A new report from Chicago-based market researcher IRI and 210 Analytics looks at how online grocery shoppers tend to fill their digital baskets and the biggest opportunities retailers have to build sales with these buyers.
Among the findings: Online shoppers tend to be less price-sensitive, spending 13% more per unit online vs. in-store for fresh items. Further, because the "core online grocery shopper" is around age 40—representing older millennials and younger Gen Xers, many of whom are at the intersection of peak career-building and family-rearing years—convenience-oriented offerings such as value-added meat and produce resonate especially strongly online.
As the COVID-19 pandemic wanes, consumers have started returning to physical grocery retailers more often, but grocery e-commerce still is projected to continue its upward trajectory, reaching 12% of retail food and beverage dollars by the end of 2021, up from 9.5% in 2020, according to IRI. "Nineteen percent of all trips are still online—vastly higher than pre-pandemic," 210 Analytics President Anne-Marie Roerink noted in the IRI/210 Analytics report.
Several other findings about online grocery shoppers' patterns and preferences can help retailers craft smarter strategies for increasing basket size with these customers—and ultimately increasing loyalty to the retailer itself, the report suggested.
- Consumers still spend the most with brick-and-mortars. For all of the attention and investments that third-party delivery specialists (e.g., Instacart and DoorDash) and online-only grocers have generated, ordering from local brick-and-mortar retail outlets remains—by a wide margin—the leading way consumers buy food and beverage items online. Brick-and-mortar stores' websites grabbed 69% of sales of CPG goods in 2020, according to IRI. Third-party delivery companies captured 26% of CPG sales, and online-only retailers captured the remaining 5%. In addition, click-and-collect services, whether pickup is curbside or in-store, are seeing stronger growth vs. home delivery, with consumers increasingly trusting their local retailer to pick perishable/fresh items.
- Online shoppers are creatures of habit. More than 4 in 5 shoppers (82%) start with items they've previously purchased when buying online, according to 210 Analytics' research. This behavior is more entrenched the longer that consumers have ordered online from the retailer that they're shopping. Surfacing most-frequently ordered items higher up on a display screen, without forcing users to scroll far down on the page to find their favorites, can be a valuable basket starter. It's also a key piece of the competitive play for "ghost grocers" such as Farmstead and Jupiter, which seek to build order consistency with automatic or easy-add refills of consumers' top purchases. "Winning from the first click is crucially important as is having a strategy to create visibility for new items, seasonal offerings and flavor extensions," report author Roerink wrote.
- Add-ons and impulse buys have significant room for growth. Forgoing checkout-line chips and candy while buying online may have helped some consumers keep their diet in check during the pandemic, but the absence of highly visible, craveable add-ons online represents a missed opportunity for retailers. (Carbonated beverages, salty snacks and energy drinks significantly underindex online vs. in-store, the report noted.) Consumers tracking down a favorite ice cream in store might see an adjacent display of waffle cones, toppings and sauces, but online, it may be out of sight, out of mind. The same goes for summer barbecues, especially as this year's summer gatherings are likely to be larger than last year's: A lot more goes into a backyard barbecue than meat, buns and beverages. "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," Roerink wrote.
- Brand names win online ... Brands' share of wallet is significantly larger online than in store, IRI found, with consumers favoring labels they know and trust for quality and consistency—especially in fresh foods. Meat is the biggest outperformer when it comes to brands in baskets: Branded meat products are 22% more likely to be in online vs. offline baskets, according to IRI. For baked goods, the gap is 16%.
- ... And smaller brands grab a bigger share online Maybe they've seen or tried a particular local or niche brand at an area market or sporting event, or maybe they've seen it on social media: However consumers are exposed to smaller and up-and-coming brands, they're keen to shop them online. While small and very small brands account for only 14% and 8%, respectively, of sales in the multistore brick-and-mortar retailers that IRI studied, they accounted for 27% each of these retailers' online sales. IRI noted further that early adopters of online grocery shopping overindex on purchases of items associated with health and wellness or sustainability—organic or grass-fed products, for example. These brands' visibility and shelf share may be smaller in store, but online, they can capture sales from label-attuned and less-price-conscious consumers.
Seventy-nine percent of online shoppers ordering for curbside pickup and 73% of those ordering groceries for delivery expect to do so with the same or greater frequency post-pandemic, according to IRI's research. For retailers, continuing to invest in online capabilities to create a seamless and smarter online experience for customers will be critical to keeping share, the report concluded.