We are living in challenging and unprecedented times, as we learn more about COVID-19 each day, and its global presence. No amount of additional context related to health considerations or staying safe from us here at Velocity Commerce Group can augment what you are already getting from multiple sources. That said, let’s have a discussion on the commerce industry and try to contextualize what is happening today.
For several years, we (Velocity Commerce Group, TPN’s digital consultancy), have been tracking the growth of digital grocery commerce; we have seen steady gains in the category that once seemed impossible, particularly in the last two years. We once believed that BOPIS (Buy Online, Pick Up in Store) and Amazon’s purchase of Whole Foods served as the greatest catalyst to push online grocery shopping into the mainstream. It turns out that, while important, those were just stepping stones; vessels for behavior change but not a true breakthrough moment.
For reasons we wish we didn’t have to accept, COVID-19 is requiring that people stay home, order staples and groceries and practice social distancing. We assert that this year will represent the tipping point, where many of these shoppers never go back to the way they grocery shopped before. New customer behaviors are being tested, created and possibly cemented during this time.
Going into 2020 online grocery shopping comprised somewhere between 2-3% of all grocery sales according to 2019 reports. That said, forecasts from Nielsen and FMI indicate that online grocery sales will sky rocket to $100 billion in sales by 2022 or 2024, but still only represent a portion of sales.
A significant driver of this growth has been BOPIS which has continued to propel the numbers over the past 24 months. According to Market Force Information, “US Grocery Benchmark Study” 2018, 15% of US grocery shoppers have tried BOPIS and we believe the number is much higher today than when the study was conducted just 18 months ago.
As many of our readers know, the nation’s biggest grocer, Walmart, has been investing aggressively in Online Grocery Pickup and the service is available in approximately 3,000 stores nationwide. For shoppers who have tried Walmart Pickup, about 42% are utilizing it once a month or more (according to proprietary research from TPN, the creative commerce agency). The study, conducted in 2019, surveyed over 1,000 people who had shopped via BOPIS fulfillment methods across a variety of retailers.
Despite all of this, online grocery still hasn’t met its potential. However, the dismal circumstances surrounding the Coronavirus have already forced behavior change that is taking advantage of the robust grocery infrastructure that has been built out by Walmart, Amazon, Kroger, Instacart, Peapod and others.
Brand new research from Numerator states that COVID-19 has created a rush to buy groceries online for not only folks looking to stock up but in support of various trip missions. In early March 2020, 1 in 4 consumers with confirmed in-store purchases indicated they were replacing in-store shopping trips with online. This significant increase is creating trial at scale and, along with dramatically increased demand, is challenging the ability of grocery and mass retailers to cope. After this short-term rush is over, we are interested to know how grocery ecommerce will evolve next…and it will evolve dramatically.
With millions of new baskets created, shopped and bought online, how will online grocery react? We believe that a cascading stickiness will play out, accelerating the rate of adoption and drive the total online grocery category size beyond the $100 billion estimate that Nielsen and FMI boldly made a couple of years ago. We believe that the percentage of total online grocery sales will rocket toward 10% of category sales more quickly than previously predicted. We believe all of this because online grocery shopping saves time, is transparent, is convenient and allows you to shop how you want to shop with the ability to choose how you want to receive product the way you want to receive it.
In short, we have reached the critical turning point in online grocery shopping where it moves from a rounding error to real numbers and everything from brand shopper marketing programs to retailer inventory, assets, media, strategy and merchandising need to be ready for the acceleration…or be left behind.