Is digital grocery shopping ready for takeoff?
Grocery shoppers are ready for a more involved digital experience than many supermarkets are promoting or prepared to deliver, according to a global survey by Nielsen.
The survey of 30,000 online consumers in 60 countries found that a quarter already order grocery products online for home delivery and 55 percent are willing to use such services in the future. Regarding "click and collect," 12 percent pick up at a store or other location, another 12 percent use drive-thru, and 10 percent curbside pickup. In the future, 57 percent say they will be willing to use online options for in-store pickup, 55 percent for drive-thru and 52 percent for curbside pickup.
In other delivery options, 14 percent have used an automatic online subscription service in which orders are routinely replenished at a specified frequency, and 54 percent are willing to do so in the future. Thirteen percent are already using a virtual store, such as kiosks in subway stations, and 58 percent are willing use them when they become available.
Photo: RetailWire
In other areas of the digital experience for grocery shopping:
- Eighteen percent use online or mobile coupons with about 65 percent willing to use them in the future;
- Fifteen percent use mobile shopping lists with 64 percent willing to use them in the future;
- Fourteen have downloaded a retailer/loyalty program app on a mobile phone to receive information or offers and 63 percent are willing to use one when available;
- Twelve percent log in to store Wi-Fi to receive information or offers with 66 percent willing to do so in the future;
- Eleven percent scan QR codes to access more information with 65 percent open to doing so in the future.
Thirty percent of Millennials (ages 21-34) and 28 percent of Generation Z (15-20) respondents say they are ordering groceries online for home delivery, compared with 22 percent of Generation X (35-49), 17 percent of Baby Boomers (50-64) and nine percent of Silent Generation (65+) respondents. Younger respondents are also the most willing to use all of the e-commerce options (home delivery, in-store pickup, drive-through pickup, curbside pickup, virtual supermarket and automatic subscription) in the future.
"Time-starved consumers want to use technology to make shopping faster, easier and more efficient," said Patrick Dodd, president, global retailer vertical, Nielsen. "As we’ve seen with self-checkout, one of the more mature flexible retailing options included in the survey, as more retailers incorporate these options in their in-store and online offerings, adoption rates will likely increase."
Discussion Questions
Is the grocery category at a tipping point when it comes to e-commerce and digital shopping? Which online/digital options will become commonplace with grocery shopping over the next few years and which will take much longer?
Poll
BrainTrust
Richard J. George, Ph.D.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
No — the consistent estimate I see is that we’re at about 4 percent of grocery expenditures online right now. Nielsen has for years been saying it will reach about 14 percent to 17 percent, and they keep pushing out that number year after year.
Online grocery does seem to be at an inflection point, as I’ve recently argued.
Many remember the Web 1.0 flameouts and still dismiss the potential of online grocery, but remember:
Amazon has made its commitment to grocery and CPG clear with the expansion of Prime Pantry, AmazonFresh and even hardware innovations like Amazon Dash. Walmart, Target, Kroger and other incumbents are investing to modernize their asset base and business models. And now new entrants like Instacart, Jet and Boxed are driving yet more innovation.
Many food retailers are motivated more by their competitors than shoppers’ needs, but it’s getting harder by the day to stand by and do nothing.
Convenience will always trump more involved means of acquiring goods of any type, food or otherwise. Although the grocery business has had options for delivery dating back to at least 1989, obviously many organizations have come and gone during this time period. However as the world, not just the U.S., adopts e-commerce in ever-growing numbers, the grocery merchants have unprecedented support from shoppers, as well as from supply chain partners to “deliver” the shopping experience that consumers are looking for. I think there will eventually be enough demand for buy online/deliver to the home in a specific time period to warrant that level of service in metro areas within the next 24 months if not sooner. This is the most convenient way to get groceries, for certain.
I believe so. The number of users by generation is similar to my research findings. Europe is ahead of the U.S. The number of Europeans ordering groceries online has grown 60 percent in the past five years. Britain leads the way with 25 percent of its population ordering groceries online.
I think click-and-collect will emerge as the preferred option. Collections can now be made from many locations, e.g., store, train stations, temperature-controlled collection lockers and mini-collection stores at schools and businesses. For in-store pickup you benefit from the possibility of bringing the customer into the store to shop for additional products. At Tesco U.K., for example — online and in-store spending was two times greater than in-store only spending.
In addition, there are tremendous inventory savings. For example, a Gap experiment with store pick-up has resulted in a 21.5 percent online sales increase with 8 percent fewer square feet in retail.
It is clear from the data that consumers have evolved in their thinking about online grocery shopping faster than grocery retailers have. Particularly in the Millennial generation, consumers are accustomed to selecting their products online and then fulfilling their order in the manner of their choosing, whether through home delivery or pickup in-store.
Based on other categories, online couponing will be more rapidly adopted than phone apps, since consumers are suffering from app-overload.
When the numbers in the reported results are close to 33 percent across all responses there will be a tipping point. Many of these responses are still in the teens. Interest in a variety of delivery options is growing. However we have not yet reached a tipping point where an acceptable model will become omnipresent.
I find these conclusions amazing. Based on the research evidence I’d say the answer is no.
Survey respondents seemed to have limited engagement with digital products but overwhelmingly said they would use them at some unspecified future date. Hmmm … sounds like people saying they plan to engage in a rigorous exercise program “soon,” but in the meantime could you pass the nachos.
I am always skeptical when research shows a “future proclivity to adoption” in the 3X or 4X range. If the potential is so high, why isn’t actual behavior changing faster?
One theory might be that there just aren’t enough offerings to meet this selling latent consumer demand. If so, shame on the marketers.
Again, I think we are making a mistake here by creating technology fetishes. People shop with the tools they find convenient.
The sooner we get over our apparently inevitable fixation with labeling and categorizing these tools and focus on perfecting customer-friendly versions of them and marketing them effectively, the better.
Patrick Dodd is correct. Consumers do want to make shopping faster, easier and more efficient, as he points out.
However, it is important to break down the results of this study by country. The U.S. sample size is not offered in this particular piece, so comments are going by a “gut feel.” Watching consumers in China, as I travel there, I can understand why and how consumers choose to make an online purchase of grocery store products (the Nielsen study does point out that more than 60 percent of those purchases are non-food).
If you live in a city like Shanghai with nearly 26 million people, it is decidedly easier to avoid traffic, save time and avoid the hassle of not having to tote bags of non-perishables to your home. This will be the case in developing world countries, where grocery stores are not at the level of U.S. consumer expectations. The tipping point is there in these developing countries, but online purchasing from grocery stores is not going to explode quickly —it has a longer plateau of at least 10 years.
In terms of this country, the U.S. grocery industry has performed extraordinarily well in updating and modernizing their facilities. The U.S. consumer is nowhere near to the tipping point of using online vs. brick-and-mortar for grocery purchases. Based on the Prosper April Monthly Consumer Survey of 6,500 plus U.S. adults, 85.7 percent of adults have visited brick-and-mortar grocery stores in the past 30 days. While only 79 percent of Millennials have been in a brick-and-mortar grocery store during that time, 10.1 percent have made shopping online a part of their shopping pattern.
That figure has changed in the past nine months.
Grocers and manufacturers will want to monitor the progress in developing countries, as well as keeping an eye on the U.S. for that grocery basket. The tipping point to online has not arrived for the U.S. grocery shopper at this stage.
Yes, it is absolutely reaching the tipping point.
In the city it is all about home delivery. There are four grocery services now competing. But, the city has definitive advantages on the receiving side. many buildings have doormen to take the delivery and the service have almost round the clock delivery.
It is a little more tricky in the suburbs because today’s family is often not at home. So this situation begs for curbside pick-up. Order from work and swing by on the way home, or drop a kid off at a play date and swing by and pick up.
In either the case of home delivery or curbside pick-up the time saving is immense, and that is what will tip the trend.
Survey responses almost always overstate reality, but with that said, momentum is clear in the area of digitally-aided shopping and actual e-commerce in grocery. I think it is important to keep these two behavioral categories separate.
Digitally-aided shopping involves using websites and/or shopping apps for the purpose of making the shopping trip more effective. This is clearly happening more frequently with the advent of multiple websites (beyond the actual retailer’s) that aggregate digital coupons, coupon codes and even offer the retailer’s circular in digital form. Shopping apps, although still a quagmire of too many players, are more prolific as their ergonomics and functionality improve with each new release.
E-commerce on the other hand has two major barriers to overcome before it becomes mainstream. First, it is still too expensive for the budget-minded shopper, (unless it involves in-store pick-up) and secondly, it is inherently restricted to a limited set of categories due to perishable handling and the lingering attraction of shopping for many perishable items in person.
While some progress is being made on both fronts, I see e-commerce lagging well behind digitally-aided shopping, even though both are here to stay.
Adoption of the online/digital option for grocery shopping remains generational. Interesting Nielsen statistic: 50 to 60 percent of Millennials shop online for groceries compared to 10 percent for Baby Boomers. It’s no surprise that home delivery will take the longest for adoption (it was my vote). Millennials will not be at home during the day to accept the groceries.
There will be more grocery delivery in the future, but here is my concern. Many in my area are struggling to pay for what they buy in the stores now, and there is no way it will get to their homes without additional fees or shipping added in. This is not an issue for the higher income brackets and city dwellers who can access food quickly for their immediate needs.
I have looked at this for several years, and grocery delivery is unlike anything else out there, as special trucks with multiple temperatures are needed to protect perishables and maintain the integrity of the products.
These vehicles cost close to $60,000 fully equipped, and it will take a company with deep pockets to do the job. I am convinced that the future is bright for the right company to actually make this work, as Amazon will try and capture much of this market with their capital and logistic partners.
Also, grocery shopping is very sensory as the smells from the deli or bakery, and that new Italian sausage blend being sampled, cannot be done online. This gives hope to the markets willing to provide this experience.
Brick-and-mortar food stores are evolving slowly, and with curbside pick-up and delivery in the cities already happening, it is going to be interesting to see just what percentage of business is actually online in 10 years. We’ll see.
One man’s opinion: We are not that close to any kind of tipping point. I am not sure of the statistics quoted. If they were accurate, wouldn’t we be seeing more grocery digital shopping at home?
Digital influenced grocery shopping is absolutely here to stay and growing more intriguing by the day.
Home delivery is another matter. It’s costly and can actually be inconvenient for people who work all day.
I think the French may have nailed the model with “click and collect.” Carrefour and Casino are examples for the rest to emulate. We have discussed Walmart’s move in this direction here on the RetailWire.
One area where the Nielsen survey does a very nice job is its breakdown of shopping behavior by age cohort. When we boomers are tempted to make generalizations about the entire population, it will be most instructive to refer to the generational differences.
Human beings are hunter-gatherers by nature so this behavior will never change. Perishables will need to stay in the store for hunter-gatherers to pick through. Non-perishables such as packaged and canned goods are more realistic for digital grocery shopping.
The big missing element based on our research is an universal data format that supercede the UPC code that allows all 3rd party entities to classify food and groceries. This is the glue that ties a mobile app for a cooking show or recipe book to send data to the grocery store or show the nearest grocery store. Similar to EDI or XML format, this is the real missing key to make digital grocery shopping work.
If you’re a grocer, and you’re NOT doing BOPIS, you’re in trouble. The world’s largest grocer has been testing it for a while and you know what that means. And IMO, if you want to up that ante a little and provide better service than the mass retailers will soon make ubiquitous, you need to figure out home delivery, like Whole Foods is testing.
Purely from a consumers P.O.V., can you imagine grocery home delivery? That, my RetailWire friends, is consumer nirvana.