December 3rd, 2018

Branch to Basket—The Future of Online Grocery Shopping

November is officially in the rearview mirror and its passing should leave a big smile on the faces of online retailers throughout the world. Last week’s Cyber Monday broke records in the US, generating an estimated $ 7.9 billion in revenue, a 19.7% increase from 2017’s impressive haul. The number was higher than anticipated but in line with the year’s growth of online retail (Adobe Analytics expects 2018 to record a 19.9% increase).

Branch to Basket—The Future of Online Grocery Shopping

These historic numbers were dwarfed in China, where Alibaba’s Single’s Day event recorded $ 30.8 billion USD in sales in a 24-hour period. This was a significant jump from 2017’s record of $25.3 billion. Like Black Friday and Cyber Monday, the appeal of Single’s Day as a retail event is spreading beyond China’s borders and tapping new consumer bases.

While these events put the size and strength of the online marketplace on full display, the growth of online retail has been skyrocketing for years. England recorded an increase in the online sale of non-food items from 11.6% of the English market in December of 2012 to nearly a full quarter of the market—24.1% at the same time in 2017. Doubling market share in five years is extraordinary, but the island country’s steep slope is clearly not an outlier.

According to a joint study conducted by Nielsen and the Food Marketing Institute, this rapid expansion will extend to online grocery sales. The study, “The Digitally Engaged Food Shopper,” expects that within five to seven years, 70% of US consumers will be grocery shopping online. This would account for 20% of all US grocery sales by 2025, a projection that represents $100 billion in sales.

While more and more grocery shoppers are enjoying the convenience of click-and-pick, willingness to venture beyond non-perishables has lagged at times. Amazon’s grocery sales provide a perfect illustration of shoppers adapting to the online marketplace. The most popular items are primarily non-perishables, with beverages, coffees, snack foods, breakfast foods, and candy securing the top five spots. Grocery shoppers start with these familiar purchases which all but guarantee quality and conformity. But as they get comfortable with the online medium, it appears they are willing to explore fresh produce purchases as well.

Forbes contributor Pamela Danziger explains, “Increasingly consumers are gaining confidence in buying their groceries online.” Part of this, Danziger believes, can be attributed to moves like Amazon’s acquisition of Whole Foods. A 2017 Feedvisor survey shows nearly 25% of respondents are more likely to consider purchasing fresh produce online after Amazon acquired the major grocer. The acquisition of a well-known and respected brand clearly boosts consumer trust in the quality of a product they won’t be able to personally inspect until it arrives on their doorstep.

Globally, willingness to purchase produce online is catching in the East and moving westward. Forty percent of Chinese respondents to a Nielsen survey say they have purchased fresh groceries online. South Korea reports 39%, and 35% in India. Those numbers fall to just 9% in Europe, and 7% each for Africa and the Middle East, and Latin America. “While not being able to hand-pick fresh groceries is a clear barrier to online adoption, as grocery delivery services expand and improve, and quality assurance is guaranteed, the allure of purchasing fresh groceries will expand,” the report authors assure.

Interest in online produce sales understandably pricked some ears at Fresh Summit, the Produce Marketing Association’s annual convention in Orlando, FL. One of the panelists who spoke in October was SVP of Nielsen Perishables Group Sherry Frey. Frey explained that online sales represent a major growth opportunity because 69% of consumers say they haven’t yet shopped online for food. “There is upside opportunity,” Frey emphasized, “…It really is where the growth is.”

The panel reiterated that quality control will be the key to consumer commitment. When the opportunity to select from a physical assortment is sacrificed, consistent quality will be expected every time. “This will change who we are and the jobs we are doing for consumers,” Frey said.

Of course, some companies like Hungry Harvest and Imperfect Produce are reversing this expectation by marketing online sale of fresh, yet “ugly” produce at a reduced cost. In any event, the continued growth of online shopping is inevitable and produce providers need to be willing and able to adapt if they want to grow with their customers.

(Read more about India and the Group of 20 Summit in Argentina)

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