Dive Brief:

• A new Gallup poll finds that consumers shop online for groceries at similar rates across income levels and age groups, according to a news release. Among those that make less than $30,000 in yearly income, for instance, 13% say they shop online once or twice a month, compared to 10% among those making $75,000 and over.  
• The poll found that city dwellers are more likely to shop for groceries online, with 15% saying they do so at least once or twice a month, compared to 8% of suburban consumers. Also, those living on the coasts are more likely to shop online, with 16% of East Coast respondents and 11% of West Coast respondents saying they do so at least once or twice a month — substantially more than those living in the Midwest (5%) and the South (8%).
• Overall, 4% of respondents said they grocery shop online every week, while 9% do so at least once a month. This compares to 83% of respondents who said they shop their local supermarket every week.

Dive Insight:

The top-line results from this latest Gallup poll show what many in the industry already know: Despite more and more retailers rolling out online grocery shopping over the past few years, the vast majority of consumers still prefer to shop in-store.

On the plus side, this low penetration proves that grocery e-commerce still has a lot of room to expand. And all indications are that the channel will see dramatic growth in the coming years, with the Food Marketing Institute predicting 20% market share and $100 billion in annual sales by 2025. However, the low rate of adoption also indicates that grocers will have to work hard to promote their e-commerce capabilities while at the same time investing in their stores.

Indeed, analysts note that offering online shopping has become table stakes for supermarkets at this point. Shoppers demand it, but it’s not really profitable, given the economics and inefficiencies of the model, along with increasing competition from other players. Adding marketing and promotional costs on top of all this can be a stretch for retailers.

However, online shopping represents one of the few growth avenues for supermarkets. Research shows that having an e-commerce platform boosts shopper loyalty, which is crucial at a time when most consumers are visiting multiple outlets. It can also inspire consumers to build larger baskets and to order more high-margin prepared meals.  

As the Gallup poll shows, online grocery shopping is popular across age groups and income levels, indicating a high ceiling for growth across the American consumer population. Some companies might assume that tech-savvy millennials are the core audience for online grocery shopping, but the Gallup results support grocery e-commerce’s position as a convenient service first and foremost. 

Even so, consumers remain reluctant to buy many fresh items online, including produce, because they want the tactile experience of seeing, smelling and touching items. Many services are addressing this problem by allowing customers to communicate with or offer special instructions to their store shoppers.

Grocers are also struggling with last-mile delivery and using their stores to fulfill online demand. As retailers fill more online orders, the inefficiencies of driving long distances and filling aisles with dedicated shoppers will compound.       

The way grocers fulfill online orders will no doubt change over time, as retailers closely study their operations and their shoppers. Many industry observers see Amazon’s entry into brick-and-mortar industry as a potential catalyst for e-commerce evolution. Others, meanwhile, see promise in the model offered by Mike Lee and his Future Market concept, as well as Alibaba’s Hema markets, which cast supermarkets as showrooms where shoppers can choose their products, have their orders assembled, and either take them home or have them delivered.