New Delivery, Pickup Options Drive Online Grocery Gains

Mark Hamstra
October 27 2015
Retail Leader
Barriers around quality of perishables, cost and convenience remain, according to A.T Kearney report.
A sharp increase in consumer trials of online grocery shopping during the past year indicates that web-based platforms may be gaining traction for food and CPG retailers, according to a report.
People of all age groups showed a significant increase in their use of online grocery-shopping services in 2015, compared with a year ago, the report from global strategy and management consulting firm A.T. Kearney concluded.
“Trial nearly tripled since our 2014 consumer survey, driven by increased availability of both home delivery and click-and-collect options and shoppers becoming more comfortable with buying food online,” says Randy Burt, partner in the retail practice of A.T. Kearney. “We are truly at an inflection point.”
The report, called “Capturing the Online Grocery Opportunity,” projected growth in online grocery shopping of 15 to 18 percent annually over the next decade.
Consumers age 25 to 34 are most likely to have bought groceries online, with 37 percent saying they have done so in the last year, the report found. That compares with just 11 percent of consumers in that age group who said they had shopped for groceries online a year ago.
Although more and more shoppers are buying groceries online, consumers still remain skeptical about buying perishables in this way. Nearly two thirds of shoppers—64 percent—said they would buy more groceries online if they felt they could get the same quality and freshness that they can in the store.
In addition, the report found that while slightly more than half of shoppers had purchased personal care or beauty items online in the past six months (53 percent and 52 percent, respectively), only 14 percent had purchased fresh produce online. The same percentage said they had purchased fresh meat and seafood online.
Only 13 percent said they had purchased fresh prepared meals online, and 7 percent said they had purchased other fresh foods.
Burt says limited flexibility and choice around home delivery windows is also slowing adoption. About half—51 percent—of consumers say they would buy more groceries online if they were given the option of same-day delivery, which is being offered by some grocery-delivery specialists.
“Retailers will need to determine how best to employ third parties like Instacart and Google Shopping Express and where in-house capabilities should be developed—and the associated strategic implications and ROI of both options,” Burt says.
The report also concluded that consumers are very concerned about the cost of online shopping. Seventy-one percent of respondents to the survey said they would be likely to return to online shopping they were offered coupons, and 58 percent said they would order more groceries online if they were offered free or low-cost shipping or pickup.
Burt also notes that consumers can be put off by the lack of real-time inventory and in-stock position on grocery websites—when items are listed but are actually unavailable, or substitutes are difficult to find.
“Retailers need to develop real-time, store-SKU-level inventory management capabilities to address this,” he says.
Grocery retailers need to update their overall approach to integrating the online and in-store experience for consumers, Burt says.
“Many retailers are not yet creating a consistent, seamless experience across online and off-line shopper interactions,” he says. “Retailers need to rethink shopper engagement and create approaches that transcend conventional thinking around channels, which are becoming less and less useful as a segmentation construct.”