What's the Future for Online Grocery Shopping?

Disruptions in how consumers shop and buy food are a constant in today’s fast changing markets, and as online and mobile technologies have improved, the failed attempts to launch online grocery in the late 1990's appear to be a distant memory. Certainly, Consumer Packaged Goods (CPG) food and beverage brands are looking for any kind of incremental growth, especially growth that might eliminate wholesale costs by going direct to the consumer. Also, struggling mid-market grocers, under attack from all sides, are looking to retain shopper share of wallet as well as share of mind.

Most commentary on the phenomenon of digital food shopping has focused on the potential of online grocery shopping. Inroads made by Amazon on Walmart, Best Buy, Circuit City and other brick and mortar retailers are clearly the inspiration behind many potential worried retail executives: Within food retail, questions may arise, like “will the grocery store as we know it…die?”

Death might not be imminent, but digital changes are certainly disrupting the way consumers shop and eat.  We’ve found that early adopters in online grocery tend to be those shoppers more willing to let go of traditional notions of how to obtain food, just as these consumers are letting go of traditional notions of how to eat, when to eat and what to eat. Yet, they are still a minority of food shoppers.

The question on most minds is: Will online grocery shopping behavior really grow both in adoption and in share of wallet (and why or why not)?  A Hartman Group report finds that online grocery shopping today is tapping into pure convenience drivers, not the higher-order ones that are driving early adopters’ increased spending in the brick-and-mortar side of grocery. This is not necessarily bad for long-term growth in online grocery, since it suggests a broader, midmarket hook relevant to many households. But it does suggest that, unlike the iPhone, current digital grocery solutions aren’t really innovating much in terms of the grocery shopping experience itself. In order to capture growth, online grocery platforms will need to focus on the following areas:

Target Households: Young urbanites, suburban families, older singles

Meet Underserved Needs: Eliminating the drudgery and inconvenience of constant physical shopping

Look for Cultural Hooks: Encourage the ability to order in the home kitchen, as the need arises as well as enable ordering “on demand” out of the home. Also look for ways to facilitate democratic grocery shopping across household members to ensure “agreement” and total household satisfaction.

Online grocery shopping ordering potentially reduces the inconvenience of grocery selection by eliminating trips to physical stores. It theoretically enables consumers to shop much more quickly by occasion or for targeted fill-in trips, precisely when a trip to the grocery store is most difficult.

Online grocery shoppers today do not appear to enter the experience looking for a radical new way to shop (even if they eventually start shopping differently due to use of online platforms). For consumers whose shopping behavior is full of dull, fill-in and pantry-stocking trips, online grocery has interesting potential to remove drudgery. For others who are not so tired of food shopping, online grocery will most likely not seduce them until super-fast delivery becomes reliable and feasible (e.g., Instacart) and ordering processes are more closely harmonized with how households really buy food. By examining food culture more closely, technology-driven online grocery solutions can eventually earn a greater share of shoppers.