The state of the grocery industry - 4 trends shaping the next normal - Plexure
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The state of the grocery industry 4 trends shaping the next normal
Introduction sumers say they do not go out of their way to
find their favorite food brands, and 52% buy
As difficult as the COVID-19 outbreak has whatever is available instead of comparing
been for society, this situation poses sig- prices.
nificant opportunities for grocers to grow
sales and pivot their business models more However, grocers should not expect this in-
toward online. difference to last. Consumers may be willing
to buy whatever items are in stock and might
Consumers have increasingly relied on gro- choose the grocer that has delivery or pickup
cery stores due to a convergence of factors, slots available, but eventually consumers will
such as needing extra essential items to settle back into their usual habits and again
account for more time spent at home and a choose their favorite food and brands based
desire to save money compared with getting on availability, price, service, etc.
delivery or takeout in these uncertain eco-
nomic conditions. While keeping up with all the coronavirus-re-
lated change has been anything but easy,
This has amounted to an additional average grocers that are tuned into evolving prefer-
spend of $25 per week on groceries (a total ences and aim to optimize customer expe-
of $184 as of the end of March 2020) despite rience, particularly through digital channels
making fewer trips to the store, according to like mobile apps, will be in a better position
a survey by C+R Research.1 to:
What this leads to is that online grocery • Acquire new customers
has surged as a significant channel, en- • Scale customer traffic within digital
abling grocers to reach more customers channels
who want to minimize physical trips to the • Improve customer loyalty and trust
store. In March 2020, online grocery sales • Increase average transaction value
soared by 233% above August 2019 lev-
els, according to a Brick Meets Click and To achieve these gains, grocers need to
ShopperKit survey. 2 be mindful of the following trends that have
accelerated during this outbreak and will
Yet at this time loyalty is relatively low, finds likely have a significant impact on defining
the C+R survey. Specifically, 76% of US con- the next normal.
2
1. Customer acquisition to incent that type of change,”
can be cheap yet fleeting notes Brick Meets Click.3
Considering consumers’ proclivity Yet even though acquiring new
to spend more on groceries during customers may be relatively cheap
this time and intrinsically seeking and easy right now, grocers need
online ordering options, grocers to focus on optimizing operational
have an opportunity to acquire new execution, especially for online
customers at an all-time-low cost. orders, to motivate new customers
to change their habits long-term. is the magical number, finds Brick
Where previously grocers would Meets Click, where 93% of shop-
have advertised online grocery “New consumers are flooding to pers are likely to use the same
to acquire new customers, these these services, driving low cus- retailer again.5
customers are coming through tomer acquisition costs. The play-
organically now as they seek ers who navigate surge demand Getting to that optimal number of
out options on their own through successfully and provide top- three requires operational excel-
channels such as search and notch reliable service and superior lence covering a range of aspects;
word-of-mouth. quality will be best positioned to where grocers can efficiently and
efficiently attract and retain cus- accurately fulfill online orders and
“Acquiring new online grocery tomers well into the future,” notes create a great customer expe-
shoppers has traditionally been a Mike Schall, a managing director rience, which includes highly
slow, gradual and expensive pro- on the food & beverage team at personalized messaging and
cess, but this crisis has created the FocalPoint Partners, LLC, in an product recommendations as well
opportunity to avoid much of the article for The Food Institute.4 as reaching customers through
promotional effort usually required their preferred channels so they
As it currently stands, customers feel incentivized to continue using
are largely willing to jump from your brand.
grocer to grocer with many trying
online services either for the first “While digital grocery has seen an
time, or for the first time with that increase in demand from shop-
brand. This indicates that custom- pers, grocers must still continue
ers may not have brand loyalty to take steps to drive the adoption
yet, especially in this environment of digital shopping habits through
where grocers may be struggling improved site and app functionality.
to maintain up-to-date inventory As grocers build their digital shop-
and the delivery or pickup pro- per bases, they must continue to
cess might be riddled with delays, execute digital strategies with cus-
among other potential challenges. tomer agency in mind,” notes Gart-
ner.6 “Allowing customers to have
To turn newly acquired customers control over their digital grocery
into long-term advocates, grocers shopping experience, especially
need to execute at a high enough during this time, is crucial to devel-
standard to encourage customers oping trust and a loyal customer
to reach three online orders. Three base in the long run.”
3
2. A new wave of online shoppers also increasing their frequency of online
has arrived grocery deliveries.
While online orders comprised a small “While there were no statistically significant
portion of grocery shopping in the past and demographic differences seen in those who
primarily appealed to certain demographics started online grocery ordering, college-ed-
such as young city-dwellers, COVID-19 has ucated people and those under the age of
brought a new wave of grocery shoppers 45 were more likely to increase the frequen-
online. cy of their existing grocery delivery versus
non-college educated and older age groups,
Overall, 31% of US households, totaling respectively,” notes IFIC.7
around 39.5 million consumers ordered gro-
ceries online in March 2020, compared with Still, these findings indicate that online cus-
13% in August 2019, finds the Brick Meets tomers, especially new ones, are far broader
Click and ShopperKit survey. And these than in the past. Grocers should be focused
shoppers span generations, though the on finding ways to capture this shifting de-
specifics vary somewhat among surveyors, mand toward online grocery and converting
which could be due in part to the fluidity of customers to recurring shoppers.
this situation.
“This shift could potentially be the break-
In the Brick Meets Click and ShopperKit sur- through that online grocery buying needed
vey, those ages 60 and older surged ahead to catch up with other categories such as
as the fastest-growing group of online gro- electronics and apparel. Executives should
cery adopters, with 39% of online shoppers be sure to monitor this trend going forward,”
in this demographic trying this method for notes McKinsey.8 “Our sense is that with
the first time in March 2020. In comparison, many consumers overcoming the trial barrier
26% of online grocery shoppers overall say for the first time and with retailers further
they made their first online grocery purchase investing in e-commerce to support rapid
during this period. growth, sales in this channel will see a sus-
tained post-crisis increase.”
A survey by the International Food Informa-
tion Council (IFIC) Foundation also found While consumers will likely continue to use
more consumers across all demographics online grocery after the crisis ends, ques-
turning to online grocery. Not only are new tions remain around how long this will last
users flocking to this channel, but 13% are and which grocers consumers will choose,
4
considering the relative lack of ing mobile order and pay (MOP) code at the register for contact-
loyalty at this point. technologies to enable customers less payment.
to easily place orders and check-
The Brick Meets Click and Shop- out on mobile devices, rather than Similarly, grocers can leverage
perKit survey found that 43% of having to shop in-store and under- contactless payment methods
online grocery shoppers say they take actions like physically hand- like Apple Pay and Google Pay
are still very or extremely likely ing a credit card to a cashier. that rely on near-field communi-
to use the same grocer again for Not only does this minimize cation (NFC) technology, which
online ordering when the pan- in-person interactions and reduce can reduce physical touchpoints
demic ends or subsides. Yet that transmission, but it’s also a highly on payment terminals. In fact, the
could still leave the majority of convenient feature. Even before World Economic Forum notes that
consumers up for grabs, which the pandemic, MOP had been “contactless digital payments,
means grocers need to develop growing in popularity in catego- either in the form of cards or
programs to keep the customers ries like quick service restaurants e-wallets, are the recommended
they’ve organically attracted. where busy customers could payment method to avoid the
place and pay for orders through spread of COVID-19.”10
There is great opportunity for a mobile app and collect their
grocers to influence the response purchases in store, often without While these payment methods
to these questions by harness- having to wait in line. have been relatively slow to catch
ing the power of data and AI to on, Apple Pay accounted for less
create personalized, meaning- than 1% of in-store sales across
Now, grocers can become simi-
ful customer experiences that industries in early 2020, according
larly efficient through contactless
remove friction and reasons for to PYMNTS.com11 — the pandem-
commerce.
customers to change their habits ic could spur a shift in consumer
or indeed brands. Perhaps what’s behavior similar to the shift toward
needed is a paradigm shift, “Even as food retailers address to-
online grocery.
where instead of looking at online day’s short-term challenges, they
shoppers as a monolith, grocers should take the time to rethink
their business models to become For example, 27% of US small
need to understand the variety and mid-size business owners
of demographics they’re serving more efficient—and, therefore, less
exposed to shocks,” advises McK- say they’ve seen an increase in
online and tailor their marketing contactless payments during this
toward the preferences of differ- insey.9 The consultancy adds that
grocers should ask themselves period, finds a survey from The
ent groups. Grocers should be Strawhecker Group and The Elec-
looking to target customers on a questions like “Can you make your
store model cashless or virtually tronic Transactions Association.12
1:1 basis, using tactics like loca-
tion-based marketing and ana- cashless? Can you replace the ca-
shier-based model with a seam- “Use of contactless mobile pay-
lyzing shopping history to make
less no-checkout model?” ments — services that once strug-
personalized recommendations.
gled to catch on in the US — is
Beyond MOP, grocers can also im- surging as people come to see
3. The rise of contactless
plement contactless commerce their phones as the safer way to
commerce
tactics like enabling customers to pay. They’re also using mobile
Safety has been paramount, and pay via apps in-store. For exam- apps tied to payments, such as
has been a large catalyst for the ple, through Walmart Pay custom- Amazon Prime Now, to place deliv-
increase in digital transactions. ers can store payment data in the ery or pickup orders for groceries,”
In particular, grocers are leverag- Walmart app and then scan a QR notes a recent Bloomberg article.13
5
4. Curbside pickup provides an “The online grocery shopping category over-
appealing alternative all has seen a 100% increase in daily online
sales between March 13 and March 15, while
Closely tied to the rise of contactless com- BOPIS has seen a surge with a 62% year-
merce has been a surge in curbside pickup, over-year increase between February 24 and
also known as buy online, pick up in-store March 21,” finds Adobe Analytics.15
(BOPIS). In many cases, grocers are expand-
ing their offerings in this area such as by Even with grocers ex-
implementing systems where customers panding delivery capa-
can notify stores when they arrive, and an bilities, curbside pickup
employee can then place the grocery bags looks to be a prominent
in their car to maintain physical distancing part of the next normal.
protocols. Customers want flexibility
in their online ordering
For grocers, this option can be a happy me- options, such as in cases
dium because it limits the number of people where they would prefer
in stores while reducing costs and opera- to use curbside pickup
tional complexity compared with implement- while running other er-
ing delivery. rands rather than waiting
around for delivery.
Even before the pandemic took hold in the
US, curbside pickup options were growing The natural next step is
rapidly. For example, Instacart, known large- that grocers offer curb-
ly for its delivery services, has been signifi- side pickup orders now
cantly expanding its pickup options through to gain customer loyalty
a variety of retail partnerships. going forward. And as
stay-at-home orders are
In a January 14, 2020 press release, Nilam lifted in certain parts of
Ganenthiran, president of Instacart, noted: the country, grocers need
“2020 is the year of pickup. For our retail to be able to personalize
partners, we’ve seen Instacart Pickup be- their marketing to reach
come a gateway to growth in a margin-thin customers at the right
industry. Our pickup product is also becom- time and place, such as
ing a significant revenue contributor for our to incentivize customers
retail partners, growing customer basket size to use curbside pickup on
by an average of 15% and accounting for an the way home from work.
average of 20% of a retailer’s total Instacart
store sales.”14
Since then, the virus has accelerated curb-
side pickup adoption, due in part to a limited
amount of available delivery windows.
6Building optimal
experiences for customers
As we enter this next normal, shoppers to increase order fre-
grocers need to up the ante to win quency and/or transaction size via
over customers in the long term. AI-fueled learnings that can pro-
While customer experience may vide up- and cross-sell opportuni-
be taking a backseat to meeting ties. Customers also want to feel
current operational challenges like recognized and valued through
supply chain backlogs, grocers loyalty programs and using AI and
that do not commit to setting the other forms of data analysis can
right expectations for customers help grocers personalize these
risk losing these customers to experiences to keep customers
competitors. coming back.
Right now, it might seem easy Lastly, grocers may need to re-
to acquire new customers and kindle relationships with previous
expand online sales channels, but customers, particularly if opera-
when the pandemic subsides, gro- tional challenges during this pan-
cers that have been optimizing the demic have caused them to shift to
customer experience will be in a competitors.
better position to retain customers
and continue to grow. Plexure excels at helping brands
deliver highly personalized expe-
Specifically, grocers can capitalize riences at scale. We harness the
on these trends through deeply power of data and AI to identify
personalized customer engage- what the right offers, content, loy-
ment and loyalty programs. alty programs and product recom-
mendations should be for each of
Grocers should be exploring the your customers.
use of contextual, shopping and
demographic data from online We work with some of the world’s
purchases to inform campaigns largest brands to increase their
geared toward shifting new cus- premium customer bases, which
tomers toward that third purchase, has led to a 60% increase in visit
where 93% of shoppers are likely frequency, a 35% increase in aver-
to use the same retailer habitually. age transaction value and a 315%
increase in impulse visits, and we
There should also be a focus on can help grocers continue to grow
increasing customer lifetime value, as we enter the next normal.
such as by incentivizing online
7Sources
1. C+R Research. Changes in Grocery Shopping Habits During Covid-19
2. Brick Meets Click/Shopper Kit Online Grocery Shopping Survey. March 23-25,
2020 and BMC Online Grocery Shopping Survey, August 21-23, 2019. Online Gro-
cery Delivery & Pickup Scorecard
3. Bishop, Bill. Brick Meets Click. April 6, 2020. What can retailers do to capture more
than their fair share of the new online grocery business?
4. Schall, Mike. The Food Institute. April 14, 2020. As COVID-19 Contagion Roils Food
Industry, Adaption is Key
5. Bishop, David.Brick Meets Click. March 19, 2020. How will COVID-19 affect growth
of online grocery? What retailers can do to improve the experience
6. Gartner. April 20, 2020. Grocery US 2020
7. The International Food Information Council Foundation. April 14, 2020. Consumer
Survey: COVID-19’s Impact on Food Purchasing, Eating Behaviors and Perceptions
of Food Safety
8. Becdach, Camilo; Brown, Brandon; Halbardier, Ford; Henstorf, Brian & Murphy,
Ryan. McKinsey & Company. April 2020. Rapidly forecasting demand and adapt-
ing commercial plans in a pandemic
9. Aull, Bill; Kuijpers, Dymfke; Sawaya, Alex & Vallöf, Rickard. McKinsey & Company.
March 19, 2020. What food retailers should do during the coronavirus crisis
10. Xiao, Yan & Fan, Ziyang. World Economic Forum. April 27, 2020. 10 technology
trends to watch in the COVID-19 pandemic
11. PYMNTS.com. April 2020. Mobile Wallet Adoption 2020: Mobile Wallet Use
Among the Covid-19 Pandemic
12. The Strawhecker Group & The Electronic Transactions Association. April 2020.
TSG-ETA COVID-19 SMB Insights
13. Kharif, Olga. Bloomberg. April 16, 2020. Contactless Payments Skyrocket Because
No One Wants to Handle Cash
14. Instacart. PR Newswire. January 14, 2020. Instacart Rolls Out New Grocery Pickup
Experience For Customers Across North America
15. Adobe. March 31, 2020. Adobe Unveils First Digital Economy Index
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