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Will Pre-payment for Groceries Pay Off for the Grocer? - Mark Heckman Consulting

Will Pre-payment for Groceries Pay Off for the Grocer?

As a grocery consumer, consider the items you buy week end and week out.  If you are like me (and most folks), they 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 driver most of the sales.  In fact, just the top volume 80 items they sell represent as much 20% of their sales.  RetailWire 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”.

There are numerous implications of the Big Head-Long tail dichotomy.  For starters, the fact that there are relatively few items and categories shoppers predictably  buy, it 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.  

aisle50Aisle50, is an application-based service that, among other things, allows shoppers to pre-pay for deals on branded grocery items and then receive that item by shopping with their frequent shopper card at a participating retailer.  The pre-paid item cost is deducted from their grocery bill at the store and thus the shopper gets the item at the pre-paid price.  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 that has a good chance of working on a broader scale.  Today, there are a handful of retailers on the Aisle5o bandwagon, 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 those 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.

 

 

 

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