Since the start of the pandemic, all eyes have been on Trader Joe’s with a single question in mind: Can this smaller footprint grocer sustain success and its loyal customer following without the online presence its competition has so aggressively pursued for the past six months?
Online grocery is expected to account for 21.5% of total grocery sales by 2025—an estimated $250 billion, which is more than a 60% increase over pre-pandemic estimates, finds a new survey from Mercatus, with research and insights from Incisiv. The just-released survey, eGrocery’s New Reality: The Pandemic’s Lasting Impact on U.S. Grocery Shopping Behavior, surveyed nearly 60,000 American shoppers across every region in the country.
Early in the pandemic, Trader Joe’s was inundated with requests to take its business online. “Customers are asking if given current circumstances, we’re planning on offering delivery or curbside pickup,” said Tara Miller, Trader Joe’s marketing director, in an April podcast (Episode 24). “We understand the impulse, and we know that some other retailers are offering these services. We also know those offerings don’t always translate into positive results.”
“Creating an online shopping system for curbside pickup or the infrastructure for delivery, it’s a massive undertaking,” Trader Joe’s VP of Marketing Matt Sloan affirmed. “It’s something that takes months or years to plan, build and implement and it requires tremendous resources. Well, at Trader Joe’s, the reality is that over the last couple of decades, we’ve invested those resources in our people rather than build an infrastructure that eliminates the need for people.”
Trader Joe’s aired this podcast in April, when, according to foot traffic analytics firm Placer.ai, the Monrovia, Calif.-based retailer’s in-store traffic tanked. Placer.ai’s data showed a 44.4% reduction in monthly visits year over year for Trader Joe’s in April. Foot traffic remained down in May (-24.6%), June (-12.1%) and July (-3%), according to Placer.ai data.
The retailer’s foot traffic was further challenged by store size. With the implementation of social distancing guidelines, Trader Joe’s was forced to limit the number of shoppers in its stores at a given time. The average size of a Trader Joe’s is between 8,000 and 15,000 square feet, which created long lines of shoppers waiting to get in the store.
Seeking to provide a barometer of the dramatic changes in consumer behavior and preferences during the coronavirus pandemic, the Mercatus/Incisiv survey also found that while 40% of online shoppers are likely or very likely to continue to purchase via online channels, 78% of all shoppers still prefer to visit a brick-and-mortar grocery store either to shop in store or for curbside pickup.
“Despite the high growth in online adoption, most grocery shoppers still profess loyalty to retailers and online brands that have a physical store presence,” said Toronto-based Mercatus. “Post-pandemic success will go to those retailers who can best bridge both online and offline shopping journeys and provide a seamless experience with minimal friction points.”
Consumers’ love of the in-store experience is in line with Placer.ai’ s most recent foot traffic findings. “In March, we noted the unique struggles that Trader Joe’s would likely face during COVID. The brand’s pricing, lack of online orientation, and perception as ‘part’ of the grocery picture as opposed to a one-stop-shop, were factors that we felt would limit success,” writes Ethan Chernofsky of Placer.ai. “And this proved to be true early on in the crisis, when year-over-year declines were some of the industry’s largest and continued even as recoveries were underway.
“But, the brand deserves a huge tip of the cap at the moment,” Chernofsky continues. “In August, Trader Joe’s marked its first month of year-over-year visit growth since February. And amazingly, it’s done so while other brands who’ve struggled, like Whole Foods, remain down. While the wide geographic distribution may be helping, the progress goes a very long way in building a model for how different types of brands can drive recoveries even while facing significant obstacles.”
Placer.ai data finds that Trader Joe’s foot traffic was up 1% for the month of August vs. last year.
“The bottom line here is that our people remain our most valued resource,” said Miller in the April podcast. “While other retailers were cutting staff and adding things like self-checkout, curbside pickup and outsourcing delivery options, we were hiring more crew, and we continue to do that. We know that this period of distancing will end and when it does, our crew will be in our stores to help you find your next favorite product, just as they’ve always been.”
While its August foot traffic gains are modest, it remains to be seen if Trader Joe’s can maintain the positive trajectory of in-store shoppers.
The Mercatus/Incisiv survey also found reason to believe, at least for the time being, that shoppers remain connected to the in-store experience of their favorite store. “With close to 60,000 respondents across the U.S., we analyzed more than 48 million data points and found that shoppers are highly satisfied and loyal to their preferred grocery store, but this loyalty does not extend to the online channel,” said Amar Mokha, COO and benchmarking lead of Incisiv. “While the adoption rate of online grocery has increased significantly, grocers need to improve pickup and delivery slot availability, promotion and coupon availability, and product substitutions to improve customer loyalty online.”