Online Grocery: More Change, More Transformation Ahead

Where grocery retailers are turning their attention in 2021 

Online grocery’s meteoric growth in 2020 started a digital transformation that can’t be stopped now. At the start of the pandemic, most grocery retailers were concerned with implementing infrastructure and scaling operations. Now, attentions must turn to improving online grocery order profitability and efficiency. So where should grocers be focusing their efforts? 

Enhancing Online Grocery Fulfillment 

Effective and low-cost fulfillment is the thorn in the side of most grocery retailers when it comes to online orders. Sending employees around the store to pull orders off the shelves is slow and hard to scale, yet a better way forward is still being tested and defined. From automation to dark stores to micro-fulfillment centers and more, grocers have to determine the best investments to make for their own organization. 

Meeting Customer Demands 

Customer acquisition and retention will also be key, meaning grocery retailers need to find ways to differentiate from the competition, as well as ensure customer satisfaction. 

Consumers were more willing to overlook errors or hitches with online grocery orders early in the pandemic (what choice did they have?), but not so much anymore. Retailers have now had months to streamline processes, refine systems, and work through supply issues. If consumers do not receive the experience they expect, they will give a competitor a try. 

And yet, every online grocery retailer is going to be looking for ongoing improvements and efficiencies to the online order process and experience. In order to really set themselves apart, grocers need to explore ways to anticipate customer needs and solve their problems. 

For example, Kroger and Hy-Vee both now offer unlimited free delivery as a perk for their new premium membership programs. And while delivery hasn’t seen quite the same growth as pickup for online grocery orders, 63% of consumers that have turned to grocery delivery plan to continue even after the pandemic. 

Meanwhile, The Fresh Market relies on personalized touches and superior service to add value to their curbside pickup offering. Still other grocers are focusing on providing healthy recipe ideas or easy ready-to-eat meals. The fact is, no matter where you look there are opportunities for grocers to improve their customer experiences. 

Combatting Online Only Grocers 

As consumers continue to place more orders online, brick-and-mortar grocers now face increased competitive pressures from online-only grocery retailers. With stock shortages, capacity limits and safety concerns, more consumers turned to alternative food and grocery delivery services during the pandemic. And trends show that many consumers who tried these services intend to stay with them. 

While many of these online companies typically serve niche markets, the recent surge in sales has enabled them to expand their products and offerings. This expansion brings them in closer competition with traditional supermarkets, while still maintaining their niche differentiation.  

Many of the pure online grocery retailers set themselves apart even further by leveraging private label brands. As consumers are more open to trying new brands, online-only grocers are capitalizing on the opportunity from the pandemic and overcoming low customer retention by building up loyalty to their private label products. 

Transforming Online Grocery 

The coronavirus pandemic has accelerated transformation across the retail industry, perhaps in no market more so than grocery. While many may say these changes are overdue, grocers are nevertheless hastening to invest and prepare for the future, lest they be left behind. And online grocery is just the start. We expect 2021 to hold continued innovation and growth across the grocery industry.