The Supply Side: Despite digital grocery growth, ‘stores are still king’

Digital grocery shopping exploded in 2020 amid the COVID-19 pandemic, accelerating by an estimated five years, according to the IBM Retail Index. But as vaccines reduce COVID’s spread, retailers and suppliers are left to wonder what comes next.

Fayetteville-based tech/marketing firm Field Agent recently surveyed its nationwide agent pool to map out what shopping behaviors will stick and report on the state of digital grocery in 2021. The survey findings showed that 98% of agents still shop inside stores despite 58% saying they also buy some grocery items online.

“Stores are still king,” the report states.

Almost half of the agents said they used curbside pickup outside of local stores, and 31% said they used online apps to place the order, but picked up inside the store. Despite an abundance of delivery options, just 21% said they chose this option. The same number said they order some consumables for direct-to-home shipments, and just 3% said they are using their smart speakers to place orders for consumables. Field Agent said respondents were asked to select all the ways they order groceries and consumables, and the data indicates most use multiple shopping options.

Field Agent CEO Rick West told the Northwest Arkansas Business Journal that retailers have to be able to serve shoppers who want and expect the best of both worlds — physical and digital. He said retailers also have to continue resolving issues for the aging demographic, the working family and new households, and deliver on service, value and shopping experiences to each respective shopping group.

Field Agent found just 11% of those surveyed are purchasing more than half of their food and consumables online. But 21% said their online grocery purchases ranged from 11% to 50% of their total grocery spend. One in five said they make no grocery purchases online.

While the growth of online grocery has been robust in the past year, analysts largely believe growth will flatten this year as consumers are eager to get out again.

The respondents are also shopping more than one retailer for digital purchases for food and consumables. Walmart was the biggest digital grocery winner with 76% of the respondents buying at least some groceries for pickup or delivery. Target was also popular with 52% reporting some digital grocery purchases. Amazon garnered 39%, and Kroger and Sam’s Club each got 27% of the online grocery business. Instacart, when fulfilling through any retailer, got 22% of the agents’ purchases. Discounters Aldi and Costco each came in at 15%, and Whole Foods was 13%. Regional brands like Publix, Meijer, Albertsons and H-E-B had between 6% and 7% of the respondents’ digital grocery business, according to the report.

Field Agent also found no matter how much retailers train their personal shoppers, consumers still want to pick out their own produce and meats. Toothpaste was an item that 68% of the cohorts said they bought online, followed by potato chips and salty snacks at 63%, breakfast cereal at 62%, and canned foods at 61%.

Personal hygiene and over-the-counter medications were purchased digitally by slightly more than half of the survey respondents. They did become more comfortable ordering bread, milk and alcohol online as the pandemic progressed in 2020. Just 31% said they order meat and fresh products online, while 8% said they don’t order any food items online.

With consumers determined to return to stores in 2021 to do more shopping for themselves, 46% said they will keep their social distance from other shoppers, and 41% said they will continue to sanitize shopping carts. While consumers want to go back to stores, 40% said they will make fewer overall trips in the future, keeping larger quantities of foods and consumables at home.

Nearly 20% said they plan to spend more on groceries as they have become accustomed to eating more meals at home. Also, 15% said they plan on shopping at different stores than they did before the outbreak, and 13% said they intend to use delivery services more often for their digital grocery purchases.

The biggest challenges consumers have with using digital grocery are the lack of control of what is picked (58%) and the inability to use coupons or take advantage of store promotions (52%). Fees and the cost of service are problems for 43% of the respondents, and the same number of people said they also worried about the quality of substitutes for items out of stock. The minimum purchase requirement was a deterrent for 42% of the respondents, and 36% had order accuracy concerns.

West said retailers were able to grow their digital grocery businesses at light speed because of the pandemic. Those who made substantial investments in digital grocery pickup like Walmart and Target ahead of the pandemic were two of the biggest winners. He said most everyone is now in the game, and holding on to market share will become more of a challenge as the world returns to some version of a new normal.

“Stores are important,” West said. “Amazon did not buy Whole Foods because they wanted lockers. They needed a brick-and-mortar footprint and cold supply chain. Retailers have to win inside the box and outside of the box, and they do that by solving shopper needs, delivering on value and experience.”

He said retailers are now in a race to win the increased wallets of consumers following federal stimulus and a record-level savings rate. He expects more advertising as retailers try and keep core shoppers’ increased spending and try and lure others into their fold. He said loyalty programs will be one way that retailers entice shoppers to spend more. Walmart+ continues to add perks for its subscribers that now include discounts on common prescription medications with some being free. Amazon answered that announcement with news it will begin offering a six-month supply of selected prescription medicines for as low as $6 for Prime members.

Outside of food retail, West also predicts back-to-school and holiday shopping will be huge for retailers because of the increased spending power.

“It’s a race to the pocketbook before the money is gone,” West said.

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.