Peapod, the $1 billion online grocery delivery business, needs to defend its turf in an increasingly competitive market where Amazon and Walmart are making moves, and it’s banking on a new innovation center to drive growth.
Peapod Digital Labs will open at the company’s Chicago headquarters in January, but the operation is already the “driving mindset” of the business, according to Peapod CMO Carrie Bienkowski. The Digital Labs will bring together departments that currently intersect under one roof: marketing, data science and analytics, technology, engineering and innovation.
The goal is to better position the company as it prepares for battle. The two areas it needs to win: personalized marketing and delivery speed.
Accounting for only 3 percent of the total $800 billion grocery market, penetration for online grocery is still low. To encourage more adoption, Peapod is working toward offering same-day and instant delivery, currently offering next-day. Right now, Peapod is a distant fourth in the grocery wars after Amazon, Walmart and Kroger. But customer acquisition is the second-biggest lever: Since the industry is still nascent, there’s a lot of potential ground to win.
“The future of grocery retailing is powered by digital and driven by the customer,” said Bienkowski. “As an e-commerce retailer, we have the golden goose of retailing, which is first-party data. So most important is changing the customer experience to be more personalized, and benefiting the customer at the end of the day. We feel a huge amount of responsibility to create more relevance.”
To be more relevant, Peapod uses layers of customer data to target the right messages to the right audience on a constantly changing basis. Since people are always shopping for groceries with an average cart size of 25 items, there can be quite a lot of data on customer preferences. Right now, Peapod can narrow its advertising down to the zip code. Bienkowski said Peapod has a database of 3,000 zip codes that it uses to tailor ads.
“For every Peapod campaign, we use data, geographic targeting and messaging, and we go about them in that order,” said Vic Drabicky, the founder of the agency January Digital, which works with Peapod’s digital marketing team. “In groceries, you have an exorbitant amount of data. In a store, you may have one pair of shoes being purchased, and then you have to do a lot of guesswork around what else that customer might buy. With groceries, you have patterns that form from big orders, all the time.”
Peapod currently sells in 24 U.S. markets, and each has its own nuances. In the middle of August, Peapod might target customers in Staten Island with summer backyard barbecue recipes and related products. That differs from what customers in Midtown Manhattan would see. So, Peapod’s marketing team works alongside data analysts to come up with the proper creative around food-related and seasonal trends — gluten-free, weather, organic, holidays, storm prep — and then fire them off to the right customers at the right time.
“We can make adjustments on the fly, in the course of 24 hours, as we see how a message is resonating or not online. A lot of times, it’s just finessing the differences in food trends from geography to geography. On display ads, paid social and search, it’s about audience customization,” said Bienkowski.
Bienkowski described Peapod’s paid marketing strategy as “block and tackle,” particularly in paid search, where it drives the most customer acquisition (social then comes in to drive retention). She didn’t say how much more Peapod has spent in marketing year over year but said that as user growth stalls on paid platforms, prices have gone up. But it can’t ease off now.
According to an October report from Deutsche Bank, online grocery sales are projected to quadruple between 2018 and 2025, from 3 percent to 12 percent. The Food Marketing Institute and Nielsen predicted in a January study that 70 percent of customers will regularly shop for groceries online by 2024.
Peapod is the underdog. Deutsche Bank’s report listed Amazon as the biggest online grocer, with sales of $2 billion and 12.5 percent market share. Walmart was close behind, with online grocery sales of $1.8 billion and an 11 percent market share. Kroger took third place, with 6.4 percent of the market, followed by Peapod, with 5.3 percent.
To fight for its turf, Peapod used its customer data capabilities to position itself less like a commodity and more like a service. Recipes have played a big role: Bienkowski said that since grocery lists are just pieces of meal recipes, it can target customers based on what they’ve made in the past and push them toward purchases with inspiration.
With data from its Digital Labs, Peapod put money behind 2,000 recipe terms on Google, using what people were already searching for on the site, according to seasonal and food trends, to bolster the visibility of the brand. To make it more convenient, it added thousands of corresponding recipes to its database.
“We believe there’s a huge growth opportunity here, and that we have the right mix to win,” said Bienkowski. Under its parent company’s retail network, Peapod is tied to 1,600 grocery stores in the country, and it also builds fulfillment centers. “Look at Whole Foods and Amazon — that was basically a very expensive real estate deal to buy stores near customers. We can compete with that.”