Six things eCommerce stores can learn from supermarkets

Hi I’m Duncan Jones and I lead strategy and growth at Web Profits. Today I’m gonna take you six things that eCommerce stores can learn from supermarkets. The first self-servicesupermarket opened back in 1916 with a chain of supermarkets called Piggly Wiggly, which is still open today. Since then, supermarkets have dominated the world with both small operators and big names like Walmart competing fiercely for consumers. With small margins and new competitors popping up all of the time, supermarkets have had to optimise and improve their business constantly. With every part of a supermarket meticulously planned and find tuned to maximize profitability. So what can over a century of focus groups and sales data analysis in supermarkets teach eCommerce stores? One thing that supermarkets spend a lot of time on is the layout for the shops. It’s something they’re constantly improving so that their customers spend more. Take the store entrance for example, through a lot of testing, supermarkets have found that when shoppers are exposed to sensory items at an early stage of shopping, they spend more. You’ll commonly see departments that have products likely to activate the senses shown early such as, fruits and vegetables which are brightly coloured and excite the eye. Bakery, which have smells of baking and cause people to feel hungry. And flowers which have bright colors and fragrant smells. Along with the entrance, every aisle is chosen to maximize spend including how hard they make it to get straight to the checkout if you want just one item. They also never stop testing their layout and analyzing the results which is why sometimes the aisles you visit regularly are completely different all of a sudden. So what can eCommerce stores learn from this? Whilst your eCommerce store can’t transmit the smell of baking yet, the main learning here is to not settle on your default or first eCommerce layout but to keep evolving and improving it. For an eCommerce site you’re entrance way is your home page and this is something you should be constantly optimising to ensure that visitors are tempted to start their shopping experience. Things like awesome photos, great branding, and irresistible offers can all make an impact along with optimising which category and products you feature first. Equally things like your navigation, which may have a default alphabetical category order, should be tested and optimised to work out the best order to display them in. Supermarkets don’t just work on the overall layout of the store, they also look at the layout in micro-terms such as where products should go on each shelf. One way they do this is by looking at the levels of each shelf and which products to place on each to maximize sales. Middle shelf, at eye level, is considered prime real estate where they put the best brands and the best sellers. Cheaper brands are generally placed on the bottom shelves with discount and bulk buyers more likely to search out a deal and they don’t need to waste prime real estate on those products. Likewise, any smaller brands that they sell infrequently are placed on top shelves which are more out of reach and harder to get to. Another thing supermarkets have found is that people tend to scan prices from left to right, like reading. Because of this they put more expensive items on the left which make customers scan until they see a price they’re happy with and grab the product maximizing what they spend. So what can eCommerce stores learn from this? An eCommerce stores shelves is their category and search result pages. And again, most eCommerce stores just leave the default order without a second thought. Like the middle shelf, the prime real estate of an eCommerce store is the products at the top of the category or search result pages which are above the fold. Placing the right products in these positions can increase your conversion rate and your sales. Whether you choose to place products that are your best sellers or once that generate the highest margin, it’s up to you but it’s important you test and optimise the products in each of your categories. If you’ve got a big eCommerce store you can even look into selling this prime real estate at the top of categories, like supermarkets sell their shelf space to manufacturers. It’s something that Amazon is already doing with their sponsored product ads. Another tactic supermarkets like to use is to place related products close to each other on shelves. Something you’ll notice when you see salsa in the chips aisle. This has been proven to increase the number of sales of both products significantly. This effect can also be replicated simply by moving aisles of related products closer to each other. With one study showing that by moving chips one aisle closer to Coca Cola it increased sales of both items without them even being directly together. So what can eCommerce stores learn from this? If you have any products which are related or commonly bought together it’s important your website visitors know this and see them both. You can do this by optimising the product pages and introducing a new, commonly bought with section which showcases other products that are commonly bought with the one they’re looking at and which gives them an easy way to add both products to their carts, something that Amazon is doing well. Another way of selling more related products is to simply add a brand new product to your store which is a bundle of other products and it has a combined photo, a combined total price and an updated description. You can then feature that bundle in both categories which should increase sales of each product. Supermarkets spend a lot of time analyzing pricing and they use a lot of different strategies to increase sales and profits. A good example of this is how they price items just below whole dollar amounts to give the appearance of it being cheaper. For example, they may price at $9.90 or $9.95 so that they don’t go over the $10 mark. Another strategy they use that works well is contextual pricing. This encourages people to see value by offering a wide range of options. Studies have shown that if a customer’s offered just one product and one price, they find it hard to decide whether it’s a good deal or not and this leads them to checking out competitors offers. In supermarkets, every product category has different brands essentially selling the same thing but with slight differences in quality, price and quantity. This gives the consumer the ability to compare options and find the item that is best for them right in the supermarket. Interestingly, consumers usually go for the middle priced option when presented with three different products. Lastly, they analyze competitors pricing constantly and tweak their pricing daily to ensure they’re offering their customers competitive pricing. Which, although this hurts their margin in the short term, ensures they’re customers keep coming back maximizing their lifetime value. So what can eCommerce stores learn from this? Other than not using round pricing, which I hope you’re already doing, the main takeaway from supermarkets pricing strategy is ensuring you have different price levels of products in every category that you sell. Adding lower and higher price items in each category will give consumers context and allow them to select between several options on your website without needing to go off and compare your product to a competitors. Another thing eCommerce stores should do is monitor all of their competitors pricing constantly and then tweak their pricing accordingly. Online shopping is even more price dependent than offline and if you don’t maintain close to the lowest rate on your store, you’ll find you never get traffic from channels like Google shopping and your conversion rates will be a lot lower. Everyone who has been to a supermarket will know that sales, deals, and offers are a huge part of their strategy to make you spend more. A great example of this is the “two for the price of” sales offers. I’ve found myself taking advantage of those deals just because of the perceived value only to find out later that they weren’t a deal at all and they were just two items at their standard pricing which is a great example of the psychology of deals in action. Along with deals for buying quantity, you can’t escape a supermarket without seeing hundreds of sales signs. These work so well because a large number of consumers use pricing to determine the quality of a product and when faced with a quality product at a reduced price it is hard for many consumers to turn them down. To help customers see the value that they’re getting supermarkets make sure that every sale sticker shows the original price, the reduced price and the saving. The colour of the sticker used in sales are not by chance either. With the supermarkets using contrasting colours such as red to catch attention. So what can eCommerce stores learn from this? It’s extremely important that throughout your eCommerce store you put some products on sale and create a sale category for bargain hunters to head straight to. Each sale item should be clearly marked with bright contrasting sale icons and clearly differentiated before and after prices to show the consumer how much they’re saving and allow them to see the quality of the product that they’re getting for the sale price. It is also a good idea to experiment with different sale offers such as the “two for the price of” deals until you find one which resonates with your audience and which maximizes your profit. Lastly, supermarket checkouts. Have you ever found yourself waiting in line to buy your shopping and have added a magazine, a chocolate bar, and some chewing gum? Well, you’re not alone in this. Checkout counter is the most profitable area of a supermarket and one where they manage to easily upsell impulse products which you don’t need but when you’re looking at have to have. Not only are supermarkets using checkouts to upsell more products but they also use this final step to build customer loyalty with almost every customer prompted to sign up for a loyalty program or to use their card and get points. This not only ensures the customer will come back but also gives the supermarket invaluable data to enable the optimisations that I’ve mentioned today. So what can eCommerce stores learn from this? Along with optimising and improving your checkout process, so it’s as friction-free as possible, you need to offer your customers upsells to help improve your average order value and your profit per order. These upsells can be added during the checkout process or you can even offer a one click upsell on the success page after they’ve already ordered. The products you feature should be inexpensive and easy to add products that are impulse buys so they don’t require that much research. Alternatively, they could be related product add-ons such as batteries if they’re buying something electronic. Along with upsells, if you can create a loyalty program that gets people coming back more and more often, you’ll start to develop a loyal customer base which will maximize your lifetime value. To conclude there’s six main things you can learn from supermarkets: Number one, constantly optimise your eCommerce store layout and design. Number two, test the products that show in your category and search result pages. Number three, increase your sales volumes by cross-selling related products. Number four, ensure you have multiple products in each category and competitive pricing. Number five, give the consumer the sales, deals and offers they desire. Number six, upsell your customers in the checkout and create a loyalty program. To make all of these optimisations, supermarkets have spent years analyzing both qualitative and quantitative data before they made the changes. Whilst learning from them is a great place to start it’s important to know that works in one industry may not work for your eCommerce store so it’s important you test each idea and analyze the results, verse blindly implementing them all and hoping that they will work. That’s it for now, thanks for watching.

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