Grocery E-Commerce — Opportunity Remains

Originally printed in the June 2021 issue of Produce Business.

By Anne-Marie Roerink, President, 210 Analytics

Grocery e-commerce has been an area of growth for many years. In 2017, the online portion of total food and beverage sales was a mere 3.3%. Come 2019, that had grown to 6.0% or $31 billion. The pandemic prompted not only further growth of e-commerce, but a rapid acceleration. By the end of 2020, e-commerce made up 9.5% of all food and beverage sales in the U.S., reflecting annual growth of 84%, according to IRI.

Even so, online food and beverage sales trail non-food by a wide margin. Non-food CPG ecommerce reached $105 billion in 2020, now reflecting 31% of all dollars sold. This signals both an important gap and growth opportunity for food and beverage e-commerce.

E-commerce engagement

The $26 billion increase in U.S. e-commerce sales was based on more people buying online, existing customers buying more each trip and people buying food and beverages online more frequently — the trifecta of growth. In 2019, 47% of consumers had purchased groceries online. In 2020, that share rose to 64%, according to research by 210 Analytics.

However, many shoppers have increased their order frequency over the past year. Online weekly orders rose from 5% in 2019 to 11% in 2020. Likewise, the share ordering every two weeks increased from 4% to 9%. IRI found that among new online shoppers as of the start of the pandemic in March 2020, 50% continue to buy online and about 20% have become heavy hitters. The online basket averages $74 versus $55 for the average in-store ring. Online shoppers are less price-sensitive and spend an average of 13% more per unit online versus offline for fresh foods.

E-commerce fulfillment types

As more retailers dialed up click-and-collect or delivery, ordering through the website of local brick-and-mortar retailers is by far the most popular way to buy food and beverages online. In 2020, 69% of all CPG dollars came by means of a website of a brick-and-mortar retailer. The second-largest share was generated by third-party delivery companies, such as Instacart, at 26% and the remaining 5% came from online-only food and beverage companies. The share generated through the online presence of brick-and-mortar retailers is not only the largest but also increasing. When looking at the same three-way split during just the month of December, 73% of dollars came from the online presence of brick-and-mortar retailers versus just 2% from pure online players.

Subsequently, click-and-collect — where the order is placed online, but the shopper picks up the order at the store — is growing the fastest. Another consequence is a changing basket mix. Due to click-and-collect and the acceleration of e-commerce during the pandemic, the online basket now includes more perishable items, such as meat and produce, with fulfillment by the trusted retailer. Fresh food e-commerce, that had lagged center-store and frozen, grew as much as 200% during the early months of the pandemic.

Brand, or basket, loyalty

More than four in five online consumers (82%) start with their past purchases when placing an online order, according to research by 210 Analytics. The longer someone has ordered online, the more likely they are to start with their favorites. After all, more frequent online orders means a greater level of curation in their past order history. But this also has great consequences as it is resulting in great brand, or perhaps more accurately put, basket loyalty. IRI studied a variety of brands and their share of wallet in store versus online. For each, the online loyalty was significantly higher. This means winning from the first click is crucially important as is having a strategy to create visibility for new items, seasonal offerings and flavor extensions.

The same goes for impulse items. There are many fresh categories that benefit from impulse purchases, such as fruit, floral and baked goods, and driving impulse online in the same vein as inspiring unplanned purchases in-store will be crucial to maintain spending. Brand and retailers have room to close the lost impulse opportunity that IRI places between 0.5% and 1% of omnichannel food and beverage sales by partnering on building baskets to further push underdeveloped impulse categories online.

The who

210 Analytics’ research shows that the core online grocery shopper are the older Millennials and younger Gen X-ers – shoppers right around age 40 who tend to be in their family-rearing and career-building years. With all the demographic changes, the items purchased online are changing too. The early adopters of grocery e-commerce, for example, had a high propensity for health and wellbeing, driving an above-average share of organic, grass-fed and other items consumers associate with health. And at the same time, their focus on saving time spurred above-average shares of convenience-focused items, such as value-added meat and produce. As a result of all of these buying tendencies, branded item sales in the fresh categories is higher online than offline, at +2% for fresh foods overall.

Some crystal ball

While online grocery shopping isn’t for everyone, 79% of those currently doing curbside pick-up and 73% of those who order groceries for delivery expect they will continue to do so the same amount or even more often post-pandemic. This means some shifting back from online trips to in-store, which is precisely what the market has been experiencing in the past few months. But even so, 19% of all trips are still online — vastly higher than pre-pandemic. IRI is expecting continued e-commerce growth, albeit at a bit of a milder pace. IRI anticipates the share of online food and beverage dollars to reach 12% by the end of 2021, up from 9.5% in 2020.

210 Analytics is the brainchild of principal and founder, Anne-Marie Roerink. The San Antonio market research firm’s services include customized market research and data analysis, marketing strategies and public speaking.