were quick to adopt the new model, and most French supermarkets, recognizing the opportunity, built out Click & Collect infrastructure – including construction of both online order interfaces, and physical collection points. France now boasts at least 3,800 different Click & Collect pickup points, allowing 80% of the population access within 10 minutes.

This has all led to Click & Collect’s domination of eCommerce. Click & Collect represents 5.2% of all CPG retail in France, accounting for 95% of all CPG eCommerce. In the US, where grocery is an $800B annual industry, a 5.2% share would work out to a whopping $42B opportunity for Click & Collect.

What about the United States?

Could Click & Collect take off in the US, to the tune of $42B? To answer that, you have to consider two questions: first, are US retailers building out Click & Collect infrastructure at a rate that could support that level of adoption, and second, to what extent are US shoppers similar to their French counterparts?

Harris Teeter appears to be the first major US grocery retailer to build out Click & Collect capabilities, with a mature service in the works by at least 2011. Kroger expanded on that program after its acquisition of Harris Teeter in 2013. Kroger stores now offer Click & Collect in 559 US locations, with plans to roll the service out to 1200 locations. Kroger’s top competition in the US is Walmart, which reportedly has 600 locations open, with plans to open another 525. Safeway, Peapod and Target also have growing Click & Collect capabilities.

And now Amazon is jumping into the game. Amazon currently only operates two Click & Collect locations (both in Seattle), but with Amazon’s reputation for fast growth, innovative technology applications, and its recent acquisition of Whole Foods, Amazon is looking to contend. While Whole Foods currently only operates Click & Collect as a way to move prepared foods, Amazon is sure to bring learnings from its own experiments to build on Whole Foods’ existing Click & Collect infrastructure. With some 432 locations, Amazon could catch up in a fast way.

As far as Click & Collect infrastructure is concerned, the US currently has around half the pickup points that France does – likely to catch up to around two-thirds of France’s total within a year or two. Still – US population is nearly five times that of France. Gauging from that, the US would need around 18K total Click & Collect pickup locations to match the per capita in France. That’s a big number. Still – in France, the current dominant Click & Collect retailer increased its pickup point count 100-fold in five years. And that retailer, LeClerc, embarked on this build-out frenzy six years after the first French Click & Collect point was opened – signalling that the dominant player in the US may not even be on our map yet.

By a different measure, the US is closer to the infrastructure buildout in France. In France, we see that 80% of the population lives within 10 minutes of a Click & Collect pickup point. In the US, 90% of the population lives within 15 minutes of a Walmart. Comme ci, comme ca.

Both these measures – per capita Click & Collect pickup points, and distance to a Click & Collect location – show that the US still has work to do to match the infrastructure of France. One measure simply shows the US is closer than the other. Could the US get there? It all comes down to the willingness of the American shopper to embrace the Click & Collect model.

When it comes to grocery delivery, US shoppers have shown a greater willingness than the French to hop online (eCommerce delivery accounts for 1.5% of all FMCG in the US, only 0.3% in France). As far as Click & Collect, the US is just beginning to scratch surface. Surveys show that American shoppers are open to the idea of Click & Collect (68% say they are willing to try it), but they’re not yet coming out in droves. However, US shoppers’ demonstrated willingness to purchase groceries online for delivery may signal an easy transition to embracing ordering for pickup.

One of the powerful things about the Click & Collect model is that it requires less of a change to existing behavior than is needed for grocery delivery. Inherent in delivery is the need to set a time in the future for when you’ll be at home to receive the delivery. Click and Collect sometimes requires a customer to select a time for pickup, but often the shopper can opt to pick them up immediately. Since American shoppers are used to the ritual of visiting the grocery store multiple times per week, Click & Collect folds neatly into that established routine. Click & Collect lets you continue in your normal behavior pattern – it simply makes the pattern vastly more efficient.

But Will it Happen?

Indeed, the idea that Click & Collect is a natural growth from normal grocery shopping patterns is borne out by statistics on the reasons why the French like the model. The top reasons French shoppers cite for gravitating to Click & Collect are time & money. 68% of French shoppers feel that Click & Collect saves them time, and their number two reason for using the model is money. French shoppers feel that price comparison shopping is easier when you use the online interface.

So will American shoppers gravitate to Click & Collect? Why not? To put it cheekily, American shoppers are just as cheap and lazy as the French. Surveys of American shoppers show that money is their #1 issue when grocery shopping, and time savings is high on the list too. Kantar’s recent survey shows that US shoppers also prioritize “stress-free” shopping and “shopping in one place” as well – two factors that Click & Collect models support.

Yes, but $42B via Click & Collect? When all of US online grocery is currently only about $12B?

It may not happen overnight, but it would appear as though both Nielsen and Kantar are factoring in a large future for Click & Collect. Kantar predicts that by 2021, total online grocery in the US will be $55B, with Nielsen putting US online grocery at $100B by 2025. Given that in France Click & Collect represents 95% of all grocery eCommerce, $42B for Click & Collect appears a safe bet.

Danny Silverman
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Danny Silverman
Marketing
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