(CTN News) – As Walmart continues to ramp up its low pricing engine, regional grocers will find it increasingly difficult to compete online with Walmart, according tostudy from grocery ecommerce software company Mercatus.
A daunting scenario is forecast in the new report. According to the report, Walmart generates eight times more revenue online than regional competitors and already enjoys a 15% price advantage online on large baskets of groceries in the U.S. As a result, Walmart does not need to rely on service fees to support pickup operations.
In the coming years, Mercatus forecasts that Walmart retail media revenue will increase at a minimum of 20% as automation reduces the cost of fulfilling orders.
Regional stores, however, are well positioned to deal with the new paradigm shift in pricing.
Based on Mercatus research conducted last year, four out of ten customers cited the convenience of a regional store as their primary grocery store.
Over half of Walmart’s loyal customers drive past two or more rival stores in order to shop at the retailer.
Online shopping makes a difference in terms of location since many shoppers pick up their orders at their local stores, according to the research from that time.
The following are key takeaways from the new report, “Pricing’s Potential Roles for Improving Online Grocery Performance for Regional Grocers”:
Comparison of shoppers’ perceptions of online and in-store pricing
Intention to repeat based on various elements of pricing
In order to place an order online, how many shoppers viewed a weekly ad.
Furthermore, the report suggests that grocery stores adopt a flexible fee system based on when shoppers wish to receive online orders. In this manner, the retailer can save labor costs by batching orders during the fulfillment process.
According to the report, brick-and-click consultant Brick Meets Click has developed a framework that allows grocers to use service fees and retail media revenues to offset the cost of online orders.
As noted in the report, retailers may also be able to improve efficiencies, such as bundling products more efficiently, before determining a price premium for online products.
“A key takeaway from this research initiative is that regional grocers should consider pursuing a different path forward for online pricing because they typically have less capacity to cover the incremental costs of these value-added services than Walmart,” stated Sylvain Perrier, CEO of Mercatus.
The rationale and evidence for adopting a new online pricing paradigm continue to strengthen, and we want to help grocers navigate how they can adjust to these competitive realities.”