“People’s shopping behaviors have been forever changed by [the pandemic],” said Nick Nickitas, CEO of Rosie, an e-commerce platform for independent grocers in a recent interview with WGB. “One of the big shifts that retailers are trying to figure out now is what [will] Q4 look like? What does the holiday season look like?
“These are weeks that are typically some of the biggest sales weeks of the year. And so how are [grocers] going to help solve [consumers’] problem of how do I make the holidays at least feel normal for my family?” In the current environment, the whole family may not be able to gather as they have in years past, so grocery stores are going to need to be the solution providers that solve that problem.
He also notes that a second wave of COVID-19 will likely engender a different response from consumers than when it initially hit. “What we’re seeing now is online sales are much more geographically specific based on hot spot areas,” Nickitas says. “You’re going to see more online shopping in the Southeast. You’re going to see it on the West Coast and California. You’re going to see it in some areas in the Midwest. So it’s going to be much more localized based on where hot spots start.”
Prior to the pandemic, Rosie’s customers typically saw about 1% to 3% of their sales coming from e-commerce; post-pandemic, Nickitas predicts that those sales numbers will settle at about 10% to 15% of store sales. The basket size for online orders is five to six times larger than when shopping in-store, and “customer churn is lower than ever,” Nickitas says. “They’re not just renting these customers and then they’re going away, they’re holding on to them. This is a really sticky customer and the independent is getting more share of wallet. They’re holding onto that customer more than ever before.”
The demographics of the online shopper have also forever changed. “You’ve got customer segments who had never purchased online before who are now using it regularly, even after the pandemic spike. Traditionally, the highest demos for online grocery were young families, working professionals and the mobility impaired. But since COVID started, empty nesters, [those ages] 55 to 75 have become the second-largest demographic of online shoppers in the U.S., and I see this continuing to be a tool that all shoppers have in their toolkit, even after the pandemic is over.”
One of the most notable changes that drove industry sales online was the shutdown of foodservice, which pushed consumers back into their kitchens to do their own cooking. At the beginning of the pandemic when sales were up 15 times normal levels, Nickitas noted that those shoppers who had previously filled their carts with ready-to-heat and heat-and-items from the grocery store were now buying flour and yeast to bake their own bread. And while purchases of these items slowed somewhat this summer, sales were still five and six times higher than previous years, says Nickitas, who wonders what this means for grocery sales this winter.
Consumers have widely adopted e-commerce for their grocery solution, but now they also are using it for foodservice, a need grocers will continue to have to meet, whether its for an everyday dinner or a holiday celebration such as Thanksgiving where they purchase the whole meal from the grocer.
“It’s really going to come down to how much grocers innovate over the next 12 to 18 months,” Nickitas says. “There is a wide blue ocean opportunity for grocers to really build up their prepared foods program, really build up their grocerant capabilities. I think that pre-COVID, there were some stores that were doing this, but it wasn’t truly widely adopted across the industry.”
The pandemic won't last forever and restaurants and retail foodservice operations will eventually open back up completely. Independent grocers need to use this time to retain the sales and even customers that they have gained during it.
While he notes that many shoppers will continue their cooking habits that they picked up during the pandemic, some will want to shift back to foodservice—if they haven’t already—so independent grocers have to be ready to fill that need, especially because many want to continue to eat at home but may not necessarily want to continue to cook.
“Grocery stores have to focus on catering, fresh and ready prepared foods and offering meal solutions to their shoppers, so that those behaviors become sticky long after this is over,” he says. “I think that a lot of retailers still have work to do in those areas. But those are the areas where they can most differentiate against an Amazon and a Walmart to provide something differentiated to their community.”