The state of the food and beverage industry in the fall of 2020 would be completely unrecognizable to consumers at the beginning of the year.
Away from in-restaurant dining, eating habits have shifted toward outdoor seating, home cooking and food delivery.
Meanwhile, the experience of going grocery shopping has changed, with new cleaning protocols, limited capacity, and guided paths through stores introduced to make consumers feel more comfortable in-store. Even still, many consumers have decided to steer clear of the supermarket entirely, and digital grocery alternatives have swallowed up this shift in demand.
Unlike any other event in recent memory, the effects of this crisis have been ongoing for nearly the entire year, and don’t show any signs of abating soon.
So, the question on the minds of most brands and marketers in the grocery space is: what will be the lasting implications of the coronavirus on in-person and online grocery sales?
Who’s buying groceries online now.
Online food shopping and delivery sales have spiked, especially among groups of consumers that were previously underrepresented in the online grocery industry.
Before the coronavirus, online grocery shopping was most common among urban dwelling millennials, and while this is still the case, the pandemic has driven other consumers into the market.
Since Q1, we’ve seen larger growth in online shopping behaviors among Gen Zs and baby boomers, as well as consumers living in rural and suburban environments.
This suggests that the reason behind online grocery shopping has changed.
Where before, online grocery brands were targeting young, tech savvy professionals without enough time to visit the shops, they now find themselves catering to a much wider range of consumers.
Online grocery shoppers in Q2 2020 are a very brand, price, and quality conscious audience: 63% say they research products online before buying, 56% say they use coupons or discounts, and 52% say they take their time finding the best deals.
Online grocery storefronts and delivery services face a lot of challenges as the pandemic continues, and especially once it ends. Though some grocery shoppers are using online sources because of health concerns, their expectations have also risen – meaning they’re more concerned about things like free delivery, discounts and coupons than before the pandemic.
Online grocery shoppers can be won over by a better value deal. But if getting groceries delivered increases the overall costs of a weekly shop too much, these consumers may quickly return to stores once they feel safe doing so.
There’s a need for balance – online grocery stores should weigh up the cost of offering discounts and other incentives against the slim margins of the industry overall.
Regions experiencing the most growth – and why.
Over one third of the online population globally say they’ve purchased a grocery item online in the past month.
That said, growth rates in different regions vary – especially when looking at those who are the main shopper in their household.
Among those responsible for their household’s food purchases, Latin and North America have experienced the greatest increases in online grocery shopping since the start of the pandemic.
In the U.S., Argentina and Colombia, where deaths per 100k citizens are among the highest in the world, 3 in 10 internet users now say they’ve ordered groceries online in the past month. However, severity of COVID-19 is not the sole driver of growth in online grocery sales.
In Europe for example, the situation differs widely by country.
The UK experienced the greatest percentage growth of online grocery shoppers in the region, and now 3 in 10 consumers have online grocery shopped in the past month.
The portion of online grocery shoppers in Italy and France, where coronavirus cases were among the highest in the world earlier this year, also rose by almost 20% in a single quarter. Despite experiencing a boost, uptake remains comparatively low in these countries, with only one quarter or less of these populations having purchased groceries online.
Whether this is driven by cultural differences, or a lack of supply in online grocery sellers in these regions, it’s likely that a lengthy pandemic and increased risks of transmission in winter months will keep numbers climbing steadily in months to come.
On the other hand, in APAC, the portion of main household shoppers who’ve ordered groceries online has declined overall. A greater portion of APAC’s population was already using online grocery services before the pandemic, so COVID-19 was less of a driver for new shoppers.
Although the category of online shopping is stronger in APAC compared to the rest of the world, the plateau suggests growth of the industry overall may have an upper limit.
Snapshot of a growth market: U.S. Online Grocery Shoppers
The U.S., one of the largest markets for online grocery shopping outside of APAC, offers a unique view into the specifics of how the grocery industry could change as the pandemic unfolds.
Across the country, one third of all internet users have online grocery shopped in the past month (nearly a 30% increase since Q1 2020).
New shoppers are largely from suburban and rural environments. As of Q2, our research shows more than half of all U.S. online grocery shoppers live in the suburbs.
Around the country, regional differences in the preferred channels for online grocery shopping give us an idea of where growth will come in the future of the industry.
When migrating online, consumers are sticking with stores they’re familiar with for the most part. Across the board, consumers are more likely to look toward brick and mortar grocery brands.
The switch to online grocery in America has mimicked the distribution of market share for brick and mortar stores around the country.
It appears U.S. consumers are comfortable buying the brands they like, making them less likely to diverge from their normal grocery stores in order to find a deal.
In the coming months, whether or not these trends continue as the pandemic gives or detracts from our ability to return to stores will be important to watch.
With less physical overheads than brick and mortar stores, competing ecommerce brands may have an advantage over being able to drop prices or raise their offering. Still, there’s a long way to go before online grocery shopping surpasses in-store sales.
Is online grocery here to stay?
Even though the coronavirus has resulted in a larger portion of consumers shopping online, it’s not yet clear if this trend will extend beyond the creation of a vaccine and the return to normal life – however far away that may be.
Simply put, newcomers aren’t the same as pre-pandemic online grocery shoppers because their expectations are higher.
Lowering prices, or offering incentives to appeal to these consumers is something brands should consider, but within reason, given the long-term challenges associated with smaller profit margins.
Brands that overextend themselves in the pandemic may find themselves in a precarious position when the world returns back to normal.
In the meantime the online grocery industry will no-doubt benefit from months of pandemic uncertainty, driving growth in the short-term.