The novel coronavirus (aka Covid-19) outbreak has disrupted lives and businesses in countless ways. One result of the outbreak has been an upsurge in online grocery shopping. E-commerce analytics company Contentsquare reports, “Since the crisis began, traffic to online grocery sites has increased by +116%.”[1] Contentsquare’s CMO, Aimee Stone Munsell, commented, “As the public adheres to tougher social isolation measures, their behavior online shows they are making preparations to stay at home for an extended period of time. This has caused a major strain on some retailer’s supply chains as online grocery stores are struggling to keep up with demand, resulting in greater levels of traffic but fewer transactions for those sites.” Brad Tuttle reports the Covid-19 outbreak has produced a perfect storm of conditions. He writes, “Coronavirus guidelines say that people are supposed to maintain social distancing and stay home as much as possible. Even so, grocery stores are crowded around the country, and shoppers report that many items are sold out. At the same time, supermarkets have reduced store hours, to allow employees more time to clean stores and restock shelves. When you combine all of these factors together, there’s a great argument that right now is the perfect time for people to order groceries online. There’s just one problem with this plan, however: It’s really difficult to successfully order groceries and get them delivered at the moment.”[2] The big question is whether consumers will continue to shop for groceries online once the pandemic subsides.

Grocers are having a difficult time meeting demand

It should come as no surprise that grocers are having difficulties meeting the demand for current online orders. Last fall, before the pandemic was even a blip on the horizon, Jessica Dumont (@JLDumont6) reported, “Online grocery sales … now account for 6.3% of U.S. households’ total grocery-related spending, according to a new analysis from Brick Meets Click.”[3] That percentage leaped dramatically once people understood the seriousness of the current pandemic. Adam Levy (@admlvy) reports, “Social distancing has more people shopping for groceries online instead of going into crowded stores that might not even have every item they need in stock. One-third of shoppers surveyed by Gordon Haskett Research Advisors [on 13 March] said they bought groceries online [during the] week. It was their first time buying groceries online for 41% of those shoppers.”[4] Carol Ryan reports, “Average daily traffic to Walmart’s grocery site reached 1.1 million between March 1 and March 20, according to analytics company SimilarWeb — a 55% increase on average daily visitor numbers during the previous two months. Kroger, Peapod, Instacart, Carrefour and Tesco have also experienced big surges in daily traffic. The number of U.S. households ordering groceries online roughly doubled this month to 40 million compared with levels recorded in August 2019, data released Thursday by consulting firm Brick Meets Click shows.”[5]

Prior to the pandemic, curbside pickup was one of the most popular online options for consumers. Since the Covid-19 outbreak, grocery delivery has surged in popularity and those services are also experiencing difficulty meeting demand. Steve Hornyak COO of Fabric, reports, “This online grocery boom shows up in delivery app downloads. On March 15, Instacart, Walmart Grocery and Shipt all set their personal bests for the most downloads in a single day, growing by 218%, 160% and 124%, respectively, compared with average daily downloads in February 2020, according to Apptopia.” As a result of this activity, “Instacart is planning to hire 300,000 personal shoppers.”[7] Instacart isn’t alone in the search for new temporary workers. Justin Wm. Moyer (@justinwmmoyer) and Michael E. Ruane (@michaelruane) report most grocery chains are looking for new temporary workers to help with current demand. Safeway is looking for 30,000 workers and “a Giant spokesperson said the company is hiring store clerks, pharmacy technicians, delivery drivers and warehouse workers,” and Amazon “plans to hire 100,000 full- and part-time workers.”[8]

The future of online grocery shopping

Despite the current hiccups being experienced by grocers and delivery companies, Ryan insists their “e-commerce businesses should be in a different league after the crisis” and “some retailers are betting that the extra demand will stick.” She explains why she insists online grocery shopping will be in a different league. “Online grocers are learning how to allocate delivery slots most efficiently in times of peak demand,” she writes. “They are testing in real time how different order-fulfillment methods, such as manual picking in stores or from dedicated online warehouses, perform under stress.” Tuttle explains fulfilling online groceries is more complicated than many people realize. He notes, “The service is not like regular online shopping. Groceries are obviously temperature-sensitive, so they cannot sit around in warehouses and be shipped by standard, non-refrigerated Federal Express or postal service vans. Produce, meat, and dairy products also should not be left on your front porch for hours like any old Amazon package. Online grocery delivery is instead typically offered only via special delivery trucks (whose availability is limited), and only in narrow time windows (to ensure the recipient can be home).”

Increased online sales is not all good news. Hornyak explains, “As if the grocery business wasn’t challenging enough before — with fierce competition, razor-thin margins and the rise of ecommerce — grocers have now been thrust into the position of trying to fulfill urgent demand and meet customers’ needs on the fly.” And, as Ryan explains, providing customers with the best service can decrease profit margins. She writes, “Sales delivered to a shopper’s home are far less profitable than those made in stores. Grocers need time to manage the shift online to avoid a big hit to their already thin operating margins.” Nevertheless, she concludes, “Online grocery businesses may be struggling at the moment, but they will emerge from their unexpected trial better equipped for the future.” Hornyak agrees. He writes, “The good news is that grocers can make a few adjustments both now and, in the future, to meet this demand and emerge from this crisis in a stronger position. In particular, grocers that can adapt to meet online grocery demand can shine as community lifelines and be ready for a larger shift toward ecommerce.”

The question remains: Will consumers continue to buy groceries online once the pandemic subsides? Hornyak believes they will. He explains, “The surge in online grocery penetration isn’t just a fluke due to the pandemic. Sales were already trending more toward online ordering, with Deutsche Bank projecting this channel to expand at a compound annual growth rate (CAGR) of 28.2%, compared with a 2.5% CAGR for total grocery sales.” He also notes that the 2003 SARS outbreak, which similarly caused people to stay home, “helped usher in two of today’s largest ecommerce giants, JD.com and Alibaba’s Taobao.” The Food Industry Association (FIA) also believes online food shopping is here to stay. FIA analysts write, “Now that 44% of American households are actively buying food both on- and offline, the industry needs to focus more on the consumer and less on the physical channel.”[9] They conclude, “Companies that now have those infrastructures in place are well-poised for success. That’s because at the end of 2019, more than 54 million U.S. households transitioned to true omnichannel shoppers. That’s up 14% from just two years earlier, and it means that it’s time to put the consumer — not the channel — at the center of the equation.” Consumer shopping habits of older generations may change more dramatically than younger generations following the outbreak. FIA analysts explain, “The 45-54 and 55-64 demos account for the most omnishopper growth, and their spending prowess is much bigger. In the past two years alone, these two age cohorts increased their spending by about $20 billion, well ahead of the spending growth of younger generations.”

Footnotes
[1] Ameya Dusane, “Traffic to Online Grocery Sites Increased by 116% During 5th Week of COVID-19, Reports Contentsquare,” MarTech Advisor, 30 March 2020.
[2] Brad Tuttle, “Coronavirus and Online Grocery Delivery: Everything You Need to Know,” Money, 24 March 2020.
[3] Jessica Dumont, “Report: Online grocery sales grew 15% this year,” Grocery Dive, 13 September 2019.
[4] Adam Levy, “Walmart’s Winning More Than Half of All New Online Grocery Shopping,” The Motley Fool, 19 March 2020.
[5] Carol Ryan, “Online Grocers Are Getting a Preview of Their Future,” The Wall Street Journal, 27 March 2020.
[6] Steve Hornyak, “How Grocers Can Handle the Online Grocery Surge,” Progressive Grocer, 27 March 2020.
[7] Justin Wm. Moyer and Michael E. Ruane, “Demand for online ordering leaves grocery stores scrambling, customers waiting,” The Washington Post, 27 March 2020.
[8] Ibid.
[9] Food Industry Association, “Study: It’s Time to Think of Omnichannel Shopper, Not Just Omnichannel,” Food Logistics, 25 February 2020.