The pandemic has brought together the physical and digital worlds of grocery, resulting in a 133% year-over-year increase in online grocery spending from 2019 to 2020, according to new study from 1010data.
The State of Grocery Report leverages insights derived from 1010data's consumer spending data and examines changes caused by pandemic shopping, making a case for which shifts in behavior are here to stay.
“The grocery industry is managing a massive, perhaps once-in-a-lifetime surge to online shopping and diversification of fulfillment channels,” said Inna Kuznetsova, CEO of New York-based 1010data, in a release. “Retailers today have to combine behavior-based segmentation of buying habits with shifting preferences for home delivery, curbside pickup or buy online, pickup in-store (BOPIS) to tailor customer experience to a variety of needs while optimizing business performance."
Changes in Shopping Patterns
By year-end 2019, online grocery and grocery delivery services accounted for 8% of annual grocery spend, with Walmart claiming No. 1 market share for total online grocery delivery sales, according to 1010data.
But as safety, availability and convenience became key priorities during the pandemic, online grocery ordering saw a boost. On April 20, 2020, 1010data’s card panel data found online grocery delivery spending reached its peak in year-over-year growth at 527%—just three weeks after in-store spend grew 40% year over year. Online and delivery soon became commonplace, and Instacart—recently valued at $39 billion—drove significant adoption, 1010data said.
According to 1010data, about 19% of Instacart’s shoppers prepandemic were new—meaning they didn’t shop at Instacart in the prior year. During April 2020, however, 46% of Instacart customers were new. Levels returned to “normal” in May, 1010data said, but many of those new customers continued to use the grocery delivery and pickup service.
And by the end of first-half 2020, Instacart surpassed Walmart for the No. 1 spot in market share for total online grocery sales. While Target.com sales grew the most year over year within 1010data’s panel, Instacart gained 12 share points in 2020 and now holds the majority market share (28%) online, with total year-over-year growth of 323%.
Here to Stay
Health and convenience trends surged during the pandemic, and 1010data expects consumer affinity for these products to continue.
Its panel shows significant year-over-year growth in health-centric keywords from 2019 to 2020, with organic growing 163%, plant-based 148%, gluten-free 99% and vegan 88%. Because of the desire to be healthier, 1010data anticipates online sales of fresh/perishable items to continue to grow as more consumers gravitate toward fresher at-home dining options.
Simpler, quicker meal options, meanwhile, soared as consumers experienced cooking-at-home fatigue or were used to dining out. Brands such as Armour LunchMakers (up 273%), Banquet (up 164%) and Rana (new to market) are owning this niche and seeing substantial growth, 1010data said.
Customers are turning to Walmart Pickup and Delivery to fulfill these items. The retailer now owns 70% share, eating up the 20% share that Peapod left up for grabs after shutting down before the pandemic, according to 1010data, which notes that although Amazon Subscription makes up a small portion of this segment (2%), subscriptions for meal and snack kits on Amazon have grown 675% year over year.
Actions Retailers Can Take
To help retailers and brands stay ahead of the curve in 2021, 1010data recommends embracing new shopping habits, as well as expanding fulfillment options and streamlining operations.
While market conditions continue to evolve, consumers have shown their new behaviors—adopting digital commerce for safety and convenience reasons—have become habits and are becoming their preferred way to interact with brands. “Understanding the way consumers are shopping today informs the grocer’s drive to dynamic merchandising, which will result in the ability to deliver more targeted, localized assortments in physical locations, and a more personalized shopping experience online,” said Jonah Ellin, chief product officer of 1010data.
As for expanding fulfillment options and streamline operations, 1010data said future hybrid shopping will combine no-touch online for restocks and usual items, and high-touch in-store for fresh, promoted and personal items. Winning both the “click” and the “pick,” it said, will be helped by low minimum orders and increased options without the time burden of in-store shopping. 1010data also suggested pinpointing the most efficient SKUs in-store and online, and optimizing replenishment leveraging real-time inventory data and holistic demand forecasting to avoid out-of-stocks, and when necessary, propose alternatives that meet and exceed customer expectations.
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