The Rise of Online Grocery and What CPGs Can Learn From Drives

With Walmart set to extend US grocery pickup services to 3,100 stores by the end of 2019, Kroger following suit, and retailers all over the world investing in online grocery, we look to France, the originator of the drive concept, to learn some clues about successfully executing online grocery.

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With Walmart set to extend US grocery pickup services to 3,100 stores by the end of 2019, Kroger following suit, and retailers all over the world investing in online grocery, we look to France, the originator of the drive concept, to learn some clues about successfully executing online grocery.  

Auchan pioneered the drive/pickup format in 2004 with Chronodrive and has exploded in growth since then. The drive/pickup format in France accounts for 8 out of 10 online grocery purchases, featuring strong economics with average basket size of USD75*, compared to USD53* for home delivery.  

It is a format that continues to grow strongly – with sales in France forecast to rise to USD11.8 billion by 2024, up from USD8.6 billion in 2019, a five-year CAGR of 6.6%. Drive/pickup numbers (standalone and attached to store) will grow by nearly 1,000 outlets over the next 5 years, reaching 5,662 locations by 2024. With grocery click & collect being rapidly exported to other markets, particularly the US, we look at actions suppliers can take to win with this growing channel.  

*Source Nielson France   

Graph illustrating the sales and outlet growth for Drive/Pickup Model in France

Please note, Drive/pickup outlet numbers in the above chart include attached to store and standalone.  

Manage the drive/pickup model to ensure listing of highest selling SKUs  

CPGs must carefully manage their drive/pickup assortment, considering the limited range found at most drive/pickup locations, usually 7,500 to 15,000 SKUs. Private label is also well represented across drive/pickup formats, usually accounting for a higher proportion than in stores given the smaller assortment size, creating greater competition for brands.

Chart showcasing Key facts among Leclerc Drive, Auchan Drive and Carrefour Drive around SKUs

Drive/pickups have opted for this limited range model, as a broader assortment has been found not to drive significantly higher sales, but more SKUs do translate to more cost and complexity. As this model grows around the world, it’s likely that a limited assortment remains a component of success.  

CPGs in other markets, particularly the US, should seek listings in emerging grocery pickup services, ensuring they are positioned to capitalize on this growing sales channel.  

Drive in-store sales to ensure listings through the drive/pickup format  

For drive/pickups located adjacent to stores, the range offered is impacted by the attached store’s assortment, meaning success in the physical store makes a brand more likely to be a locally prioritized SKU among the limited 7,500 to 15,000 SKUs available through the drive/pickup model. 

In France, assortment, pricing and promotional decisions at the drive/pickup are normally taken at a local or regional level, with few national pricing policies utilized. Leclerc’s decisions are taken separately across its 13 regions, while ITM’s drive/pickups are operated locally. This requires CPGs to adapt their assortment, promotions and pricing by region and even by individual location.  

With pick up becoming more prevalent, CPG’s are finding the need to track product distribution, pricing and promotions as a necessity in this more complex landscape, making location-based analytics a more important capability.  

Optimize the digital shelf 

Drive/pickup operators are also becoming more sophisticated in their digital shelf capabilities, providing opportunities for CPGs to make their products more visible on the digital shelf, through enhanced content, reviews and search optimization. Auchan has recently integrated customer reviews into its drive/pickup website. CPGs must also proactively work with drive/pickup operators to help manage their category online and improve taxonomy. 

Screenshot from Auchan Drive of mega dry baby pamper pants

Invest in just-in-time supply chain capabilities  

The key selling point of drive/pickup formats is fast fulfillment, usually allowing collection within as little as two hours. There are three main types of drive/pickup; (1) attached to store, (2) standalone remote and (3) dedicated withdrawal points, such as pedestrian drive/pickups, each with varying fulfillment methods. 

For drive/pickups attached to stores, products can reach the consumer in two ways: (1) Store Picking (personal shoppers manually pick and pack items from the attached hypermarket/supermarket) and (2) Warehouse (products are picked and packed in an area of the store closed to the public, sometimes involving automation.)  

The standalone remote drive/pickup locations are not attached to stores, with products picked and packed in a standalone warehouse (sometimes involving automation.) Auchan with its Chronodrive banner pioneered this format.  

There are also an increasing number of dedicated withdrawal points in towns and cities such as pedestrian drive/pickups. These are fulfilled through external warehouses such as Carrefour’s new ecommerce logistics platform at Aulnay-sous-Bois serving pedestrian drive/pickups and 50 standalone remote drive/pickups.  

Increasingly drive/pickup operators are looking to utilize external or centralized warehouses to supply their standalone remote drive/pickups and pedestrian outlets in city centers. As operators look to introduce labor saving technologies into their drive/pickup supply chains, CPGs will need to optimize packaging and products for more automated supply chains.  

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