In the 20th century, the person in the family who would do the grocery shopping didn’t change very much — after all, everyone needs to eat, and nuclear families were the norm. Because of this, how shoppers bought groceries for their families also rarely changed. Traditional grocery stores and supermarkets reigned supreme, and although supercenters like Walmart and warehouse clubs like Costco eventually took the lion’s share of the market, the grocery shopping experience remained the same. This simply isn’t the case anymore, as many trends are changing the way people shop.
How We Buy Groceries Today
Between 2005 and 2016, the number of shoppers to declare the supermarket their primary channel for groceries dropped from 67% to 49%, though it’s still definitively the market leader. The number of people who say they don’t have a primary store has remained relatively steady. Shoppers are turning to two or three different retailers (and even different retail formats) on average to meet their needs. Diversification of shopping options and tools coupled with diversified values has led to four major trends.
Online Grocery Orders for Delivery
There was a time when industry experts thought that online grocery ordering would never catch on. Meals provide a visceral experience, and so it was presumed that shoppers would want to buy all of their groceries, be it fresh vegetables and meat or CPG items, from a supermarket. Companies like Amazon and Peapod would prove them wrong on both counts, and the delivery option finally spread to neighborhood supermarkets like Safeway and Shop Rite. The offering is continuing to grow as well — Target recently acquired grocery delivery company Shipt to become more competitive in the same-day delivery race.
Nielsen found online grocery shopping commands 8.1% of sales, but has predicted it would see a 12.2% CAGR (compound annual growth rate) through 2020. Depending on your source, other forecasts can be both more or less conservative, suggesting that it could command 20% of the market by 2025, but that it would also put online grocery sales up to $100 billion. Roughly 25% of American families buy groceries online, and the latter estimates also say 70% will engage with this format of grocery shopping over the next decade. Traditionally, CPG brands are more successful in this area because there is some resistance to buying fresh food without seeing it first.
Subscription Grocery Services
Subscription services thrive on a “set it and forget it” process which allows the shopper to define which products they want, how much of each they want, and how often they want to receive it. Amazon’s Subscribe and Save program was a leader in this area, starting with CPG items people would normally need to restock by regularly heading to the supermarket. Other retailers followed in their footsteps, like Target did recently starting with baby diapers and formula before expanding to all of its grocery aisles.
Unfortunately, this straddles the divide between the online-for-delivery trend previously mentioned and meal-kit services, which can obscure the statistics somewhat. In a Nielsen report, it lumped subscription groceries into its 12.2% CAGR through 2020 for online groceries. It also states subscription groceries probably represent 18% of online grocery purchases, but notes they have also seen major growth. In Nielsen’s older report, it showed that while only 9% of shoppers in North America were already using this purchase method, another 45% were willing to try them in the future.
Click-and-Collect Grocery Shopping
Another segment of online grocery shopping is the click-and-collect model, where shoppers order the groceries on a store’s website with a scheduled pickup time at the brick-and-mortar location. When the shopper arrives at the store, they either head inside just long enough to pick up their groceries, or employees meet them in a designated parking area for curbside pick-up. It is just one way that retailers can offer an experience that crosses from online to offline brand experiences. Many of the retailers with physical locations that provide online-for-delivery services (such as Walmart, Target, or smaller supermarkets) also have this option. Some companies, like Peapod, manage this for stores that don’t have an in-house option. Even some pure-play services (namely, Amazon) are experimenting with this model.
More than two-thirds of shoppers are somewhat or definitely willing to use this type of service, which is up from a previous study showing that while only 9% of North Americans already use click-and-collect groceries, 57% were willing to use it in the future. Another survey showed that 73% of consumers that did pick up items at the grocery store did so to avoid shipping fees. Despite this, 77% of grocery stores in the U.S. don’t currently offer this service. The click-and-collect model of grocery shopping saw significant growth between 2015 and 2016.
In-Store Grocery Shopping
In-store grocery shopping is on the decline partially due to the rise and adoption of the digital options we’ve already mentioned. Instead, shoppers are turning to other retail formats and split shopping to meet certain needs. For instance, they may head to a specialty store for specific items (like ethnic foods), then head to the dollar store for other products.
Fortunately, retailers are listening to shopper demands to enhance the in-store experience. A number of stores have joined the Guiding Stars program, which is designed to help direct shoppers to healthier food choices that have more nutrition (like omega-3s) and fewer potentially harmful ingredients (like trans-fat). A recent study reported that not only is Guiding Stars successful in stores where it’s been implemented, but it’s raising sales and revenue as well. Many stores are looking to digital enablement options, like in-store WiFi, mobile coupons, and apps with shopping lists. On the other hand, some major grocery stores are implementing a more direct answer for customer experience. Wegmans develops memorable in-store events with a friendly, welcoming atmosphere, thematic food stations and freshly prepared food directly in front of the customer.
The Driving Factors Behind These Trends
Shifts in the tools people use, how we communicate with one another, and much more have made an impact on brand-shopper relationships. We’ve identified some of the influences here.
Technology has made a tremendous impact. The invention of the internet gave birth to e-commerce, which is the only way online grocery shopping can exist or function, whether it’s for delivery, pick-up at the store, or a grocery subscription. Technology has also improved innovation in production, distribution, and the number of ways in which brands can intersect shoppers’ lives. What’s more, it bolsters the checkout process, as with self-pay kiosks (41% in North America adopted, with 45% that are willing to use) or in-store scanners (10% adoption, 65% willing).
Also, shoppers now have a plethora of information at their fingertips thanks to ever-advancing technology, and the emphasis on mobile means it’s easily accessible. The top two reasons people pull out a smartphone to help them shop are checking prices (54%) and researching product or brand information (58%); in fact, shoppers are more likely to seek help from their device than consulting a store employee. Another 40% will look for or download digital coupons with their device to use at checkout. Gen Z and Millennials are the most likely to do these things, but even half of Boomers will.
Technology has influenced more than just the way shoppers purchase groceries at the store. It’s provided new ways to gather and share information, both for publishers and for shoppers, putting more spotlights on brands when things go wrong. You only have to look at the food safety subject page for the New York Times — just one of many potential news sources — to realize the level of access shoppers have to information about top concerns like food safety. They will use this as a starting point to research brands and retailers to make choices that minimize the risk to themselves and their families. If it seems as though a retailer isn’t handling something promptly or properly, or if a manufacturer implies they’re hiding something important, shoppers will find a different option, even if it means visiting somewhere new. Conversely, one of the barriers to online groceries is the fact that the shopper cannot inspect the food for themselves first; they have to trust the retailer’s employees to make the choice for them.
According to a retail performance index survey from Dunnhumby, retailers like Trader Joe’s, Whole Foods, and Sprouts Market are becoming shoppers’ preferred grocery stores, scoring in the top ten (first, ninth, and tenth out of 59, respectively). But it’s not just because they rank well in terms of quality, brand perception, and price. Shoppers worry about allergens and other sensitivities or intolerances (44% of shoppers), and are increasingly aware of the nutritious value of their food options. This hasn’t just led to shifts toward healthy and organic foods, it’s also pushed shoppers toward split shopping and retailer diversification. Limited assortment and natural food grocers are gaining more ground and increasingly frequented by shoppers (25% and 17% respectively).
Shopper access to information has amped the need for brand transparency, and it’s another factor in choosing where to shop and what products to buy. Manufacturers that provide increased transparency can capture new customers and gain their loyalty — 39% of shoppers would switch to new brands that are more transparent than their favorite, and 81% would even try a brand’s whole portfolio.
While 66% of shoppers believe that the manufacturer is responsible for giving them the information they need to make smart decisions about the food they buy, only a mere 12% actually trust brands as a reliable source of information. That’s not just because of a diminished trust in media and corporations — 48% of shoppers don’t feel like they know enough about a product’s nutrition and ingredients, even after reading the label.
Boomers are the age demographic to shop most traditionally. They’re more likely to use a list, more likely to emphasize price, and least likely to use technology. Unsurprisingly, Millennials and Gen Z are the most likely to drive newer, technology driven options, and are fairly close together. Despite their emphasis on quality, Millennials are also more likely to diversify their shopping and split shop because of finances — they make 20% less than their parents did at the same age. Meanwhile, Gen X sits generally in the middle. The following statistics will help illustrate:
Ordering for Delivery
- When Boomers do decide to grocery shop digitally, they’re most likely to order for delivery (17%), with an additional 48% considering it as an option in the future..
- Gen X is more open to digital options, with 22% adopting delivery and 57% considering it.
- 30% of Millennials and 28% of Gen Z shop this way, with 57% and 55% considering it.
- Only 6% of Boomers use subscriptions for their groceries, and only 40% will consider it.
- For Gen X, 11% are using a subscription with 56% considering it.
- Millennials and Gen Z remain close, with 19% and 20% already adopting this option, as well as 60% and 55% considering.
- Again, a mere 6% of Boomers utilize this technology for groceries with 48% giving it consideration.
- Gen X is slowly adopting this technology, with 10% using click-and-collect and another 59% considering.
- Millennials and Gen Z Continue to lead the way, with 17% and 14% respectively, plus 61% and 59% giving it consideration.
Other Demographic Shifts
Age factors aren’t the only thing that’s changing. Brands are becoming increasingly aware of the fact that different ethnicities and sub-cultures have various shopping expectations than the broad average usually used to guide them. For instance, Hispanics are an underserved group that distinguish themselves by enjoying grocery shopping (68% versus the 59% average), grocery shopping socially (79% versus 39% average), and being influenced by coupons at the shelf (26% versus the 21% average).
What’s more, who actually does the shopping is changing. More than half (58%) of households identify as co-shoppers, with a third splitting the duties evenly between parents, especially among Millennials. A fifth of shoppers are single shoppers (i.e., they’re single and shop for themselves), and another fifth are sole shoppers (i.e., they’re either single parents or part of multi-adult households that do the total shopping duties).
- Shoppers aren’t relying on traditional grocery shopping behaviors to meet their needs. Their loyalties are shifting in order to buy the best products for themselves and their families.
- Transparency is vital for both retailers and manufacturers. Providing as much information as possible about ingredients, sourcing, and ethical practices does more than a sales pitch.
- Segmentation is also vital. Different age groups, ethnicities, and income brackets will have different concerns and access groceries in alternative ways.
- Technology is increasingly imperative to the process of grocery shopping throughout the entire path to purchase, even in-store. Brands need to be sure they can meet applicable expectations and ease concerns surrounding online ordering, like quality assurance.
Nielsen may have put it best when it called clicks versus bricks a thing of the past, and proposed clicks-and-bricks as grocery’s likely future. How shoppers think about themselves and their families is changing, and with that, the way they perceive and consider brands, food categories, and groceries is changing as well. They’re more informed, so they’re more cautious about safety and more determined to be healthy. Yet each generation and demographic engages with technology and approaches the food they eat differently. This drives the trends we’ve named above, and defines how each fits into each of your target segment’s life.