From the time humans abandoned a hunter/gatherer life style, food markets, in one form or another, have been essential to survival. The pandemic reminded us just how essential grocery stores have become in our daily lives. Prior to the pandemic, many of us took grocery stores for granted, along with the employees who work in them. That is no longer the case. Although debates are flaring about paying essential grocery workers hazard pay (e.g., Kroger is closing underperforming stores in Washington and California and blaming the closures on forced hazard pay), there is no doubt those workers have served the public well. Protecting employees and customers has been a priority for most stores.

Jeff Wells (@JeffWellsWH), the Senior Editor at Grocery Dive, writes, “The pandemic has changed the in-store shopping experience, requiring customers to follow protocols like mask-wearing and traversing one-way aisles as they quickly go about their business. But what was a highly fraught experience in the early months of the coronavirus crisis is beginning to normalize, and though it will take time, I expect shoppers will eventually return to their pre-pandemic shopping routines.”[1] He adds, “What has changed for good is online shopping.”

The future of online shopping

“Those nervous initial months [of the pandemic] pushed millions of consumers towards e-commerce,” Wells writes. “Several months later, many of them have stuck around.” Wells’ seemingly contradictory comments — “shoppers will eventually return to their pre-pandemic shopping routines” and “online grocery shopping has changed for good” — highlights the conundrum facing grocery store owners. They are asking: What does the future of grocery look like? Is online grocery shopping going to continue to grow? Russell Redman, Senior Editor at Supermarket News, reports a study by grocery e-commerce specialist Mercatus and research firm Incisiv, concludes, “Online grocery will swell to 21.5% of total U.S. grocery sales by 2025, more than doubling its current share of the overall grocery market.”[2] If that prediction proves correct, it means many shoppers won’t return to pre-pandemic shopping patterns.

It needs to be pointed out that, even during the height of the pandemic, most grocery shoppers were not taking the digital path to purchase. Journalist Rosie Bradbury reports a survey commissioned by micro-fulfillment company Takeoff Technologies found, “Consumers who buy groceries primarily in person place a greater weight on price compared to online shoppers.”[3] The survey also found, “The most common demographic of online grocery shoppers were men who are the primary shopper for their household. Households of four and of five or more members accounted for the highest percentage of online shoppers, with 68% and 71% respectively shopping at least partly online. Accessing a large variety of products was not viewed by most shoppers surveyed as important, nor was speed of delivery, as long as it was made same-day.”

Although it sounds like the online grocery business is coming up roses, grocery industry journalist Sam Silverstein (@SilversteinSam) reports a survey by Brick Meets Click and Mercatus found, “Customer satisfaction with online grocery services plunged in January even as orders for pickup and delivery rose markedly. … Overall satisfaction dropped 32 percentage points during the month to 56% from a record high recorded in November, with pickup leading the way down.”[4] Grocery stores are likely to find those results only confuse the picture. From my perspective, however, the most important finding was, “U.S. online grocery shoppers spent $7.1 billion on orders for pickup or delivery in January, up 20% from the $5.9 billion they spent on those categories during November. More than 69.7 million U.S. households made online grocery purchases in January, with each household placing 2.8 orders on average. The online grocery segment remains brisk nearly a year after the onset of the coronavirus pandemic pushed unprecedented numbers of shoppers online.” Nevertheless, Silverstein notes, “Retailers are struggling to maintain customer loyalty even as they scale services like store pickup.”

Will online grocery shopping maintain its upward thrust?

Two different online grocery trends deserve further attention. First, online grocery services involving normal grocery shopping; and, second, online ordering of meal-kits. Freelance writer Kelsi Maree Borland (@KelsiMaree) reports most predictions are that online grocery shopping will continue to grow. She writes, “The pandemic has transformed the online grocery channel from a middling category to one positioned for explosive growth.”[5] She explains:

“Online grocery sales are expected to increase 53% by the end of the year, according to research from eMarketer, totaling $89.2 billion. This is an increase of $30.9 billion compared to the previous year. This trend is expected to continue. The report estimates growing online grocery sales over the next three years. By 2023, sales are expected to hit $179.2 billion annually, and will make up 10% of total grocery sales. eMarketer isn’t the only outlet predicting online grocery shopping growth beyond the pandemic. Aki Technologies and TapResearch conducted a survey of current online shoppers, and 68% responded that they expect to continue shopping online after the pandemic. The survey reported that the combination of increased shopping from existing buyers and the entry of new buyers created a perfect storm for growth. They called the growth ‘astronomical’.”

Those reports track with the study cited above by Redman. Redman adds, “For 2020, online grocery’s percentage of the $1.04 trillion grocery market is pegged at 10.2%, or about $106 billion, up from 3.4%, or $34.54 billion, of the $1.02 billion market in 2019, according to the study. … By 2025, online grocery’s dollar share stands to climb to $250.26 billion of the estimated $1.16 trillion overall grocery market.”

Concerning the second version of the online grocery business, meal-kits, Robert J. Bowman, Managing Editor of SupplyChainBrain, writes, “Meal-kit delivery services, already on a steady growth curve prior to this year, have seen sales explode with the coming of COVID-19. Now they’re scurrying to keep pace with demand — and hang on to their customers.”[6] He continues, “Prior to the pandemic, the industry was looking at a bright future. In 2018, the U.S. market had already topped $1.3 billion, according to Grand View Research, and was expected to grow at a compound annual rate of 12.8% from 2020 to 2027. A December, 2018 survey by Peapod found 77% of Americans preferring a home-cooked meal over going out to dinner, and 20% of those respondents said they planned to try out meal-kit delivery services.” Despite those optimistic numbers, Bowman writes, “[There are] concerns about the industry’s long-term prospects. One was the ever-growing field of players, amid questions about the profitability of a business model that relied on a steady supply of fresh, perishable food, extensive menu variety, precisely timed deliveries, and the logistics of sourcing from multiple producers, many of them local to regional markets. In addition, early entrants were having a hard time holding on to customers. A 2017 report by Statista found that only 29% of users stuck with the services after one year.” Although the pandemic has helped meal-kit providers, Bowman states, “Customer retention remains an issue, the industry is hoping that the current trend will stick when the disease subsides.”

Concluding thoughts

For the most part, the future of online grocery shopping looks bright. Nevertheless, Catherine Douglas Moran (@c_douglasmoran), Associate Editor at Grocery Dive, writes, “Successful online grocery retailers will need to focus on meeting customers’ expectations and seamlessly offering online and in-store shopping.”[7] Neil Stern, senior partner at the retail strategy and consulting firm McMillanDoolittle, told Moran, “Even with the challenges posed by refrigerated, frozen and perishable products and the industry’s typically low-margins, grocers have an incentive to turn to online grocery as they look to maximize efficiency and profitability.”

Footnotes
[1] Jeff Wells, “Pardon the Disruption: 5 e-commerce trends supercharged by the pandemic,” Grocery Dive, 5 October 2020.
[2] Russell Redman, “Online grocery to more than double market share by 2025,” Supermarket News, 18 September 2020.
[3] Rosie Bradbury, “Consumers foregoing online grocery are motivated by price, report finds,” Grocery Dive, 15 September 2020.
[4] Sam Silverstein, “Satisfaction nosedives for online grocery services in January even as sales surge,” Grocery Dive, 23 February 2021.
[5] Kelsi Maree Borland, “Can Online Grocery Sales Stay Robust After the Pandemic Ends,” GlobeSt.com, 23 November 2020.
[6] Robert J. Bowman, “Meal-Kit Delivery Services Are Riding a Wave of Demand. But Will It Crash?” SupplyChainBrain, 16 November 2020.
[7] Catherine Douglas Moran, “Online grocery will leap to $250B in 5 years, report says,” Grocery Dive, 18 September 2020.