Digital grocery sales are accelerating at a record pace with no sign of slowing down.
The grocery industry is an enormous market in the United States. It is part of the food retail industry, which brings in a whopping $6.22 trillion in sales a year. Grocery alone makes up close to $700 billion of that total.¹
Grocery has seen significant growth in 2020 when many other businesses suffered due to wide-scale shutdowns and government regulations. Because grocery was considered an essential business, stores were able to stay open. As a result, grocery e-commerce (or eGrocery) sales skyrocketed as the demand for contactless and digital orders spiked.
No one expected to see this amount of growth in such a short time for an industry that hasn’t shown much innovation in recent years. New data from Brick Meets Click stated that online grocery sales reached $9.3 billion in March, up 16.3% from $8 billion in February and matching the record $9.3 billion total in January.
It’s evident that shopping for groceries online is in very high demand among consumers. Grocery consumer behavior is being changed by digital trends with a focus on three key areas: convenience, quickness, and cost.
Today’s consumers care more than ever about convenience. While this is true of many industries, some 63% of shoppers say that convenience is very important when shopping for grocery items.² This statistic was released before the pandemic hit, where convenience became king due to shelter-in-place and other restrictions. Meaning, there was already a growing trend toward convenience in grocery before 2020.
This is partly because technology, like mobile devices and online shopping in other arenas, has rewired our brains. IBM coined a term called “micro-moments” to explain the phenomenon of consumers shopping on mobile devices while doing something else. Customers expect to shop any time it’s convenient for them. This is common in retail but is a newer reality in grocery. However, since online shopping is always available for almost everything else, it didn’t take much for consumers to shift that expectation and behavior to grocery.
In addition to being able to shop from anywhere at any time, customers also expect a variety of fulfillment options to be available, like curbside and delivery. Shoppers expect their items to be ready in a timely manner and around their schedules. They want to be able to order groceries in the afternoon and have them delivered in time for dinner that evening.
That’s a tall order for grocery stores to fill, especially with rising labor costs and other challenges brought about by online and delivery fulfillment. These big grocery players obviously have more capital to leverage in the race to offer the quickest delivery options.
Kroger has made significant steps towards offering “anything, anytime, anywhere.” Earlier this month, Kroger opened its new 375,000-square-foot customer fulfillment center (CFC), which uses robotics, artificial intelligence, and automation to create faster fulfillment and delivery options. Amazon entered the grocery space a few years ago when they purchased Whole Foods and opened their cashierless Amazon Go stores. Walmart, Target, and other giant retailers are also offering grocery sales online. Walmart is also experimenting with offering same-day delivery by utilizing self-driving vehicles.
As the major players continue to make strides towards faster delivery, it will further change the expectations for consumers. Independent grocers can still compete effectively by partnering with 3rd party delivery services and offering curbside pickup for online orders.
Advances in eGrocery have brought about increased competition. With many brands offering online purchasing, there is now even greater transparency on prices. Shoppers are able to easily compare pricing on grocery items from each of their favorite stores. This can create price elasticity in some cases and is an area in which brands will need to have an increased focus.
For the market leaders, like Walmart, Kroger, and Amazon, this is less of a concern in some ways because these bigger companies have economies of scale on their side. Smaller regional chains may have a harder time keeping up, as operational costs will likely increase in an effort to go digital. Delivery services also add cost to online orders, which is an area that may become an important concern for grocers.
Digital Transformation in Grocery is Just Beginning
The grocery industry is currently going through the most dramatic digital transformation to date. As technology advances and becomes a greater part of our lives, its impact will reach even further into this space. With increased expectations and changing consumer behaviors, grocery stores need to be mindful of increased costs.
A predictive demand planning solution built on the latest machine learning and AI capabilities is the foundation of a modern eGrocery ecosystem. Regardless of what technologies are employed, grocery retailers still need to make sure they understand true demand and that they have enough inventory on hand to fulfill orders. 4R Systems’ suite of supply chain solutions can help your grocery business increase sales and capitalize on digital opportunities. Contact us today to learn more about 4R for Grocery.