Retention of online growth looks strong, but a COVID-19 recession looms ahead

Nearly eight months into the coronavirus pandemic, the food retail industry continues to face a tsunami of change brought on by the staggering growth of online grocery in that time. In our Supermarket News webinar on Wednesday, “Online Grocery Boom: Where Do We Go from Here?,” we took a look at changes in shopper behavior in online grocery as COVID-19 progressed, and how retailers have responded, where the industry has been during COVID-19 and where it might be headed. (The webinar, sponsored by Leer Manufacturing, is available on demand here.)

To help navigate the landscape of online grocery during COVID-19, we were joined by two of the retail food industry’s leaders in research and analysis — Mark Baum, senior vice president, industry relations and chief collaboration officer at FMI-The Food Industry Association, and Nicole Collida, head of consumer intelligence sales, North America at Nielsen.

Presenting data from FMI, Baum emphasized just how dramatic the boom in online grocery has been — for the first couple of months of the pandemic, grocery experienced over a 300% increase in online sales. As one FMI member put it to Baum, “We've experienced seven years of online growth in seven months.”

Since COVID, according to FMI, about 21% of consumers have tried online shopping for the first time. Of that 21%, 8% have returned and 19% are continuing to shop online and most at deeper levels than they did initially. FMI asked those same shoppers to consider their pre-COVID-19 shopping patterns and to speculate a little bit about which pandemic-driven shopping habits they expect to retain or what they'll go back to afterwards. Online, the majority of consumers expect that they will return to their pre-pandemic levels of ordering groceries online (delivery at 57% or pickup just under 60%). And while some — 27% for delivery and 24% for pickup — say they expect to be ordering more online in the future, others say they expect to order fewer groceries — 16% and 18%, respectively.

Related:FMI: Online grocery sales jumped 300% early in pandemic

That said, Baum (left) noted that the in-store experience is still very important to customers. “In-store is maybe the last vestige of normalcy that consumers are finding when they go out to shop these days,” he said. “But in-store, as with their online expectations, about half of consumers anticipate that they will return to their pre-pandemic levels of in-store grocery shopping. The remaining half are almost equally divided between shopping more and shopping less in-store for groceries in the future. So clearly, not everyone will continue ordering online at the levels we have over the height of the pandemic, but it is now just part of the fabric of our lives and we will likely continue to see more than we did pre-coronavirus.”

Collida agreed that this omnichannel shopper is here to stay. “Omni-shopping is more important than it's ever been before and we don't see that leveling out anytime soon,” she said. “We get asked the question a lot, when do we hit the leveling out point? When is the critical turning point where we're going to see this online growth subside and we're going to come back to some sort of balance between brick-and-mortar and online retail? And I would tell you that the numbers tell us it's not going to happen anytime soon. When we look just within our own marketplace, what you can see is that as a result of COVID-19, all channels are really growing at exponential rates.”

Retention is critical to this online growth. “The early data that we see show us that consumers are staying online, and in fact, new consumers are coming in every single month,” said Collida. “That's really what's generating that 90% growth year over year, it's those new consumers that are entering the online space. So I would say, in the early stages, it appears that grocers are being quite successful at retaining consumers. As you think about setting your retention strategy it’s really around that consistency and delivery, both in the online and offline space. Make it easy for consumers to engage with you in either space rather than forcing consumers into one or the other. I think that's the number one way that retailers can focus on retaining these online shoppers.”

“Make your e-comm platform really user-friendly,” advised Baum, “and there are lots of ways you can do that, but that's really important. But some customers struggled with those early deliveries and so it's been more of an effort to kind of woo them back and retain them. And now that we're much further into it, we've smoothed out a lot of those schedules, so I think you'll see more retention. But I think more importantly, online is going to only gain in velocity going forward, and that's across any given consumer-facing products-based industry.”

“So it's really important for grocery retailers, if you haven't invested in online, you better invest now,” he added. “The time is now or it's going to be too late. You've got to get into the game.”  

Collida (left) agreed, but noted that “being online doesn't mean going from zero to 60 overnight.It can be as simple as finding a way to engage with your consumer set online through maybe a video that you embed in your website that encourages them to come into the store. Think about it in terms of small steps so that you get online and that you're there meeting your consumers where they're looking for you to meet them.”

She also stressed the importance of personalization. “Consumers are being targeted in the online space with hyperpersonalized ads. And many of us aren't necessarily going to compete in that way, but it doesn't mean that we can't bring personalized opportunities to our customers as well, whether it's the ability to drill into certain product types on the website or whether it's the ability to customize the color of your bananas when you're placing a click-and-collect order. Any of those things help consumers engage with you more directly and create more success kind of in that online space.”

Of course, hanging over the heads of retailers and consumers is the threat of a pandemic-spurred recession and what that might mean for grocery shopping.

“We have seen more households begin to come into this group of financially impacted consumers, and they're coming into it at a time when the same amount of stimulus dollars aren't being flooded into the market,” said Collida. “So we do need to prepare as an industry for the best ways to reach these consumers, the best meaningful ways to interact with these consumers.

“We saw the number of trips increase for these financially impacted consumers and the basket size decrease. There's a need to make more trips to the store in order to fulfill your needs sort of based on your pay cycle,” she added. “We are now seeing these consumers pick and choose based on price, based on availability, based on convenience and omni-shop for all of their needs, more so than any other consumer groups.”

“With stimulus money drying up, and by the way, I think we're going to have to prepare ourselves for the long haul,” added Baum. “But as an industry, we learned a lot. I have to say, I'm incredibly proud and feel privileged to be part of an industry that showed up and delivered in the way we can and the way that we did both online and on-shelf over the last seven months, and we continue to get better at it. We certainly bent the supply chain, both the physical and virtual supply chain, but we also expanded it. And I think that we're well positioned to deal with whatever comes next.”