Table of Contents:
- What is the impact of the Pandemic on Grocery E-commerce?
- What is the future of online grocery shopping?
- What are the key drivers for online grocery growth?
- How grocers can win in e-commerce—delivering on both growth and profitability
- Implications for other businesses
The COVID-19 pandemic acted as a catalyst that catapulted the grocery e-commerce market to new heights. As consumers become more comfortable ordering food and goods online, retailers must place a greater emphasis on establishing a digital presence, especially during times of crisis, such as a global epidemic.
Since the start of the pandemic, consumer preferences are changing. While the demand for electronics is decreasing, the demand for food and grocery items increased drastically. This presented a huge challenge before the grocery retailers to shift their already existing marketplace and incorporate an omnichannel strategy.
- In 2021, the global food market generated around 8.27 trillion U.S. dollars in revenue
- $89.2 billion was the estimated spend on online groceries in 2020
- With total downloads of some online grocery shopping apps exceeding 200%, the grocery delivery industry is booming
- People tend to spend nearly $40 more when doing grocery shopping online
- 22% of consumers shop online for groceries at least once a week
- 45% of Millennials do their grocery shopping online
Now that the pandemic has entered its endgame with many countries lifting the restrictions, customers are more likely to purchase groceries online rather than visiting stores in person. To stay in the game, marketers need to adopt e-commerce strategies to maximize their reach in the grocery market.
What is the impact of the Pandemic on Grocery E-commerce?
With the rise of e-commerce, the convenience of consumers has also increased. For example, it is more practical to purchase products with a single click/tap and have them shipped to the home than to collect them up in stores.
Nonetheless, COVID-19 had a significant impact on changing customer behavior. It altered how we socialize, our hobbies, how we work, and even how we use our free time. This pandemic has accelerated growth in the consumer internet sector, which is now anticipated to increase manifold in the coming years. It also changed consumers’ shopping and groceries priorities.
Consumers are increasingly turning away from traditional stores due to concerns about their safety. Consumers embraced more modern technologies to assist meet their needs for perishable foods.
These are some of the significant trends that are leading to the potential expansion of online groceries. One of the additional benefits is that these markets offer grocery 24 hours a day, seven days a week, and offer a wide range of services that are suitable for whatever type of lifestyle a consumer may have.
What is the future of online grocery shopping?
The future of grocery e-commerce is here, but it is not dispersed fairly. The advancement of technology and other ways to make shopping more of an experience, whether in-person or digital, will have an impact on the future of groceries.
COVID has accelerated the need for grocers to iron out the wrinkles in online delivery, but many grocers still have a lot of work to do to prepare for the future.
- Warehouse automation can also save time and money. A well-automated storage system should ensure that groceries flow is efficient, dependable, and quick. Picking automation eliminates human mistakes; automatic barcode scanning reduces the requirement for human labor while also ensuring that the system is always up to date.
- AI is a second important area for innovation. A powerful artificial intelligence can learn (acquire data and rules), reason (apply rules to data), and self-correct (learn from mistakes).
- Other improvements include a solution for consumers who do not have a credit card to purchase online, as well as solutions aimed at boosting conveniences, such as quicker shopping periods and easier navigation across online retailers.
What are the key drivers for online grocery growth?
With huge competition and a list of e-commerce giants trying to take their slice of the cake in grocery e-commerce, smaller businesses can make full use of strategies to expand their operations. Following are 4 key drivers for online grocery growth:
With the network of grocers at various stages of e-commerce maturity, as well as pure players like Amazon and third-party providers like Instacart, the offline share is not an indicator of the “fair share” of the online market.
Grocers who develop a unique value proposition that balances overall cost to consumers (including premium pricing, delivery and service fees, and gratuities) with appropriate product selection and a simple user experience are better positioned to boost online traffic and generate larger baskets.
Customers’ Omnichannel Value Should Be Prioritized.
When compared to physical establishments, the profitability of e-commerce will remain difficult. Grocers can build loyalty, tailor offers, and allow customers to visit physical stores. This boosts the frequency and basket size of online purchases, on the other hand, stands to gain a major edge.
Grocers are also beginning to test in-store programs and discounts to attract customers to their online ecosystem. Even though grocery e-commerce poses a threat to offline businesses, winning grocers have been able to improve their total share of wallets with existing consumers by 20 to 30 percent by implementing an omnichannel retailing approach.
Monetizing Digital Assets
Grocers are aiming to monetize their digital assets by discovering different avenues to work with consumer-packaged-goods (CPG) firms, just as they have done with in-store assets through end caps, off-shelf placements, and more.
Simultaneously, CPG firms are trying to invest disproportionately in digital (around 1 to 5% of sales) to stimulate growth. This dynamic opens up new revenue streams for grocers from CPG firms looking to obtain digital space for promotions, priority product placement on UX design, and media distribution, as well as to investigate data-sharing ventures.
Innovation in Order fulfillment
Grocers must optimize the mix of third-party and in-house delivery capabilities to build the necessary infrastructure to meet consumer expectations while remaining cost-effective and agile. To enable future development, in-house fulfillment operations will require the correct technology.
Many grocers, for example, are going toward micro-fulfillment centers to boost e-commerce pick capacity in their existing locations without building huge, capital-intensive automated warehouses. Similarly, supermarkets are increasingly experimenting with gig platforms and outsourced-driver models to meet instant and same-day e-commerce demand.
How grocers can win in e-commerce—delivering on both growth and profitability
Grocers must establish an integrated value offer that matches consumer needs while protecting their profitability to flourish in the next grocery e-commerce horizon. Customers want to save money, eat healthier, rediscover their love of cooking, and get the greatest deals more easily.
An advanced digital presence (both app- and web-based) may help grocers showcase their variety, tailor their promotions, and engage consumers in a more substantial manner. Organizations, particularly merchants who have historically underinvested in digital capabilities, expect to make strong investments to support these responsibilities.
However, simply reframing the value proposition is insufficient. Retailers must offer cheaper prices, lower minimum order requirements, protect quality and freshness, and expand the range and discoverability of their assortments to attract more customers to grocery e-commerce.
Implications for other businesses
While many of these guidelines apply to all grocery wholesalers, the rapid rise of e-commerce has important additional consequences for many ecosystem players. Aside from Amazon, other markets for shoppers include Cornershop by Uber and DoorDash. Investments in rapid delivery continue to flow in, with various players such as Instacart, GoPuff, Gorillas, and JOKR now testing and delivering delivery in less than 30 minutes.
Third-party marketplaces that are digital-native have seen tremendous expansion in recent years. They now have the opportunity to apply their technical skills to ensure that their partner companies have access to the greatest digital technology and customer experiences.
Another focus will be to improve efficiency and lower consumer costs by accelerating the deployment of technology (such as micro fulfillment), increasing batching of supermarket e-commerce purchases on delivery milk runs, and sharing delivery resources between vehicles and drivers.
Since the pandemic started, the preferences of shoppers have shifted from offline to online. This is true for groceries as people are less likely to spend time in stores now. Marketers need to incorporate robust technologies and effective grocery e-commerce strategies to have an edge over the competition and serve their customers better. In fact, the more advanced online stores are going to flourish in the near future as more and more technological advancements take place.
Deepak Wadhwani has over 20 years experience in software/wireless technologies. He has worked with Fortune 500 companies including Intuit, ESRI, Qualcomm, Sprint, Verizon, Vodafone, Nortel, Microsoft and Oracle in over 60 countries. Deepak has worked on Internet marketing projects in San Diego, Los Angeles, Orange Country, Denver, Nashville, Kansas City, New York, San Francisco and Huntsville. Deepak has been a founder of technology Startups for one of the first Cityguides, yellow pages online and web based enterprise solutions. He is an internet marketing and technology expert & co-founder for a San Diego Internet marketing company.