The Rise of Online Grocery Shopping: Trends, Challenges, and Opportunities

2. Still a Small Pie – and Amazon and Walmart Has Most of It • According to eMarketer, total 2019 US food and beverages online sales will be $22.63 billion, a 23% increase from 2018, and then total $40.04 billion by 2022; however, the 2019 total is only 2.6% of the approximately $880 billion in food and beverage sales. • Although Amazon looks far ahead of Walmart in the table on page 1 of the Profiler, new Citi Research finds Walmart is gaining, as 24.6% of consumers said they ordered groceries online from Amazon during the past 12 months, and 22.5% from Walmart. • As online grocery shopping has been increasing at more than 20% annually and will continue to do so through 2021, the number of click-and-collect locations at major grocery retailers increased 70% to 5,800 during the June–December 2018 period.

3. Attracting Young Adults First • According to the 2K19 Valassis Coupon Intelligence Report, 77% of online grocery shoppers are 18–44, with those 25–44, 60%. They are more likely to be male, have children in the household and have an average household income of $80,900. • Food Marketing Institute (FMI) reported in its 2019 U.S. Grocery Shopper Trends that 43% of all consumers said they shop online occasionally, with 21% who buy groceries online monthly (11%) or at least every two weeks (10%). • The Valassis report also revealed online grocery shoppers use coupons at a much higher rate than all consumers, or 65% and 45%, respectively, as well as loading e-coupons to a loyalty or frequent shopper card, or 60% and 40%, respectively.

4. In-Store Shopping Remains a Stronger Pull • Despite robust growth in online grocery sales, a recent study from Vixxo found 87% of consumers prefer to buy their groceries in a store and TABS Analytics reported only 17% of consumers it surveyed preferred online shopping. • As often cited, selecting one’s own groceries, especially meat and produce, continues to be the top barrier to more online sales. In its Groceries 2.0/Vol. 3 report, Field Agent found this was the primary concern of 58% of the surveyed consumers. • The perceived cost of buying groceries online is another primary concern, as 51% of consumers in the Field Agent study said they aren’t able to use coupons and in-store discounts and 43% were concerned about fees and required minimum purchases.

5. CPG Products Lead the Way • As the table on page 2 of the Profiler and other sources indicate, CPG products sell well online, although they still only increased 9% YOY (February 2018–2019), with those in the grocery category increasing 16% and household care increasing 19%. • The online-grocery-shopping environment is allowing a number of new products to disrupt their categories and grab market share from traditional CPG products, with Kewpie, a Japanese mayonnaise, as an example, increasing YOY sales 115%. • Conversely, some well-known CPG products in the detergent category, for example, are maintaining their prominence in online sales, with Tide achieving a 21.1% purchase rate during February 2019, compared to newcomer Solimo at just 5.4%.

6. Grocers Must Accelerate Acceptance and Changes • All the evidence clearly indicates online grocery shopping will only increase, as the Field Agent study revealed 66% of consumers expect to be buying more groceries online by 2024, and 21% said “much more.” • The challenge for traditional grocery retailers (and what consumers are expecting) is continued improvement in customer service, 68%; quality of delivered fresh food, 67%; convenient delivery windows, 66%; and low prices, 66%. • IDC states in its Personalization in Digital Food Retail report that retailers must invest in data management and analytics, personalized offers and promotions, localized assortment optimization and advertising/media spending during the next three years.

7. Delivery Satisfaction Is Key • It should be apparent by now that delivery services influence where consumers shop for groceries online; in fact, according to Capgemini Research Institute’s report, The Last-Mile Delivery Challenge, 40% of consumers consider it a “must-have.” • The good news for US grocery retailers is the Net Promoter Score (NPS) for consumer satisfaction with delivery services was a +9, while the cumulative NPS in all the countries in the Capgemini study was -9. • Last-mile delivery satisfaction drives future purchases, as 74% of satisfied consumers would buy 12% more from their preferred retailer while 48% of dissatisfied consumers would stop purchasing from retailers with an inadequate last-mile delivery process.

8. Advertising Strategies • Grocers would be wise to allocate some portion of their ad budgets and messages to tout their online grocery buying and delivery services as they add them and direct consumers to their Website and/or social media platforms for detailed information. • Show local/regional grocers the many programming choices for their commercials about their online grocery service to target mostly men, 18–44 and with above-average household incomes. • Local/regional grocers should take advantage of the captive audiences in their stores to conduct customer “training” sessions about how to order online and its benefits, and offer special coupons for participating as online grocery shoppers use more coupons.

9. New Media Strategies • Consider recording some of the in-store “training” sessions and editing them into short videos for posting on the store’s Website and/or social media platforms. • Create social media posts that feature specific CPG products that can be conveniently delivered to customers’ homes and compare the cost of delivery to the value of their time shopping for non-food items in the store. • Ask regular online customers who are ordering fruits and vegetables and meats to record short videos and/or write posts for social media explaining how they were reluctant to order these items online, but how satisfied they are with the items employees selected.