Checking out the Co-op's headless commerce strategy - a co-operative approach with Amazon, Deliveroo and Salesforce

UK grocery chain Co-op may have been a relatively late starter to the e-commerce world. However, when it finally launched its online offering in 2019, the supermarket had the advantage of learning from the successes and missteps of its competitors.

When Chris Conway joined Co-op Food as E-commerce Director in 2018, the retailer had no online shopping presence. Conway’s brief was to explore whether an e-commerce operation would be appropriate and, if so, whether that should be through partners our Co-op’s own proposition.

After an initial six months spent looking at the market and data, and interviewing customers, Conway identified a trend that showed customers had always been pushed towards a big basket and planned shop:

My previous experiences are traditional big box retailers [Conway previously worked at Morrisons and Asda], so large baskets delivered the next day or further out. Co-op is very different to those businesses, we’re a convenience business at heart.

Co-op saw an opportunity to offer customers more flexibility over spend and delivery options than available with other supermarkets at the time: 

We're really close to our communities so why can't you order for same day or within a couple of hours and get it delivered direct to your door? Why do I always have to spend £40 or £50?

I personally felt that the e-commerce grocery market had been strangled a little bit and the fact that we hadn't let customers decide how they wanted to shop, meant actually the growth was beginning to deteriorate. At the time, the penetration of grocery sales was less than 7% of the market, far behind some of the other retail sectors. I did think there was a huge opportunity for the right retailer to grab a space in that market and be integral.

It was here that Co-op’s role as a last mover in the e-commerce grocery space became an advantage, as the firm had no legacy technology to deal with. Conway explains: 

We didn't have all these legacy commerce systems knocking around, and having been a part of a couple of other retailers in the past, that was one of the biggest pain points.

We decided we would build our own e-commerce platform and we would deliver to customers, so you would shop with the Co-op and we would pick it and we would send it out to you. We can build this from the ground up in the right way, so it's future-proof and it’ll grow with us as invest in this business.

Fresh thinking 

While opting to build its own e-commerce platform, the firm also wanted to work with partners, to utilize their technology platforms to reach more customers and introduce new customers to the Co-op, adds Conway: 

What that will do in parallel will mean we can grow faster without necessarily investing lots of capital upfront, and we can start to learn about how customers shop in a much better way than trying to wait for us to scale our business.

In early 2019, Co-op launched its e-commerce offering with three different propositions: its first online-enabled store, letting customers in the Chelsea area order food via the Co-op website, with a minimum spend of £15 and same-day delivery; signing a partnership with Deliveroo as its preferred online grocery partner; and running a trial with Starship robots in Milton Keynes, reaching a few thousand customers from a few stores.

By the end of this trial year, Co-op had an e-commerce option available out of 32 of its stores, and Deliveroo users could choose from 500 products, fulfilled by 200 Co-op stores in major cities across the UK. Then, just a year on from its e-commerce launch, COVID-19 hit. This had an immediate impact on the supermarket’s online expansion strategy, recalls Conway: 

We had a five-year growth plan where we wanted to increase the level of stores we were servicing e-commerce from, from the 200 or so stores in 2019 to 1,000 stores over a four or five-year period. We condensed that all into 2020. During the pandemic, we increased our propositions from 200 stores to 1,000 stores across our own e-commerce platform, Deliveroo and also a little bit on Starship as well. We just super-charged our ambition in terms of reach and access, which meant we were delivering to nearly 50% of the UK population.

Co-op went from delivering thousands of orders a week to hundreds of thousands; it also expanded the range available on its own two-hour proposition from 2,000 products to over 7,000, and from 500 to nearly 1,800 products on Deliveroo.

The firm is aiming to close 2021 with nearly 2,000 e-commerce locations, and is on track to grow online sales from £70m to £200m by the end of the year, adds Conway:

Online services are an important part of our strategy going forward. We know that's where the customer is, and there's a larger proportion of customers wanting to shop that way. The Co-op is nearly 180 years old, and we want to be here for another 180 years, so we realize that we need to service customers in different ways. But what I would say is our physical locations are what is making all this work. We're not having to source new space, we're able to utilize our existing space with some small changes to reach these customers.

Platform

For its e-commerce platform, Co-op is using last-mile technology from Bringg, Salesforce Service Cloud and Marketing Cloud, along with a separate search engine, recommendation service and order management technology, all of which plug into the Co-op-based ecosystem. The firm built its own Co-op website on the top, opting for a headless commerce solution, says Conway:

We built it in such a way that we can converse and interact with different platforms, different partners in real-time. We've got a whole host of partner services that all form part of our cloud-based infrastructure, that infrastructure takes feeds from our pricing system, our promotion system, as well as our product information systems. Then we feed pricing, availability data, product data out to the relevant partners or platforms, like Deliveroo or Starship.

There's still lots of work to be done on it, but it means if there's something new and shiny that comes out in a couple of years’ time, a new search engine that nobody's heard of that's best in class, we're able to switch out our existing search provider and switch in a new one. We're not tied down to this end-to-end model, which we would have done historically.

The Co-op has recently integrated its e-commerce service with Amazon, launching a Co-op storefront sitting on the Amazon UK website:

We’re utilizing Amazon's platform to sell to Amazon's customers, but it's a Co-op shop, we price the products, we send the promotions, we pick the products in our store and we learn from that transactional data. We wouldn’t have been able to do that so quickly if we hadn’t set up our technology in the way that we have.”

The Co-operative Group, owner of the Co-op, was an existing Salesforce customer, but Conway notes that, from an e-commerce perspective, the firm was not obliged to choose Salesforce for these services. The decision was based on the fact that Salesforce was future-proofed and was a software as a service solution: 

We knew they would grow with us and they would continue to be as efficient as possible. We felt like Salesforce offered the best mixture of agility and scale for a business such as the size of ours.

We've implemented Salesforce a bit at a time. We didn't launch with a full Salesforce capability across Marketing Cloud and Service Cloud from day one of e-commerce, just because of our different priorities, our product roadmap.

Co-op used Service Cloud from the start to ensure its internal contact center was joined up from a comms and customer perspective, but it has only been in the last few months that Co-op properly launched its CRM campaigns, as it first needed to build up an established base of regular online shoppers. Conway explains: 

Through our Salesforce integration, we’re able to communicate to customers as they shop across our different business units. We've got customers that are regular online shoppers now but also shop in our food stores - we're able to communicate to them in a much more intelligent and personalized way through the use of our Marketing Cloud capability.

With the UK online grocery market estimated to be worth £25 billion this year, up from £21 billion in 2020, there is clearly huge potential for Co-op to grow its e-commerce revenues further. The firm is aiming to close 2021 with nearly 2,000 e-commerce locations, and is on track to grow online sales from £70 million to £200 million by the end of the year, adds Conway:

Online services are an important part of our strategy going forward. We know that's where the customer is, and there's a larger proportion of customers wanting to shop that way. The Co-op is nearly 180 years old, and we want to be here for another 180 years, so we realize that we need to service customers in different ways.

That said, the local Co-op shop remains an important element in the overall picture, he observes:

Our physical locations are what is making all this work. We're not having to source new space, we're able to utilize our existing space with some small changes to reach these customers.