COVID-19 Sparks Surge in Online Grocery Delivery Services

Lockdown has changed our relationship with food: what we buy, how we prepare it, and our awareness of where it comes from. The COVID-19 situation is having a profound impact on the relationship between consumers and the food supply chain, an impact that will far outlast the crisis. This change comes in the form of online grocery delivery.In part, the global pandemic and accompanying lockdown are accelerating a change that has been in progress for over a decade - the shift to home delivery for groceries. Online deliveries have been gradually encroaching on the retail space, and now make up 3% of the food retail market, according to a report last year by Deutsche Bank.According to Brick Meets Click, a market research firm specializing in the grocery store space, “click-and-collect” pickup services in the U.S. rose to 31% in March, compared to 13% in the previous six months. Riskhedge.com notes that Walmart sold $900 million worth of groceries online in March, representing a “100% jump over last year.”In recent years, many consumers have switched to the convenience of online grocery shopping, and many haven’t looked back. But COVID-19 is accelerating that trend at an unprecedented rate. According to the Wall Street Journal, 40% of people who ordered groceries online in mid-March did so for the very first time.This is good news for established delivery services like Amazon, whose stock has seen significant gains since the pandemic began. Already equipped with well-established delivery infrastructure, Amazon is among the best prepared for the shift towards grocery delivery. Amazon is growing so much, analysts say they could be the target of antitrust lawsuits in the near future.

Online Grocery Delivery & Pickup Scorecard (Source: Brick Meets Click)

Not all businesses are as well-prepared as Amazon, however. Many grocers in the US have been overwhelmed by the rise in demand, leading to late and poorly filled orders. Many consumers have complained about not being able to get a delivery slot, even on the nation’s biggest platforms.But too much demand is not such a bad problem to have, and grocers are quickly adapting to the change, adding more employees and more infrastructure for deliveries. Instacart, an online grocery service startup, plans to add 300,000 new jobs in the coming months. Kroger, another major grocery chain, also plans to add tens of thousands of new jobs, many of them for delivery drivers.Another major winner is Walmart, who, according to the Motley Fool, captured over half of new online grocery shoppers in the month of March. Walmart is "more than just defending market share," and the company is preparing itself for a seismic shift towards online shopping becoming the new normal.

Walmart (NYSE: WMT) Performance vs S&P 500, YTD

The spike in demand is also an opportunity for new companies to enter the market. These include Farm to People, a Brooklyn-based online grocery delivery startup that provides seasonal produce baskets sourced directly from local farmers. Michael Robinov, the company’s founder, recently told Bloomberg that Farm to People is expecting to reach five times its original customer target for the year, and that his business has grown 400% since the beginning of March.In recent years, consumers have shifted their preferences towards organic and locally-grown foods, a trend which the lockdown is likely to push forward. A higher degree of health-consciousness among consumers has led many to alter their customary purchasing patterns and branch out into locally sourced products. The lockdown may grant companies like Farm to People the opportunity to establish a lasting market share in the online grocery delivery space.That said, the success of farm-to-doorstep delivery companies (and grocery stores in general), could lie in their capacity to adapt to the logistical disruptions caused by the recent spike in demand. Changing food choices and impulsive buying habits are creating a grocery store situation that doesn’t match historical patterns, and supply chains have had to cope.

Online Grocery Shopping Sales in the U.S (Source: Statista)

Some grocery stores are reducing the variety of products on their shelves in order to focus more on providing consistent amounts of staple products. In many cases, this simply means fewer flavors of snacks such as candies and potato chips. Prioritizing essentials could have a lasting impact, but experts say it is likely to be a short-term phenomena.COVID-19 has profoundly impacted the relationship between consumers and the food supply chain, and its effects will be felt long after the crisis is over. Online grocery delivery services are here to stay, whether startups or established companies, and there is more opportunity than ever to connect farmers and consumers through technology. As we move forward, expect to see a food supply chain that is more direct, more local, and more oriented towards the online consumer.Read more from Farmfolio.