The Supply Side: Digital grocery shoppers a minority today, maybe not tomorrow

Last year, roughly 31% of U.S. consumers were likely to purchase groceries online. Overall, U.S. grocery stores rang up $641.04 billion in sales last year, with roughly $14.2 billion originating online, according to Statista.

Amazon was the winner in online grocery last year, garnering more than $2 billion in grocery sales, and Walmart was not too far behind, according to One Click Retail. Walmart does not break out its online grocery sales from those made in stores.

However, online grocery was a major contributor to Walmart’s 44% increase in e-commerce sales growth last year. Walmart expects e-commerce sales will grow 40% this year, partly because it is adding another 1,000 locations for online grocery pickup, giving the retailer roughly 2,300 access points for the service.

Billions of dollars are being invested in online grocery capabilities by Amazon, Walmart and most major grocery players because of the potential market share up for grabs. Nielsen reports consumers could spend $100 billion a year on online grocery by 2022. That’s equal to $850 per U.S. household. In 2015, Nielsen predicted digital food retailing would reach saturation in 10 years. After the growth in 2017, the estimate has been readjusted, pegging it between five to seven years when as many as 70% of consumers will regularly purchase groceries online.

DIGITAL SHOPPER PROFILE
Fayetteville-based Field Agent recently conducted a survey of 9,088 U.S. consumers seeking to assess the demand for online grocery and profile today’s digital shopper. Field Agent found only 18% of shoppers purchase fresh groceries online, and 26% go online for packaged groceries.

As other categories like apparel, household decor and pet food have shifted online, the industry is bracing itself for the grocery migration to digital as the tipping point is coming. Field Agent identified 1,848 shoppers in the survey who represent their profile of the “digital shopper.” These consumers purchase “everyday” items like groceries and household consumables online. They also rely on digital e-commerce to satisfy many of their daily needs.

Field Agent found the digital shopper buys 100% of groceries and household consumables online, 90% of their clothes, 81% of personal electronics and 79% of their footwear. They also purchased a majority of home goods and personal entertainment using digital means.

The survey found 80% of its digital shoppers purchased groceries and household consumables from Amazon, and 71% are Prime members. Walmart was a shopping destination for 71%, and 42% said they shopped Target. While 74% of the digital shoppers said they purchased more than one-tenth of groceries and consumables, just 16% bought more than half of items online. In-store pickup was used by 72% of those ordering online, 68% said they got packages delivered and 47% used curbside pickup.

SHOPPING BEHAVIORS
The survey found shopping behaviors varied among consumers as 59% created a shopping list before shopping online, while 12% prefilled their digital shopping carts with planned purchases. Also before shopping, 57% inventoried their pantries and fridge, and 38% said they did this while shopping online. One in five looked for digital coupons prior to shopping, and 13% compared prices with competitors.

Nearly seven out of 10 (69%) said they shopped and purchased everything in just one session, while 10% said they completed the shopping in three or more sessions. Just 7% said they complete some shopping through auto-refills. The top categories shopped by this group were fresh produce (65%), chilled dairy products (65%), salty snacks (38%), fresh meat (34%) and canned goods (33%). The survey found 39% didn’t buy fresh produce online because they preferred to inspect it themselves.

A majority (57%) bought mostly what was on their shopping list, 29% stuck to shopping lists and purchased no extras, but 65% said they made at least one unplanned purchase. The top items among unplanned purchases included fresh products (31%), salty snacks (23%), frozen meals (18%) and candy/chocolate (14%).

The survey found 59% of the cohort were likely to make an in-store trip to complete shopping. The main reasons for the in-store trip included:
• 37% going to another retailer;
• 33% didn’t like buying some items online;
• 33% wanted to use coupons and take advantage of sales;
• 24% said they forgot to order something online; and
• 22% said some of items on this list were not available online.

RETAILER RACE
The digital shoppers in the study made purchases with Walmart Pickup (59%), Kroger-Instacart (15%), AmazonFresh (7%), Target-Shipt (3%), Meijers-Shipt (3%), Fred Meyer-Instacart (2%), Publix-Shipt (2%), Sam’s Club-Instacart (1%), Costco-Instacart (1%), Google Express (1%), Whole Foods-Instacart (1%), H-E-B-Instacart-Shipt (1%). Aldi-Instacart (1%), HyVee-Pickup/Delivery (1%), and Sprouts-Instacart (1%).

The digital shoppers in the survey gave the retailers ratings based on their level of satisfaction. Kroger garnered the highest mark at 94%, Walmart received a 92% and Amazon scored 91%. Overall, the ratings averaged 91% satisfaction.

While online grocery is growing in the U.S., it still lags the penetration level of other countries like the United Kingdom or Australia. Field Agent found shoppers in the U.K. bought 55% of their personal care items, 42% of cleaning supplies, 44% of packaged grocery and 45% of fresh grocery online. Australia has similar penetration levels. U.S. consumers bought 45% of personal care items, 32% cleaning supplies, 26% packaged groceries and 18% of their fresh groceries online.

The clothing category’s online penetration gaps have quickly narrowed between the U.S. and U.K. in the past couple of years at 73% and 84%, respectively. Experts believe the gaps in grocery and consumables will also narrow as more consumers begin to have access to online grocery shopping.
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Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.