It’s finally here: 2020, the year when we’re supposed to have teleportation, flying cars, personal robots, vacations to the moon and technological conveniences for every aspect of our lives. Outlandish as some of these outdated predictions may still seem, the rise of digital disruptors and high-tech solutions is spot on, especially in regards to our relationship with food shopping.
Speed, convenience and innovative advancements have held the spotlight in QSR, fast-casual restaurants, meal-kit delivery services and third-party delivery vendors have been news for years, now. However, now’s the time for what was—or, perhaps, still is—known as the final frontier for digital disruption: the grocery business.
|This article is featured in O'Dwyer's Mar. '20 Food & Beverage PR Magazine.|
Forget predictions ... change is here
People said it couldn’t be done; we have too personal of a relationship with food to allow someone/something else to own their shopping experience. E-commerce and delivery services will slowly—if ever— infiltrate the brick and mortar grocery system. Remember that old mantra?
Safe to say, we were wrong. The great digital disruptor has broken through the barriers of grocery at a record pace.
According to a 2017 study, just 23 percent of American households were buying food online. A meager margin compared to other shopper categories. But that same study also predicted that by 2022, consumers would be spending up to $100 billion a year on online grocery. While it’s hard to give meaning to $100 billion, think of it this way: that’s equal to every household in America spending around $75 online per month, every month, all year for food and beverages.
A similar study by Statista found that among all the online food and beverage retailers, the e-commerce giant Amazon has the highest market share. Not a surprise, especially considering it introduced its two online grocery shopping services, Amazon Fresh and Prime Pantry. But Amazon alone is projected to deliver online food and beverage sales to surpass $23 billion in 2021. Makes it easy to imagine the reality of a $100 billion industry on the horizon.
Still, the digital revolution of grocery is not all about Amazon. According to Progressive Grocer, to compete with such tech-savvy e-retailers, grocery stores are doubling down on digital orders and delivery options for customers, including same-day delivery and curbside pickup services. Beyond the obvious convenience, these online efforts are designed to improve the customer experience, which helps to improve engagement and retention.
So, what’s fueling this record adoption of the digital grocery experience?
Grocers no longer just competing with each other
Not only do grocers have to contend with—and deliver on—elevated customer expectations, they must battle for consumers’ convenience-driven cravings, with an increasingly expanding and complex digital food ecosystem, which includes:
- Shoppable recipes (Whisk, Tasty).
- Third-party grocery delivery (Instacart, Postmates).
- Third-party food delivery (Uber Eats, DoorDash, GrubHub).
- Meal-kit subscriptions (Blue Apron, Plated).
- Restaurant delivery (Panera, Olive Garden).
Let’s face it: consumers want what they want when they want it, and it’s easier than ever—thanks digital technology—for them to get it. But what’s at the heart—or stomach—of customers’ desires?
Personalized, perfected, convenient
As noted in a recent article from AT&T Business, the pervasiveness of digital experiences in our lives is such that we don’t compartmentalize our expectations anymore. We’re busy. We need help. We’ll pay more—just not the cost of shipping—for said help. Enter digital conveniences to provide that help.
The expectations grocers must meet are now set by consumers’ best experiences across all categories, from on-demand entertainment bingeing to seamless meal-delivery at a push of a button to convenient crowd-sourced ride-sharing services like Lyft and Uber.
As shoppers embrace digitally-driven experiences in all aspects of their lives, there’s no longer a perceived barrier to allowing grocers and third-party delivery vendors to assume their food buying responsibilities.
Consumer shoppers are content to leave the grocery store visits behind them, but only if they can be replaced by efficient, transparent and continued personalized experiences from their favorite grocers. Hence the rise of:
- More online ordering and fulfillment options.
- Same-day delivery, real-time order tracking and easy returns.
- Shorter, more accurate time ranges for in-store pick-up.
- Personal shoppers literally restocking your fridge for you.
But can every digital innovation in grocery really be all wine and roses?
Opportunities to improve for the future
No, not all things in digital development for grocery are rosy. For one, online grocery delivery is largely unprofitable. As the AT&T survey finds:
- Profit-per-order has worsened for three-in-five retailers who offer online ordering.
- Other than fulfilling from distribution centers or vendor drop-ship, all other forms of online order fulfillment are margin negative or neutral.
To put that into perspective, as Recode finds, Walmart will reportedly lose $1 billion of its $21 billion e-commerce revenue as a result of its challenges integrating the Jet.com acquisition and rough margins from its next-day delivery operations.
And let’s not even get started on the costs of packaging for delivery and its impact on the bottom line and the environment.
Still, grocers must not despair or resist the digital momentum. Online ordering is a double-edged sword for grocery retailers. It offers customer growth but increased competitiveness. It grows local market footprint but puts further pressure on grocers’ wafer-thin margins. It presents a packaging nightmare but allows greater customer insights than ever before.
That’s the one indisputable reason to embrace the omni-shoppertunity: data! As FMI notes, food retailers and manufacturers are currently failing to adequately share shopper data, segmentations and consumer insights, leading to missed opportunities to work collaboratively and increase sales. With the digital data collection, available only through the adoption of online shopping, grocers have the ultimate roadmap to customize insights-driven marketing programs and turn one-time online orders into loyal lifetime customers.
A far cry from the final frontier for digital disruption, the grocery business is now poised to be the pioneer of omni-shoppertunity.
Kristen Ingraham is a Senior Vice President at Padilla and leads digital integrated marketing and business development for the agency’s Food + Beverage Practice.