Peapod’s new sales model highlights ecommerce’s competitive edge compared to brick & mortar

By Elizabeth Crawford contact

- Last updated on GMT

Peapod’s new sales model highlights ecommerce’s competitive edge compared to brick & mortar
The grocery website Peapod continues to push the boundaries of how to sell food and beverage online with a new multi-prong price reduction model that leverages unique aspects of ecommerce to profile products in innovative ways that brick and mortar stores can’t.

“Egrocery in general is such a flexible way to go about addressing consumer needs, and our belief is it has never been fully, completely, effectively utilized,”​ Spencer Baird, Peapod’s senior vice president of merchandising, told FoodNavigator-USA. But, he added, with the introduction of Peapod’s new price-reduction model that is based on shopper transaction data and what consumers care about most, Peapod is taking better advantage of what ecommerce has to offer so that more consumers can do the same.

He explained that the new model offers site-wide price reductions on everyday items as well as buy-more-save-more discounts on bulk purchases, “bundles of savings”​ on cross-category items that are commonly purchased together and a new value delivery subscription service, PodPass MidWeek, which allows consumers to pay less than half the price of the regular service.

He explained that by using anonymized shopper data, Peapod’s Buy-More-Save-More discounts offer personalized savings to consumers who normally multiple counts of the same item.

The PodPass MidWeek is a discounted version of the company’s free delivery subscription PodPass, which gives consumers a year of “free”​ deliveries on Tuesday-Thursday for $55 a year.

Of the changes, Peapod’s new bundles, which place on the same screen all the ingredients for meatloaf Monday or sandwich Saturday, best illustrate the potential of ecommerce compared to brick and mortar for manufacturers.

Bundles underscore ecommerce’s potential

At the most basic level, the bundles give the products featured added visibility to consumers, increasing their chances of ending up in shoppers’ carts. This is analogous to how end caps or standalone displays work in a brick and mortar store.

But the bundles are more flexible than end caps or in-store displays because they can feature a wider variety of products from across categories regardless of whether they need to be refrigerated or are shelf stable. Likewise, there are no space limitations online, meaning there can be dozens of curated bundles showcased on an ecommerce site, while physical stores would be limited to a smaller selection.

“One of things that my brethren on [the brick and mortar] side can’t do, that I can, is they can’t bundle all these things together in the same windowpane and say to a customer, ‘Hey, I’m going to curate for you. Just choose your own adventure here and I will give you savings on top of that,’”​ Baird said.

“If you had a whole store full of those things going on, it would wreck traditional categories and the way they are laid out in stores. So, when you put meat and cheese and lettuce and all that stuff for taco Tuesday together, that starts to leverage the platform in ways that are very different from what happens on the brick side,”​ he added.

Bundles advance online discovery

The bundles also help ecommerce improve the discovery process, which has been a major challenge holding back customer adoption of online shopping as well as limiting basket size and product variety of those who do shop online, Baird said.

“Ecommerce has been very effective in the world of replenishment ever since it was invented and it has become more and more mature in its capabilities to replenish,”​ such as through subscribe and save offerings, he explained. But, he added, “where ecommerce has fallen down is in the area of shopping … the aisle to search and discover more things.”

The bundles help Peapod “start to make the shift from replenishment to balance out with shopping because it can introduce new products in these high affinity bundles that consumers likely didn’t even know [we] carried,”​ he explained.

“In the past, if a consumer didn’t have something in her past purchase history and didn’t actively search for it, she would never bump into it. So, we just want to make sure our customers see all the variety, all the great local things we do and everything else we have to offer. And this is one of the stages that we can put that on and we can do it in a way that is advantageous from a price value standpoint as well,”​ Baird said.

Another advantage of the bundles online versus in stores is Peapod can quickly reconfigure its offerings if it discovers something is off or missing from a bundle, Baird added.

“We can make changes almost literally hourly, which is pretty wild, but true. On the brick and mortar side, it takes a bit more time to both spot the opportunities and go in and fix them because you have a lot of different properties and people managing those properties. But we have two or three keystrokes that we can change if we realize a bundle is off. We can add an item, take an item off, adjust based on geography. The flexibility is remarkable and it really sets us up to differentiate this area and value proposition,”​ he explained.

Positive early returns

Consumers already are responding well to Peapod’s changes. According to the retailer, in regions where it has tested the new model and consumers can benefit from reduced everyday price as well as either a buy-more-save-more or multi-quantity discount, they have placed 8% more in total in their baskets compared to before the new model went into effect.

Similarly, Peapod reports in orders where consumers have access to everyday low prices, buy-more-save-more or multi-quality options as well as affinity bundles, they are buying more than 40% more product than they did before.

“In these instances, they are also buying items in eight more categories than pre-period,”​ the company noted in a release.

It added that CPG partners are seeing an average lift of more than 61% for items redeemed in buy-more-save-more promotions versus a 26% lift if the pre-period run rate.

Making these results even sweeter for CPG manufacturers featured in the new model is the fact that Peapod isn’t yet charging extra to be included in the offerings. Rather, Baird said, as the company works out the kinks on the marketing strategies, it isn’t asking for more money from participating brands. Rather, it is using the money they have already designated and it is tracking the impact so that, hopefully, in future years Peapod can make the case for how participating in the promotions makes marketing dollars work harder.

Room for improvement

Despite this initial success, Baird acknowledged that ecommerce has a long way to go to compete with brick and mortar sales for shoppers.

“I would consider our mission around convenience, around value and around personalization as our identification of the things that need to be improved in order to exponentially expand adoption of egrocery,”​ he explained, emphasizing the trio but be developed together in order to succeed.

“If you have just same day or same hour delivery, yeah that is convenient, but if you don’t fix the other two areas, if it is not a personalized and curated experience, and if you are gouged on price … you will only get a certain subset of the population who forgot something at the store they need and will order online for convenience, but not the rest of the people,”​ he said.

However, he said, if retailers make shopping online seamless with shopping in stores, such as allowing consumer to use the same loyalty number to see their shopping history from both options, they can make the experience more personalized and better curate recommendations both in store and online.

“Our belief is if we can really accelerate adoption and make ecommerce a true option if we allow consumers to shop in the way they want to – whether that is ordering online and picking it up from the store or having products delivered … that is when we can truly have an omnichannel environment,”​ he said.

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