Consumers are warming up to online grocery, report says

Dive Brief:

According to IRI, consumers' increasingly positive attitude toward online shopping is resulting in greater sales gains. For the 52 weeks ended Dec. 30, 2018, grocery e-commerce sales totaled $58.9 billion — a 35.4% increase over the previous year.
While nonfood and packaged goods led online sales, IRI's latest Consumer Connect Survey found shoppers are warming up to the idea of buying frozen and refrigerated groceries. "While fresh and frozen items rank among the bottom of e-commerce sales categories, there are signs of significant growth, indicating that retailers — likely with the support of such flexible options as click-and-collect — are starting to crack the code," the firm noted.
The 2,200 survey respondents report that they tend to find better deals when buying online for personal care, beauty and home care products but say they're less likely to find deals when purchasing food online. The survey also found that shoppers were more conscious of spending money while shopping online than in traditional stores. Millennials and Gen X'ers are most likely to find value in online shopping but also report having the most difficulty affording essential groceries, IRI reported.

Dive Insight:

Online grocery has been slow growing due to a host of factors, from friction in the shopping process to high costs and a lack of trust in letting someone else select products. To solve many of these issues, retailers have rolled out innovations like same-day delivery and click and collect.

Kroger and Walmart are among the two largest grocers offering a click and collect service, and both have made significant investments to expand this service. A click-and-collect service cuts out delivery fees, which are often the root cause for many consumers’ hesitation towards online grocery shopping, according to the IRI survey and other reports. Delivery costs a retailer $10.10 on average, but customers cover about 80% of that cost, according to Capgemini research.

According to IRI's Consumer Connect Survey, 38% of shoppers across all generations prefer click-and-collect to avoid shipping fees.

One of the biggest contributors to these high fees are high last-mile costs for retailers, which trickle down to consumers. In addition to promoting click and collect, retailers are looking at fulfillment efficiencies like automation. Prices are also coming down among large competitors, with Whole Foods stores offering free two-hour delivery for Amazon Prime members, while Instacart recently slashed its fees.

Driverless delivery is another innovation aimed at saving costs — though for now, the technology remains limited to a smattering of test runs. Kroger and Walmart are testing the waters in Arizona, while Stop & Shop is working on getting a mobile grocery up and running on the streets of Boston.