Food for Thought: What’s happening with grocery ecommerce?

Food for Thought: What’s happening with grocery ecommerce?

Compared to other industries, the way people grocery shop has remained relatively unchanged over the decades. You walk in, grab a cart, check off the items on your list, and check out. Unlike other industries, grocery shopping is a weekly habit, and habits can be hard to break. It’s likely one of the top reasons why grocery is still fairly untouched in the ecommerce space.

The majority of consumers, 81%, have never bought groceries online, so why invest in a grocery ecommerce site? Here are a few compelling reasons:

  1. It’s proven to increase average order value (AOV). From March 2017 to March 2018, the AOV for delivered and fully-assorted online grocery orders was $156. For pickup orders, the AOV was $138, according to Rakuten Intelligence.
  2. Internet Retailer reported that online food sales grew nearly nine-times faster than total food sales in 2017 and continue to grow.
  3. Amazon’s purchase of Whole Foods forced the hand of other grocery retailers to enter the ecommerce space.

The Continued Growth of Online Grocery Sales

According to eMarketer, experts project that online food and beverage sales will grow to $19.89 billion in the US by the end of 2019—an 18.2% growth from the year before—and will rank as the fastest-growing product category online. By 2025, they expect this number to jump to $100 billion and capture 25% of the retail grocery business. While the industry is experiencing above-average growth rates, it remains one of the least-penetrated ecommerce categories and will remain so for the next several years.

When looking at the current frontrunners in grocery ecommerce, it’s no surprise that Amazon dominates the market with a 38.2% share, followed by Walmart including Sam’s Club with 20.6%, and Costco Wholesale Corp. with 8.8% of the share. With Amazon, shoppers get the same convenient experience as they do when shopping for other products on the site. They search for the items they want, add it to their cart, select a delivery time, and checkout.

For the past few years, retailers have been acquiring food subscription and delivery newcomers. In May of 2018, Kroger purchased Home Chef for $200 million and bought a 5% stake in the UK online grocer Ocado Group PLC. In December of 2017, Target purchased delivery service Shipt for $550 million to bolster their same-day grocery delivery capabilities. To promote the service, Target offered app users free same-day delivery from November 18-26, 2019.

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Profile of the Online Grocery Shopper

Only 6.3% of consumers shop for groceries online regularly, and most of them buy at least some of their groceries in a physical location as well. 4% of consumers order groceries online for pickup or delivery once per week, and 11% twice per month or less.

When looking at the age ranges of online grocery shoppers, the younger the consumer, the more likely they are to try online grocery ordering. Millennials make up 38% of those that have tried online grocery ordering, Gen X makes up 29%, Baby Boomers make up 14%, and Matures make up 14%.

Compared to older generations, Millennials spend less time each week preparing and presenting food. However, the number of Millennials eating at someone else’s house is greater than older generations, implying they like to entertain. This offers an opportunity for grocery retailers to market food for entertaining purposes to younger generations.

Driving Factors for Online Grocery Shopping

Distance to Grocery Stores: Distance to grocery stores impacts online shopping habits and the availability of delivery services. According to the 2018 Internet Retailer Food Report, three in four shoppers in the US live less than five miles from the grocery store they most frequently shop. However, studies show that the penetration of online grocery delivery is similar across urban, suburban, and rural residences. It may make more sense for grocery stores to target consumers that live further from their preferred store.

Short on Time: According to a Gallup survey, online grocery shopping appeals to those that are short on time: parents with young kids and employed adults. For these consumers, convenience is the obvious driver for online grocery shopping. They can shop from their phone and schedule delivery at a time that’s convenient for them.

Why People Do Not Grocery Shop Online, Yet

The same Gallup survey asked consumers why they don’t shop online. These are their top reasons:

  1. 22% said, “I prefer going to the store.”
  2. 21% said, “I prefer seeing & selecting the products personally.”
  3. 12% said, “I enjoy going to the grocery store.”
  4. 8% said, “My grocery store doesn’t offer home delivery.”

It all boils down to the habit of shopping weekly for groceries. You have a specific store you like to shop at, products you prefer, and the ability to price compare easily.

Bridging the Convenience Gap with an Optimized Customer Experience

Convenience is at the core of why customers buy groceries online. The last thing they want is an online experience that’s as laborious and frustrating as shopping in a physical location. 75% of online grocery shoppers stick with the first online store they tried, which means retailers only have one opportunity to convert and retain a customer.

Add to Cart With a Single Click

As simple as it is to add an item to their cart in a physical grocery store, it should be even easier online with a single click of a button. Including an Add to Cart button to every item on the product listing page allows the shopper to skip the detail page and quickly choose items they already know or use regularly.

Instantly Replenish Multiple Items

Every week, consumers primarily replenish the same items they regularly consume, whether it’s their favorite snack, prepared meal, or cleaning products. A re-ordering feature allows shoppers to instantly add the items to their cart without going through the process of searching for and adding each item individually.

Bundle Products with Relevant Recommendations

Milk and eggs. Chips and salsa. Pasta and marinara sauce. These are all things that customers typically purchase together. By adding relevant product recommendations to the product detail page, or bundling those products, you make it easy for shoppers to find items that complement one another and add them all on the same page.

Inspire Weekly Meals with Content and Recipes

How many times have you stared at a blank grocery list wondering what meals to make for the week? Recipes provide shoppers with meal inspiration and an easy path to follow for their online grocery shopping. Take it one step further by adding a product list to each recipe page that can easily be added to their cart.

Add Convenience Delivery Scheduling

For the ultimate convenience factor, you need a feature that enables customers to choose the best delivery time for their schedule. Most online grocery stores provide same-day or next-day delivery or go as far as offering one-hour or two-hour delivery windows.

Grocery Retailers Invest in the Future

Merging Online and Offline Experiences with Omnichannel

Data shows that while some consumers shop for groceries online regularly, many still visit a physical store. As a result, grocery retailers like ALDI and Wegmans Food Market invested in curbside pickup, online ordering, and home delivery to appeal to consumers that seek a mix of online and offline experiences.

Autonomous Vehicles for Driverless Delivery

In August 2018, Kroger debuted its unmanned delivery service in Scottsdale, AZ in partnership with robotics company Nuro. Until the program’s end in March 2019, Koger tested the autonomous fleet of Priuses with safety drivers to intervene if needed. During the pilot program, Kroger completed over 2,000 deliveries in Scottsdale.

But is the public ready for autonomous vehicles? The Arizona Republic reported at least 21 incidents against autonomous vehicles from Alphabet Inc.’s Waymo pilot program and their human safety drivers in Chandler, AZ. These incidents included waving a gun, throwing rocks, slashing a tire, forcing vehicles off the road, and standing in front of them to block their way.

Simplified Grocery List with Voice Assistant

Earlier this year, Walmart announced a partnership with Google to allow customers to order groceries via Google Assistant-enabled devices. Walmart uses the customer’s past purchases to determine the size, type, and brand of product a customer wants. For example, instead of saying, “Hey Google, add a gallon 1% Great Value milk,” they can say, “add milk” without specifying the details.

Only 4% of grocery shoppers have adopted voice assistants to add items to their grocery list, but 66% of those adopters use the tool at least weekly for grocery planning. This presents an opportunity for online grocery retailers to expand their digital tools and simplify lists for shoppers.

Blue Acorn iCi has helped several food and CPG brands take the experience online. If you’d like to take your grocery retailer online or optimize your current site, reach out to us here.