Factors That Influence Grocery Pricing Strategies

2020 was a major year in the transformation of online grocery retailing.

According to a study by Kantar, the FMCG sector reached a market penetration of 39 percent, 6.6 points higher than in 2019. In the closing months, the market share of online grocery shopping reached 8 percent and supermarkets had to look for fast and efficient solutions for the supply of products and the inflow of orders to respond to high peaks in demand.

After the re-opening of physical stores and returning optimism of the fight against COVID-19, the market share has been regulated to 4 percent. With new deliveries and consumer service options such as self-checkout or click and collect already in place, the time has come to put the spotlight on pricing.

New Online Grocery Sales Models

Until now, online grocery shopping has involved large chains such as Carrefour, Mercadona, Auchan, or Dia, with high minimum purchase and delivery costs that could reach up to $10.

With the growth recorded last year, the digital transformation of supermarkets has reached local and medium-sized chains, liberalizing the sector by increasing supply and offering new options to consumers.

The revolution began with the emergence of Amazon Fresh and Glovo Market, but in the last six months two startups have appeared that can change—by a lot—the pricing strategy in grocery: Dija and Block.

Both projects rely on dark stores to offer competitive prices and deliveries in record time. Dija is able to deliver in 10 minutes and has already delivered 500 orders a day in Madrid. Block, which was born in Barcelona, is also committed to 10-minute deliveries and expects to close 2021 with revenue of more than $30 million.

The large supermarket chains cannot match the promises of these new offerings and need a good pricing strategy to remain competitive.

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Differences Between Online and Offline Pricing Strategies

For a supermarket, the costs of an online sale are higher because, in addition to the cost of delivery itself, it has to charge for the cost of the staff who have to prepare the order.

The problem?

Although consumers are aware of this, they are not willing to pay much higher prices for food products and there are psychological price barriers that limit the supermarkets’ strategies.

It is important to have two different pricing strategies that are balanced against each other. To achieve this, a pricing intelligence tool that allows you to monitor what the competition is doing can be the key for online pricing. However, it can also help for offline.

If you can’t compete with fast delivery services, you have to be aligned in pricing with the competition and look for a point of differentiation that will help capture the attention of consumers.

Grocery and Dynamic Pricing

Online grocery retailing is characterized by a lot of competition, tight margins on most products, and the limitations offered by geolocation for fast delivery and certain product categories.

According to a consumer report by the Association of Manufacturers and Distributors (AECOC), 1 in 5 Spaniards bought groceries online in 2020, and with new supermarket models emerging, it is important to get the pricing strategy right.

Price intelligence and dynamic pricing are the keys.

Consumers are now more accustomed than ever to comparing prices and conditions. As it is not possible to offer the same price online as offline, it is important online not to be discordant with the rest of the offer in order not to lose sales opportunities.

Matt Ellsworth

Matt is the Sr. Manager, Marketing & Demand at Wiser, the leading provider of actionable data for better decisions.

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