Three ways COVID has shaken up the grocery industry, and what the future might hold

Published on December 4, 2020

We all know that the rate consumers have been buying goods through digital channels has been on a steady upward trajectory. Consumers love the convenience of shopping unencumbered at their own pace, place and time, being able to review and compare products and shop around for the best deal. And for consumer-facing brands, digital commerce typically brings greater scalability, less (or no) restrictions on operating hours and location, greater access to data and insights to personalize the customer experience, higher margins and better cashflow.

Unless you’re a grocer, that is.

“Today, while customers are often avoiding stores, brands need to be where customers want to be.”

Laura Hyland, VP of eCommerce at Henkel

Historically, the grocery industry has faced significant challenges when it comes to digital commerce. And with good reason. The logistical requirements alone makes digital a less profitable channel for grocers when you factor in the added costs to pick, pack and ship orders, let alone the complexities that come with extensive product ranges that are low-priced, often bulky and perishable. While most grocers provide digital commerce options, this hasn’t traditionally been their preferred channel. And for many demographics of consumer, in-store has also remained the preferred way to shop.

But then COVID-19 came along, and everything changed.

Shifting buying behaviors and new customer segments

Earlier this year we published a report about the state of the grocery industry and the four trends shaping the next normal as a result of COVID. In August 2019, 13% of US households ordered groceries online. By May 2020 that number had soared to 31%. In July 2020, Walmart reported a 97% increase in digital commerce with grocery orders for home delivery or curbside pickup at an all-time high.

COVID is driving consumers to digital channels in droves. A survey by Digital Commerce 360 and Bizrate Insights conducted in May 2020 showed that over 54% of consumers had switched to digital commerce because they didn’t want to venture to physical stores. Furthermore, 47% said that digital commerce saves them time, and almost 44% said it meant they didn’t have to deal with long lines in-store. So, while there is a reluctance to head to stores where physical distancing is very difficult, the other benefits of digital commerce are very much front of mind for consumers.

Our state of the grocery report also reported that the numbers of 60+ aged consumers has surged ahead as the fastest growing group of online grocery adopters, with 39% in this age group trying this channel for the first time. A study conducted by Hanover Research in October 2020 states that nearly half (47%) will not only continue with digital channels, but also plan to increase the amount of shopping they do online. This provides brands with a unique opportunity to engage more deeply with a demographic that has been difficult to reach in the past, due to a low digital presence.

Loyalty is more fluid

During the early days of COVID, the news was littered with articles about consumers around the world panic buying household necessities. Grocers and their supply chains struggled to keep up with demand and empty shelves became a regular thing.

Until this point, grocers had enjoyed steady levels of brand loyalty with consumers typically preferring the convenience of visiting a store where they know the layout, can buy their preferred brands, collect and redeem loyalty points. This is an industry that is very much dictated by habitual behaviors. But as soon as need and desperation set in, convenient and familiar fell by the wayside and suddenly those loyal, reliable customers were no longer. 61% of consumers have tried new grocery brands during the pandemic, largely because they have not been able to get what they need from their usual stores, and only 18% say they will shift completely back.

The opportunity to cater to a market of one

All is not lost, however. With more people shifting to digital channels, there is greater opportunity for grocers to collect customer data to gain insight into customer preferences and habits.

Data should be gathered at every possible touchpoint to create rich customer profiles that can be used to personalize the grocery experience through meaningful offers, content and product recommendations. Grocers can harness the power of these interactions to stimulate specific outcomes, such as increase average basket size or instigate repeat visits. The more a customer feels recognized and valued by the grocer, the more likely they are to remain loyal. In a year where consumers are less loyal and behaviors are driven by necessity, developing a program to encourage loyalty is paramount.

What does the future hold for grocery?

You only have to do a quick Google search to see that the world’s largest grocers are doubling down on their digital commerce efforts to meet evolving consumer demands. And, there are plenty of studies being conducted to gauge consumer sentiment and the long-term effects on shopping behaviors.

“Grocery delivery will be the biggest long-term beneficiary as it was expected to grow before COVID-19, but this is accelerating the rate of change and the adoption curve is happening faster than it ever could have organically.”

James Cook, Americas Director of Research, Retail, JLL

The way consumers buy their groceries was evolving before COVID-19. The rate of change has been accelerated and it is unlikely consumers will completely return to their pre-coronavirus behaviors. Even without the pandemic things were changing, we now just happen to be a few years ahead in the shift to omni-channel grocery. And, as we discussed earlier, consumers love digital commerce. The convenience, flexibility and multiple options for receiving their groceries caters to a plethora of needs. Quite likely, consumers will return to physical stores, but not at the levels they used to, and most will find a mix of online and offline channels that suit their individual needs.

Plexure’s grocery solution

As a global mobile engagement solutions provider specializing in Ai-driven personalization and loyalty, Plexure is well placed to help grocers achieve a program of marketing to individual level, at scale.

Our customized solutions help grocers target customer profiles to drive specific outcomes, such as:

  • Incentivizing a first-time buyer to return to your store versus a competitor
  • Encouraging repeat buyers to increase their average basket size through compelling personalized content, offers, product recommendations and targeted loyalty
  • Incentivize at risk customers by providing them compelling reasons to shop with you
  • Winning back lapsed customers with highly targeted offers

Find out how we helped Indonesian grocer Super Indo achieve a 55% increase in average basket size within the first three months of launching its Plexure-developed app.

If you’d like to hear more, talk to our team today to schedule a demo of the Plexure platform.

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