CPG Slow to Realign Coupon Programs For Growing Popularity of Digital

By Lynne Cooke

Digital marketing is making an impact in grocery shopping as consumers look for coupons before and during their trip to the store. But most food brands haven’t reacted to this shift in shopper behavior.

That’s the view presented in the Food Insight Report: Digital Coupons from L2, a subscription-based business intelligence service that benchmarks the digital competence of brands.

L2’s research shows that “the majority of brands have yet to realign their couponing programs with the shifting reality of the growing popularity of digital coupons. While 36% of brands have coupon sections on their brand sites, only 24% were offering coupons during the research data collection time periods.”

The report states that online grocery sites and coupon aggregator applications like Coupon Queen, Cellfire, and Grocery IQ receive the majority of coupon traffic, as opposed to food brand sites which only attract a small percentage of visits.

As Amazon and Walmart ramp up the development of their online grocery strategies, according to L2’s report, less than two of three food brands distribute coupons on Amazon and only one of three on Walmart. “Digital coupon distribution is even lower through current online grocery leaders Peapod and FreshDirect. While e-grocery players Amazon and FreshDirect have fully developed integrated coupons into the online shopping process, the majority of brands rely on the consumer to print coupons at home for in-store redemption.”

Of the eight e-commerce players analyzed in the report, Amazon was the only one to offer coupons for over half of the brands in L2’s brand index. Walmart and Target, the two runners-up, provided coupons for only half the amount of index brands of Amazon. Peapod, FreshDirect and Amazon allow coupon use during online checkout. Walmart only allowed in-store redemption during the data collection period.

Citing research by Packaged Facts, the report stated that browsing for coupons is the second most popular digital activity for grocery shoppers (55%) after reading online circulars (62%). Once in the store, 90% of smartphone shoppers use their device in aisle, searching for recipes (37%), looking for coupons (24%), and researching nutritional information (19%).

Digital coupons have benefited from a surge in consumer interest. According to Inmar’s Coupon Trends for 2013, redemptions topped 6 million – up 141% year on year. Approximately 40% of all coupons were redeemed on food products. The 2014 NCH Coupon Facts Report said digital coupons average redemption rates of 14%, outpacing print coupons that tally rates of just 1%.

L2’s report cited recent surveys that suggest mobile shoppers spend upward of 15 hours per week researching products or services on their smartphones and are 4.8 times more likely to convert in-store than on their phones. “Such behavior adds credence to the theory that ‘mobile-influenced’ sales already dwarf mobile sales and will soon overshadow all online purchases.”

While digital e-commerce represents just 3.3% of grocery, according to L2’s report, analysts expect that share to explode to 6.7% to 16.9% in the next decade. Walmart is developing an omni-channel retail strategy for online ordering and in-store and drive-through pick up. At the same time, Amazon is piloting Amazon Fresh, which provides same-day and early-morning grocery deliveries. It is investing in “a warehouse building binge” which will allow it to support same day deliveries in major population centers.

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