The hot digital sector is set to retain its sizzle in 2023.
Grocery operators’ spending to support digital transactions will increase by 2.3% next year despite a 1% shrinkage in technology budgets, reports Grocery Doppio, a grocery insights and data provider, in its State of Digital Grocery Performance Scorecard for October 2022 report. In addition, 23% of grocers plan to increase their technology spend on digital in 2023 versus a year earlier, Grocery Doppio found in its October survey of 200 U.S. grocery executives.
Fulfillment efficiencies, cited by 77% of respondents, will be among the three most popular investments next year, along with digital basket size nurturing (67%) and system-wide inventory data accuracy/transparency (55%), the survey found. In addition, 18% of respondents cited AI decision capabilities and 15% listed robotics for fulfillment as the new technologies that they plan to test and deploy the most next year.
"Fulfillment efficiency is clearly a priority for grocery leaders in 2023," said Gaurav Pant, chief insights officer of both Incisiv, a next-generation industry insights firm, and Grocery Doppio. "The ability to accurately portray available inventory and get orders quickly and efficiently into the hands of shoppers will be a key competitive differentiator in the coming year."
Digital’s portion of the overall grocery transaction market, meanwhile, is climbing. Digital grocery sales reached $11.8 billion in October, a 12.4% leap from September.
Digital’s 14.9% market share is its largest since January 2022 when it reached 15.2%, Grocery Doppio stated.
Fueling such growth is an increase in digital basket sizes, with October baskets averaging one additional item than the previous month. The $79.90 average digital basket dollar size was 4.5% higher than in September and continues to “dwarf” the average store basket size, which totaled $49.70 in October, Grocery Doppio stated.
In addition, grocery pickup sales are on the upswing, with a 1.3% gain in October and revenues totaling $6.3 billion. “That growth extended pickup’s lead over delivery as a fulfillment method, giving it a 53.7% share of all digital grocery orders,” Grocery Doppio reported.
Digital grocery sales through third-party providers, meanwhile, is slowing with third parties’ share of digital declining 1.8% to 20.9% in October. The grocer website is the primary contributor to digital grocery sales, accounting for 73.3% of all activity in October, while transactions through grocer apps accounted for 5.8 percent of digital grocery sales, Grocery Doppio noted.
"The data shows with great clarity the shift in grocers' strategies since the pandemic began," said Charlie Kaplan, chief strategy officer for Wynshop, a provider of a digital commerce and fulfillment solutions for local store-based retailers and, with Incisiv, operator of the Grocery Doppio platform. "It is no longer only the largest players leaning into digital. Local and regional grocers have upped their game to compete effectively with third-party providers, and now more grocery shoppers prefer to buy direct."
In prepping for 2023, 91% of grocers cited increasing inflation as among the top three business challenges they will face next year. Next are rising workforce costs (78%), uncertain product availability (71%), reduction in shopper spending (32%) and poor digital profitability (26%).