Will Consumers Pre-Pay for Groceries?
Through a special arrangement, presented here for discussion is a summary of a current article from the Mark Heckman Consulting blog.
As a grocery consumer, consider the items you buy week in and week out. If you are like me (and most folks), the list is remarkably consistent. On the grocer's side, most food retailers should know that of the 30,000 to 50,000 items they stock in the store, a very small percentage of those items drive most of the sales. In fact, just the top volume 80 items they sell represent as much as 20 percent of their sales. RetailWire BrainTrust panelist Herb Sorensen refers to this phenomena in his must-read book, Inside the Mind of the Shopper, as the "Big Head." Conversely, the vast majority of the items grocers stock rarely make anyone's shopping list, hence those items are referred to as the "Long Tail."
The fact that there are relatively few items and categories shoppers predictably buy begs the question: "Would they be willing to pre-pay for these items if they were financially incentivized to do so?"
One new service, Aisle50, is banking on just that.
Aisle50, is an application-based service that, among other things, allows shoppers to pre-pay for deals on branded grocery items coming from the manufacturer. The customer then receives that item by shopping with their frequent shopper card at a participating retailer with the pre-paid item cost deducted from their grocery bill at the store.
Aisle50 appears to be a reasonably manageable process for the shopper and that usually hastens the prospects for success. If the bank of offers remains strong and compelling for the shopper, this approach may have a good chance of working on a broader scale.
Today, there are a handful of retailers on the Aisle5o bandwagon (including Raley's, Lowes Foods, D'Agostino and Shop 'n Save). I would expect more to come if the offers remain strong.
In fact, as more retailers, grocery and otherwise develop the e-commerce capability, I would expect to see retailers develop and test their own pre-payment programs.
Locking up the shopper's dollars prior to the trip makes sense on a number of levels. The business model is simple and predicated on the incremental discounts used to lure the shoppers to pre-payment being more than offset by securing the sale prior to the trip. If the numbers work and the items and categories that are eligible for pre-payment fall within the "Big Head" of all items stocked in the store, pre-payment just might become more commonplace.