None of us can fathom yet how deep is the novel coronavirus’ impact on the retail economy. But when you take a look at the numbers two changes rise to the front a) people are shopping online more for apparent reasons and b) purchasing priorities have shifted from luxury items, apparel, recreation and travel they are buying medical supplies, at home fitness gear and groceries. When you peer closer at groceries, a fact jumps out. Spending has soared across all four consumer segments that emerged due to the pandemic – those who are making deep cuts in spending, those who are saving more, those who are continuing to spend as normal, and those who are spending more
Increased grocery spending by all 4 types of consumer segments
Now, when you combine the two things – more online purchases and more grocery spending – you end up with an obvious result. Online grocery shopping has rocketed. How much? By 30-35%.
To give you a clearer understanding of how drastically COVID-19 has changed grocery e-commerce, here are some before and after figures.
The Scenario That Was
Before we started fighting this unseen adversary, a rare few US consumers shopped online for groceries. Just about 3% or 4% of grocery spending was online.
The Current Lay of The Land
After people got stay-at-home orders, grocery e-commerce followed a sharp upwards trajectory. Bain & Company estimates that “at the[a1] height of the pandemic, online grocery sales increased as much as fivefold to between 10% to 15% of total grocery sales.”
So, the question now is, where are Americans choosing to spend their hard-earned cash within the grocery niche?
What are Consumers Buying Online During COVID-19?
With people turning to survival mode, you’d expect sales to pick up across the grocery board. But that’s not been the case. Packaged, processed food; frozen food; and specific items in fresh produce saw an inevitable increase.
The entire packaged food niche grew by 377% as shelf-stable and processed goods became the first choice for shoppers. For example, dried grains and rice saw a 386% rise from last year, while oat milk underwent 305.5%-dollar growth.
|Product||% increase in March 2020 as compared to 2019|
|Jerky & Dried Meats||187%|
|Chips & Pretzels||186%|
|Nut & Seed Butters||163%|
|Dried Fruit & Raisins||120%|
Frozen foods shot up by 28.7% when you compare the week ending April 19th to that of 2019. Frozen convenience foods sales like pizza have spiraled by 80.3%, and even frozen fruits saw a marginal 7% increase.
The most selling categories since the COVID-19 outbreak have been ice cream, seafood, and complete meals.
This category has undoubtedly picked up, but fresh vegetables have been outperforming fresh fruits continuously, with potatoes leading the way. Their demand rocketed by 42% in March.
What else are US consumers buying?
Where are Consumers Buying Online Groceries During COVID-19?
Now that I’ve shed some light on what groceries people are buying, the next logical question is where they are shopping. Walmart seems to be the preferred choice among new online grocery shoppers as it offers both delivery and buy-online-pick-up-in-store (BOPIS). To keep up with the orders, the grocery powerhouse had to hire additional 50,000 associates.
Where are the first-time online grocery shoppers shopping?
That is not to say Amazon Fresh and Whole Foods hasn’t seen a surge in orders. The e-commerce giant not only had to delay shipping non-essential products but also cease accepting new grocery customers. It also augmented delivery from 80 to 150 stores, expanded delivery windows, and hired more warehouse workers. In recently released quarterly numbers, Walmart has reported 10% increase in same store sales increase.
There has been an uptick in demand for pure online grocers too. Downloads of the Instacart app rose an eye-popping 218% since last year.
While all the data indicates that consumer preference has shifted to online grocery purchase but it is too early to write epitaphs for brick and mortar retailers. If Walmart’s quarterly results are anything to go by, we will continue to grapple with uncertainty and buying behavior will remain erratic. Yet there are few things you can watch out for in the coming months based on the data we do have.
On the consumer end:
The behavioral shift towards online may not persist post-pandemic. As people adapt to a new reality, most will start to question the minimum order, service charge and tips that gets added over the grocery bills. Unless the ecommerce is able to reduce these costs and bring total bill value down, a large chunk of customers will fall back to offline.
Many will learn to maintain a safety stock of staple and stable items and more will opt for channels that limit in-store interaction like automated checkout and picking up in-store or at the curbside, thus reducing online’s sheen
On the retailer side:
Expect further expansion of contact less delivery services , a higher inventory of pantry staples, and adoption of tech that reduces risk to shoppers and employees. Curbside picking, automated contact less checkout and tech enabled safety measures (like video monitoring social distancing ) are some of the process changes introduced by brick & mortar retailers to gain back customer trust . The trust factor is imperative in short run. Any grocery company weather online or offline, that can utilize tech should do it far beyond after this current crisis has passed to utilize this temporary shift and make it the new normal.