Before the pandemic, the grocery industry was set around brick-and-mortar stores, and there was a slow movement towards on-demand grocery. Online grocery delivery was still considered a peripheral channel. However, grocery shoppers started turning to on-demand platforms since the onset of COVID-19. According to Acosta’s report, since the pandemic, 45% of customers prefer online grocery shopping over physical stores.
COVID-19 drastically accelerated the online grocery delivery trend, increasing 10% and 15% of total grocery sales during the peak COVID-19 time. In the U.S., online grocery shopping reached nearly $90 billion in sales in 2020, increasing by more than $30 billion.
In this article, you’ll learn about the early pioneers of online grocery delivery in the U.S., the modern players, and the impact of COVID-19 on grocery trends.
In the late 1990s, consumers had just started ordering products online. Online grocery shopping was an early area of focus. It offered lucrative rewards to high-spending consumers, increased convenience, and saved them time. Peapod, founded in 1989 by brothers Andrew and Thomas Parkinson, was the first online grocery delivery service. Back when they started, users had to install software from CD-ROMs and then place orders. Though it took years to become a well-known name in the industry, Peapod is still in business.
Webvan and HomeGrocer.com were two other early pioneers of online grocery delivery that started in 1996 in California and 1997 in Washington respectively. Webvan had a successful launch in California, and they had aggressive expansion plans to operate in 26 major cities around the United States. However, the company filed for bankruptcy less than two years later. HomeGrocer.com quickly created the infrastructure needed to support the business, including a fleet of vans and a huge warehouse. They had impressive early growth, and sales reached over $1 million a day by mid-2000. They expanded into other markets, including California, Georgia, Oregon, Texas, and Illinois.
When COVID-19 first began to engulf the world, supermarkets and grocery delivery platforms like Amazon Fresh and Instamart became overwhelmed with huge demands. To handle the surge of online orders, stores had to make drastic changes to accommodate the switch to on-demand delivery requests. Popular grocery delivery brands had to introduce waitlists and online queues for new customers. According to a poll, 53% of shoppers would continue online grocery shopping because they had a good experience, indicating that the on-demand grocery trend will continue post-pandemic.
As shoppers prefer more digital channels in their path to purchase, the on-demand grocery trend is becoming much more significant for both consumers and brands. According to a McKinsey and company survey, frozen fruits, health care items, fresh fruits and vegetables, packaged foods, household care items, beverages, and deli meats categories are likely to remain popular among U.S. consumers post-pandemic. Meanwhile, CoreSight Research found that fresh fruits and vegetables were the biggest bestsellers from 2020-to 2021 followed by fresh dairy, meat, eggs, frozen food, and bread and baked goods.
Online ordering offers a more personalized experience to shoppers as they get recommendations for products that are often bought together. When paired with data analysis and AI-powered algorithms, grocery stores could work on targeted marketing and offer quick delivery services.
On-demand grocery shopping offers customers a wide range of delivery options, including subscription services, buy online pick up in-store, click and collect, option-based pricing, and much more. This offers choice and accessibility to modern customers looking for speed and convenience.
With the increasing focus on social distancing and safety, shoppers started to rely on delivery services rather than waiting in long queues and risking exposure. The focus and priority of grocery shoppers shifted from discounts and pricing to convenience, speed, and safety. Online grocery shopping order methods also differ by generation. 40% of millennials prefer to shop groceries on mobile, and 52% prefer computers. Similarly, 66% of Gen X prefer to shop on computers, and only 27% prefer to shop on smartphones.
The fierce competition in the on-demand grocery delivery space has led to small delivery times. Startups like GoPuff (30 minutes), and Jiffy (15 minutes) are competing with the big boys like Walmart and Amazon Fresh to deliver groceries in under an hour. Quick delivery options like two-hour delivery and same-day delivery have made it easier for customers to shop for fresh produce. Customers can quickly order a few items for a specific recipe and get it delivered within a few hours.
At store checkouts, cash and card are the only two acceptable options. Customers prefer to have more options in today’s modern world. Online grocery shopping makes buying easier by offering multiple payment options like PayPal, credit/debit cards, and monthly payment plans that negate the delivery fees for each delivery.
The increasing demand for speed and convenience puts pressure on the grocery industry that faces inventory issues like fresh produce and product availability. However, the benefit of online grocery delivery services is that it provides insight into the end-to-end view of the customer journey. Grocery delivery brands can use the data to design services and models that meet customer demand and minimize costs across the supply and distribution chain.
If you’re a Grocery Delivery company and want to track your delivery time, or product catalogue so you can boost sales with an in-demand product assortment, or you want to drive more revenue & margin by making sure your products are priced right v/s your competition, reach out to us at DataWeave! Sign up for a demo with our team to know how we can help you optimize your online sales.
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