While the world of online grocery shopping continues to evolve and grow daily, the impact on the local grocery store level isn’t all negative and could even present some opportunities. There are significant changes to the customer experience with shifts in the grocery ecosystem. Attracting and converting shoppers happens at each stage of the journey, and requires retailers and manufacturers alike to be aware of opportunities to create interaction with shoppers.
With online grocery sales set to capture 20% of the total market by 2025 — and reach $100 billion — the line between online and in-store grocery experiences will continue to blur. This represents quadruple the $20 billion that consumers are currently spending on online grocery shopping. While less than 10% of online shoppers are doing so more than once a month, those numbers will grow dramatically as more individuals become comfortable with the concept. Oddly enough, the trend isn’t across the board, as there are some segments that are impacted negatively by online grocery shopping while others are actually seeing an in-store boost.
Challengers on All Sides
Traditional grocery chains are seeing a squeeze from all sides: from commerce giants such as Walmart and Kroger, as well as Amazon and other ecommerce platforms. A recent report from Food Marketing Institute and Nielsen shows that while online channels will continue to grab market share, it will be many years before the balance of power adjusts to the digital side and away from a local shopping experience. Even after ten years, based on current shopping levels, it is unlikely that grocery shoppers will be spending much more than 60% of their grocery dollars online. Millennials are entering the marketplace in masses droves, and the tech-savvy generation is likely to cause a tectonic shift that is difficult to predict due to their love of convenience and online shopping.
Categories Negatively Impacted by Online Shopping
The segments that are struggling as consumers move to a more digital shopping experience include standards such as condiments, canned goods, spices, and other center of store products. The bad news is that these items often make up a large percentage of the shopper’s basket, and may be one of the reasons that people venture out to physical stores. Other categories that are taking a hit include products that are relatively easy to grab online and that have consistent quality, such as shampoos and other personal care items. Shoppers tend to find a brand that they are comfortable with and stick with that brand until it becomes too difficult to find, which is one place where online shopping excels. Hard-to-find options that may not be available in local retailers are one way that online commerce giants such as Amazon entice individuals to try their service — and hook shoppers with perks such as reduced cost shipping and auto-shipment convenience. Hard goods such as toilet paper, paper towels, cleaning supplies, and pet food are expected additions to the list of items that shoppers are more willing to buy online.
New Segments Emerge
Among the newest segments to emerge in the recent past are meal-kit services and restaurant delivery services. Meal kits allow shoppers to create a semi-homemade meal in only a few moments, with each package containing everything needed to cook a gourmet-quality meal. This new retail model allows retailers to target specific market segments, such as vegan or gluten-free, and craft offerings that are widely appealing in flavor and convenience. Today’s fast-paced society values anything that cuts minutes off of their day, and these pre-packaged meal kits reduce the drudgery associated with Instagram-worthy meals while allowing an easy introduction to more advanced techniques or exotic flavor combinations.
Categories Positively Impacted by the Shift Online
There are definitely some bright spots for local shopping, specifically with fresh items such as fruits, vegetable, meats, and dairy. However, trends in France may predict some changes coming in the not-so-distant future. Nielsen’s global ecommerce data shows that the click-and-drive model (where consumers can pick up their goods, groceries, and more at a drive-through so that they don’t have to ever leave their car) is thriving for edible products — and is, in fact, the dominant model for much of the country. Packaged cheeses are the big winners for grocery stores, with $311 million in sales coming through this particular segment. Shoppers are still a bit hesitant about ordering their fresh and perishable items online, and seem to prefer physically visiting a store to select fruits and vegetables at the desired ripeness.
Category dynamics continue to change, with durables growing in terms of online sales while consumables online growth is much more modest. As more options enter the marketplace in the form of meal kits and delivery services, retailers should look for ways to leverage this new direction in shopping behavior by offering easy-to-grab options. It is critical that marketers understand the dynamics driving digitally engaged shoppers, and build strategies that leverage its cost-effectiveness with an exceptional in-store experience for which they are known — and loved — by current shoppers. This cross-channel information truly allows retail brands to tailor communications to micro-segments based on their preferences and shopping history.