Imagine a segment of consumers whose only knowledge of and interaction with a grocery store is online. While it may sound too much like science fiction today, there is a younger generation of consumers who are growing up in a world where visits to the good, old-fashioned grocery store are a rare treat and the vast majority of routine shopping for foods and beverages across all categories is accomplished primarily online using a wide variety of digital technologies.
The sun has now risen on a new era of online grocery shopping. Purchasing foods and beverages online is a direct departure from the traditional boundaries of how things used to get done. Technology, as in so many other facets of lifestyle and business, has been the chief catalyst in driving distruptive change across retailing’s sectors and the driving force for the time compression of the rise, adoption and acceptence of new business models, methods and services for how consumers procure foods and beverages.
A host of digitally enabled food sourcing business models has burst onto the scene in the last five years to satisfy consumers’ curiosities for new ways to mix and match planning, shopping, cooking and eating styles. With mobile technology now fully integrated in consumers’ lives and lifestyles, companies are springing up to fill every possible food delivery market niche ranging from delivery of fully prepared meals to cooking ingredients and everything in between.
As consumers rapidly delve further into mobile device-driven shopping and discovery of food culture, numerous online startups are providing solutions for consumers on a wide continuum ranging from meal ingredients (Blue Apron and Plated) to restaurant takeout (Munchery) and to fresh and local products (Relay Foods). To complete the food shopping continuum, along with AmazonFresh, Peapod and Fresh Direct, many brick-and-mortar food retailers have added either grocery delivery or "click-and-collect" services for shoppers. And yet with all this activity tilting formerly traditional food and beverage consumption behaviors toward a digital lifestyle, how will services like online grocery thrive?
The Hartman Group’s research and analysis finds that most online grocery services of today tap into pure convenience drivers, not the higher-order ones that drive food-engaged consumer spending in the brick-and-mortar sector of grocery shopping. This is not necessarily bad for long-term growth in online grocery, since it suggests a broader, midmarket attraction relevant to many households. But it does suggest that, unlike the iPhone, current online grocery providers aren’t really innovating much in terms of the grocery shopping experience itself.
Online grocery does fulfill underserved needs by eliminating the drudgery and inconvenience of constant shopping, but more importantly, online grocery has a cultural hook in that it unleashes the ability to:
What about the future?
Online ordering potentially reduces the inconvenience of grocery selection by eliminating all the walking around the store we are habitually used to performing. It theoretically enables consumers to shop much more quickly by occasion or for targeted fill-in trips. For consumers whose shopping behavior is full of dull, fill-in and pantry-stocking trips, online has interesting potential to remove the drudgery or condense its invasion of their personal time. For others who are not so tired of shopping, online grocery will most likely not seduce them until super-fast delivery becomes reliable and feasible (e.g., Instacart, Amazon’s expanding distribution system).
Perhaps not too surprising is the fact that our ethnographers have observed how mobile devices are the real disruptive triggering force in online grocery. The growth in food-buying “quick trips,” the decline in pantry-stocking trips and the rise of distributed food shopping within households have created a behavioral foundation for easy trial of online ordering. Historically, consumers conceived of traditional grocery shopping trips at home. But, as grocery shopping gets more impromptu and less pantry-stocking oriented, we see signs that the behavioral anchor is getting reeled in with the help of digital tools like shopping list apps.
Unfortunately, as infatuated as we all are with innovations that “save us time,” the barriers to online grocery adoption continue to be related to historical and cultural aspects of grocery shopping that are unlikely to change on a quick timeline (or for every household). Barriers to growth in online grocery include the following factors:
Although online grocery shopping faces barriers, several factors are influencing it as a growth segment over time. Reasons for this include:
There is no doubt that technology has opened up new avenues for food procurement, but our belief is that these emerging formats — from the local food specialists to smartphone-powered “instant” meal delivery — will not remake food retailing as we know it in the near term. The influence they will have will be more cultural than financial for now.
As leaders in the study of American food culture, The Hartman Group has been tracking how Americans shop for food since the 1990s. From one-stop shopping to multichannel shopping to online markets and click-and-collect, we continue to track consumers’ evolving perceptions, needs, habits and relationships with food retailers. New to the 2017 report is a special section on the expansion of the discount grocery channel, the emerging fresh-format channel and smaller-footprint retail formats.