Convenience and cost savings draw more consumers to online grocery

What it means: While the grocery sector was slower to see online adoption by consumers compared to general merchandise categories, a majority of consumers now use e-commerce for grocery trips. Shifts of grocery sales from stores to e-commerce create both opportunities and challenges for retailers to engage with their shoppers. Impulse purchasing and new product trialing continue to pose challenges for online consumption, particularly within grocery. But, higher online adoption also provides brands the opportunity to optimize assortments by channel, and grow penetration of prepared foods and gourmet products in-store. Combining the convenience of the online channel and the expertise and excitement of the in-store experience together can drive the loyalty desired by larger supermarket chains. The majority (72%) of consumers in the U.S. have purchased groceries online at least once in the last three months, the same percentage as last year, a recent Chicory survey found. About 40% of respondents who ordered groceries in the past three months said they did so weekly. “It was very interesting to see that 56% of qualified respondents are ordering groceries online more now than they were one year ago,” Yuni Sameshima, Chicory’s CEO, told Retail Leader Pro. “While adoption may be slowing, it’s clear that existing online grocery shoppers are becoming increasingly loyal and are upping their reliance on grocery e-commerce.” Online grocery shoppers span all generations as well. When asked “have you purchased groceries online in the past 90 days?,” nearly all age groups surveyed said “yes” at a similar rate (approximately 75%). A slight drop off occurred for those ages 60 or older, with 56% of those in that age group responding “yes.” PYMNTS’ latest consumer research also finds that 44% of shoppers on average now make the majority of their common grocery item purchases at brick-and-mortar grocery stores, versus 63% in early 2020 — a 29% decline. During the same time period, the average share of shoppers who purchased no groceries from physical grocery stores has surged from 2.2% to 37%. A small, but rapidly growing share of consumers, buy all their groceries online. Before the pandemic, just 0.2% of all consumers purchased all their everyday staples through online channels. Now, 7.2% — about 16 million consumers — say they do, PYMNTS reports. These online consumers are led by the millennial and bridge millennial age groups, with 13% and 11% of these age groups, respectively, only using digital channels to purchase all common household items. While the vast majority of consumers still at least occasionally shop at physical grocery stores, the trend of hybrid shopping — buying groceries both online and in-store — has quickly become the norm with 39% of consumers now buying groceries through a mix of physical and digital channels, Pymnts reported. Additionally, the online grocery retail channel has the highest forecasted growth rate to 2027, according to IGD as reported by Dunnhumby. Consumer income and online shopping While online grocery shoppers span all areas of the country, more than 55% of Chicory’s respondents live in suburban areas with urban dwellers accounting for about 25% and rural consumers about 19%. “Prior to the pandemic, there was a high barrier to adopting online grocery,” Sameshima explained. “Even for people in the right demographic, trusting someone else to pick out their food was difficult. With COVID-19, many people had no other choice. And once people experienced the convenience of getting groceries delivered, the habit became sticky. The suburbs represent a population with young kids and, with a potential return to the office, a longer commute. This means that convenience and time management have become even more important. Perhaps this is a reason we see the suburbs as a prime location for where adoption remains high.” Most of Chicory’s survey respondents purchase groceries online on behalf of either three to five people or one or two people. For families of three to five, online grocery shopping can save significant time and money, Sameshima said. For individuals or couples, online grocery’s main appeal is likely that it saves them from having to make a trip to the store for a small number of items. Regardless of household size, most online grocery shoppers spend a hearty amount of money per order. Approximately 42% of Chicory’s respondents spend $51 to $100, and 33% spend $101 to $200. Digging deeper, Chicory found a relationship between online order value and frequency. Consumers who selected the lowest spending tier ($0 to $50) ordered groceries the least frequently. In contrast, those who spend the most ($201+) are the most likely to place orders daily or weekly. “These may be consumers who are highly comfortable shopping for groceries online — the more comfortable consumers are using digital solutions, the more likely they are to put their dollars there,” Sameshima said. “Or, they’re consumers who cook at home more frequently and therefore go through groceries more quickly. For families who value at-home cooking, it makes sense that they’d spend the most and order the most.” Another recent Chicory survey that examined inflationary behaviors found 55% of consumers now cooked at home due to inflation. Consumers of all incomes participate in online grocery shopping, according to Chicory’s annual research. “Some 37% actually turn to online grocery shopping because it’s less expensive than in-store shopping for them,” Sameshima said. “However, we also know that high fees are the top challenge for online grocery shoppers, according to respondents, and remain a major barrier to adoption. Those of higher incomes are more likely to look past those fees and order groceries online more frequently.” Drivers of online grocery shopping Convenience remains the number one driver of online grocery orders. Chicory’s previous online grocery shopping survey revealed that convenience, not COVID-19, drove online grocery orders. This year, convenience is not only a driving factor but a primary force behind online grocery orders — approximately 74% of respondents selected it as a top driver of their decision to order groceries online. Convenience has a 37% lead on price, the runner-up. “Convenience for the second year in a row was selected by respondents as the top driver of online grocery orders,” Sameshima said. “This year, convenience was selected by 74% of respondents; last year, it was selected by 46%, suggesting that it’s even more important now than one year ago. As more consumers adopt online grocery shopping, more consumers will get attached to the simplicity, convenience and ease of online ordering.” Price is becoming increasingly important to shoppers, but not necessarily at a detriment to online grocery shopping. Add-to-cart value in Chicory’s recipe network increased year over year, suggesting that online/in-recipe grocery shoppers didn’t slash their budgets due to inflation. Still, when selecting brands online, price is the top consideration for 67% of respondents, Chicory found. Sameshima believes online grocery shoppers can more easily compare prices from their phones, search and discover deals online, making it a more affordable option for some. PYMTS research similarly found convenience was a significant factor. Of the 62% of shoppers who opted to purchase more grocery items through digital channels than from brick-and-mortar grocery stores, 36% said it was their primary motivation for doing so. Similarly, 54% said high prices or the lack of benefits and deals when shopping in-person drove their switch toward digital alternatives. Nearly one-third (32%) named high-prices or lack of deals as their top reason for moving to digital. One of the key issues that many CPGs face with online grocery is the lack of impulse shopping, which is often a driver for many in-store purchases. “With online grocery, people are able to see an exact list of what is in their cart and the subtotal laid out,” Sameshima explained. “Even with a delivery fee, this could contribute to better spending habits at the store.” Sameshima believes more people will continue searching for meal inspiration online, as more people cook from home due to inflation. Chicory also is tracking more consumers becoming comfortable purchasing groceries off of the retailer’s site. As of now, approximately 51% of consumers are likely (32%) or very likely (18.5%) to purchase directly from food content, such as recipes and food blogs, according to Chicory. As more consumers make online grocery shopping a weekly part of their routine, Sameshima projects this number will increase. “Grocers have the ability to help consumers as the economy tightens,” Sameshima said. “Those who are trading eating out with cooking at home often look to the grocer for ideas on what to cook. Grocers would do well to take a ‘solutions’-based approach to merchandising in their stores and on their website to help shoppers make decisions about what to eat at home.” Online pain points Still, the top frustration for consumers with online grocery shopping is high fees, followed by lack of control over product selection. Nearly half of those surveyed (47%) said high delivery fees and service fees were their biggest pain point followed by lack of control over product selection (43%) and product availability issues (41%). High product prices ranked fourth with 39% of those surveyed citing it as a challenge. Additionally, consumers trust brands more than the average gig worker to ensure quality items are added to their carts. In a recent survey, Chicory found that 60% of consumers are more likely to purchase pre-packaged produce when shopping online. In Dunnhumby’s latest Consumer Trends Tracker, consumers responded with the increasing needs and wants across the e-commerce space, including: Website/app to make shopping online easy (81%). Convenient delivery/pick-up time slots available (78%). Interact with a store’s app (34%). While shoppers with an annual income of more than $100,000 have consistently had a greater-than-average need for the retailer to pick products as well as they would (78% vs. 71%), this trend is growing among less affluent shoppers too (up 6% since April/May 2022), Dunnhumby reports. An additional 8% growth in the need for the website/app to make shopping online easy – and a 5% growth in the need for ease of online payment during the same time period – shows that the less affluent demographic is coming to expect more from the online channel over time, Dunnhumby found. Additionally, compared to shoppers without kids, families are 16% more likely to interact with a store’s app and have a 10% greater need for the retailer to pick products as well as they would, Dunnhumby reports. “Over the past few years, brands and retailers have heavily invested in e-commerce, expanding order and delivery options, building out user-friendly sites and apps and working with third-party technology providers to enhance their shopping experiences,” Sameshima said. “This has made online grocery shopping more accessible than ever before.” Building loyalty When Chicory asked about consumers' preferred online grocer, Walmart received the most votes from respondents, making it the most popular option out of a group of 20. The top 10 most preferred online grocery retailers by Chicory’s respondent include: Walmart Amazon Fresh Aldi Kroger (includes multiple banners) Costco Wholesale Albertsons (includes multiple banners) Ahold Delhaize (includes multiple banners) Target HEB (includes multiple banners) Whole Foods Market The good news is that online grocery shoppers are extremely loyal, making it key for CPG brands to win the digital shelf. According to Chicory’s survey, 41% of respondents are very likely and 40% are likely to repurchase products from a past online order. “Online grocery shopping’s main advantage is its convenience, and it is made even more convenient via buy again options, order history mechanisms and cart-building options,” Sameshima said. “These features make it easier and more convenient to continue shopping at the same retailer.” In general, consumer loyalty is very difficult to maintain right now. With a changing economy and increasing food prices, retailers are competing with each other more than ever. “In online grocery, there are added variables that impact the consumer — such as delivery times, service, etc. — that can differentiate one retailer from another,” Sameshima explained. “During COVID-19, when online grocery adoption was increasing, retailers needed to make sure that they had some kind of delivery option in place in order to not lose customers. Now, in a price-sensitive environment, they need to use any advantage to keep customers loyal — a good online grocery experience being one of them.” What’s next: As online grocery penetration levels out in a post-pandemic world and consumers find a balance between in-store trips and online ordering, retailers need to focus on understanding the differences in the consumer’s path to purchase by channel. Retail media, particularly in e-commerce, can help retailers and brands guide consumers towards trending products and categories. As the online channel matures, stores will become more important to the retail ecosystem, so investing in both channels is important to the holistic future of brands. Retailers should test the correct balance of staffing in-store and online or delivery functions to ensure that the customer experience is seamless across both channels.

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