Online grocery purchases comprise about 3.4% of total sales for supermarkets offering the service, but that average is improving to 5.2% for retailers with the service for a minimum of four years, according to a new report from Brick Meets Click. The report indicates same-store sales for online grocery orders grew 26% year-over-year.
Wal-Mart’s expansion of online grocery to more than 1,000 locations this year is fueling that growth. Kroger has also expanded its curbside service and Amazon continues to push more grocery sales. David Bishop, partner at Brick Meets Click, said the strong annual growth indicates e-commerce is becoming an important contributor to supermarket sales.
“This growth in supermarket e-commerce comes just as the online grocery battle between Amazon and Walmart is intensifying,” Bishop said. “The good news is that supermarket e-commerce growth was happening even before Amazon announced their purchase of Whole Foods. The rapid deployment of a number of different Walmart initiatives reveals that the company considers online grocery an important gateway to their e-commerce growth.”
He said increased competition in grocery is not only pressuring grocery retailers to delve into e-commerce, it’s requiring retailers to master the service. The report included a scorecard based on online transactions over a four-week period ending March 2017. The scoring involved nearly 200 stores operating under 26 retail banners, Bishop said.
“While some food retailers have moved cautiously into e-commerce, adoption is now accelerating, driven partly by the increased share of households who are regularly buying groceries online. This research found that 24% of shoppers bought groceries online in the last 30 days, up from 22% two years ago,” Bishop said. “Other signs of accelerating adoption include the average number of online transactions per store is up almost 20% from last year and total online sales are growing year over year at over 25%.”
Bishop said the average size of supermarket online transactions during the research period was $148, which is 5% higher than last year’s report. Data also indicates customers are getting more comfortable buying a brand range of items. Some of the observations in the Brick Meet Click report include:
• Two-thirds of the transitions in the research period included meat/seafood and deli items;
• 85% of orders involved produce; and
• Almost half of the orders included bakery items.
Fresh produce, meat and bakery were areas that consumers initially felt uneasy about having someone else pick for them. Bishop said edible grocery, dairy and frozen foods were also purchased the most frequently during the four-week research period.
While there is a lot emphasis on home delivery, 66% of the stores in this report offered only pickup, 2% offered delivery only and 32% gives customers both options. Bishop said customers when given the option chose delivery 74% of the time verse pickup just 26% of the time.
Areas of concern revealed in the report were lost sales from out-of-stocks. The average retailer experienced a 3.3% loss in online sales because of out-of-stocks when there was not a suitable substitute available. Bishop said lost sales in edible grocery were 38% of all lost sales given the size of this category. The general merchandise category generated about 2% of the total lost sales.
Shopper attitudes around online grocery were gathered by Fayetteville-based Field Agent earlier this year. Field Agent surveyed 1,100 U.S. consumers. The survey indicated 46% of the households purchase groceries online. In five years, 71% of the respondents expect to conduct more of their grocery purchases digitally. Four in 10 expect to make fewer store trips in the coming years.
The Field Agent report also noted 54% of consumers said they “never” buy online. One-quarter of them said buy about 5% of their household’s total groceries online, 9% buy half of the household groceries online, and just 1% buys all groceries online.
The primary concerns among consumers shopping online for groceries included:
69% – Not personally picking fresh items / quality concerns
61% – Not being able to see or touch the product before buying
58% – Lack of sales promotions
51% – Minimum purchase requirements
50% – Needing grocery items immediately
40% – Out of stocks and unsuitable substitutes
39% – Accuracy of orders
19% – Time it takes to shop online and pickup the order
13% – Lack of human assistance or contact in the process
Consumers in the Field Agent report also indicated there were more likely to buy certain items online over fresh foods. That list includes:
74% – Toothpaste
72% – Feminine Hygiene
70% – Over-the-counter medicines
50% – Chocolate
48% – Alcohol
35% – Bread
25% – Milk
25% – Bananas
24% – Ice Cream
23% – Tomatoes
22% – Chicken breasts (not frozen)
Field Agent asked respondents to rate the retailers where they purchased groceries online. At Wal-Mart, the online grocery pickup received a 90% approval rating for being a “very good or good” overall experience. The retail giant had an 85% approval rating on the fresh products being, “extremely or very fresh,” with 80% saying their orders were correct the first time.
The good news for Walmart U.S. is that 90% of respondents said after using the service they’d prefer to use grocery pickup over shopping inside a physical Walmart store.
Amazon offers grocery pickup and delivery in certain markets. Consumers using AmazonFresh pickup gave the service a 90% approval rating of “very good or good.” Also, 95% said their fresh items were “extremely fresh” and 70% said their AmazonFresh orders were delivered within two minutes of arriving at the pickup site. Amazon also garnered an impressive 100% accuracy rate on first orders, but just 50% said they would be “completely likely” to use the service again. About 25% said they would be “very likely” to use it again.
On the delivery side, Amazon fared well, with 58% of new users saying they will continue that method of shopping in the future. About 95% of the customers reported on-time deliveries and 80% said the condition of their groceries were “very good” while 75% rated the fresh items as “extremely fresh.”
Jet Fresh was also reviewed by Field Agent which evaluated the retailer’s grocery delivery services in New York City, New Jersey, Connecticut, Pennsylvania and Washington D.C. Jet’s results were mixed with the retailer getting an 81% overall rating on the condition of the groceries as “very good.” Right at 95% of orders were delivered on time but just 33% said the fresh items were “extremely fresh.” That said, 52% did rate the freshness as “good.”
Just 37% of the respondents said they are “completely likely” to use the service again. Slightly more than half (52%) of respondents said they did prefer Jet Fresh delivery to shopping at a brick-and-mortar store.