Is the Pandemic an Inflection Point for Grocery E-Commerce?

COVID-19’s surging demand for digital options is creating a historic moment in the grocery world
Courtesy Mercatus

COVID-19 continues to send shockwaves through all aspects of life as much of the world physically distances and discretionary spending decreases. But while so much else has come to a standstill, grocers, their employees and their partners have continued to serve an increasingly essential role.

Looking to avoid exposure to others, many grocery shoppers are steering clear of brick-and-mortar stores and turning to online solutions. This increased demand for digital grocery options, including click-and-collect and delivery, is creating a historic moment in digital grocery. Numbers across Mercatus’ retail partner network show online grocery shopping surging and grocers fighting to keep up with demand. Our data illustrates this surge and provides valuable e-commerce lessons that could help shape the future of the industry.

Will the Online Grocery Surge Last?

Necessity is the mother of invention, but during this crisis it’s also the mother of adoption. Our data indicates a threefold (305%) increase in new accounts registered during the first week of March.

First-Time Orders

Source: Mercatus data, April 2020

We also saw that 92% of all online grocery orders placed between March 1 and March 22 were first-time orders, while only 30% of orders in the final week of March were by first-time users. This suggests that those who tried online grocery for the first time at the start of the crisis have continued to do so. This drastic adoption, spurred by COVID-19, is moving the predicted $150 billion in online food and beverage sales at a much faster rate.

What Is the New Normal in Online Grocery?

Mercatus platform data shows exceptionally high weekly increases in online orders at both the beginning of March, which coincided with shelter-in-place announcements, and the end of March, when extensions were announced and shoppers realized they’d be inside for longer than they initially thought. Notably, the last week of March showed the largest weekly increase in total sales (71.8%).

Depending on the uncertainty and progression of the coronavirus and governments’ responses to developments, this trend may continue. However, as shoppers become more acquainted with their quarantine lifestyle and panic sprints for supplies end, the surge in orders could level off to a steadier pace. And, as the curve for infection rates varies in different parts of the country, we may see some regional variation in demand. Grocers will need to be agile in responding to constantly shifting shopper needs.

There are droves of new shoppers now privy to the online grocery experience. As the virus runs its course, and customers take precautions to avoid infection, we can expect continued use of online grocery shopping.

But will this continue into the post-COVID world? That will largely depend on how grocers respond now.

New Account Registrations

Source: Mercatus data, April 2020

Where Is Online Grocery Failing?

With this newfound demand, some grocers have struggled to keep up. Online delivery and curbside pickup slots have been hard to come by and online inventory counts have been unreliable.

Some grocers are responding by trying to slow the influx. Amazon is placing new grocery customers on a waitlist and ShopRite customers must wait in a virtual line to access the website. Stores are drinking from a firehose as they try to figure out the best ways to fulfill orders. In-store associates have been doing a valiant job to date, but they are stretched. Gig economy players have been less successful in meeting high demand due to over-reliance on a depleted and fearful workforce.

The high demand has led to plenty of canceled orders. But an estimated 70% of all cancellations originate from delivery providers. In other scenarios, delivery apps are moving deliveries out by days at a time, which is resulting in customers cancelling orders.

Enter a New Era of Grocery E-Commerce

Grocers are struggling to keep up with online demand, a struggle compounded by fulfillment partners’ limited ability to match customer expectations. The question now is: Will these issues turn customers off online grocery forever?

Or is it possible that some grocers will capture these new online accounts, and retain these customers? By owning their grocery e-commerce website, and indeed the entire grocery e-commerce experience from the first click to the last mile, some grocers will be able to keep pace with changing customer needs, to form an even larger customer base than before the pandemic.

Sylvain Perrier is president and CEO of Toronto-based Mercatus.


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