The Changing Face of the Grocery Industry

January 26, 2021

Korey Thurber, SVP Data Science & Marketing Service Solutions


2020 was quite a year to say the least…the negative impact the pandemic had on many businesses was felt throughout the world.  However, online grocery businesses and the grocery industry in general thrived in 2020.  Many of these businesses saw record growth and are now strategizing on how to maintain that momentum into 2021 and beyond.

Prior to the pandemic, most U.S. shoppers still preferred to visit their local grocery store to select their items, especially perishable foods like produce and meats. Based on data from Forrester, Food Marketing Institute and Nielsen, online grocery sales accounted for about 3 – 4 percent of all grocery sales in 2019. However, given what we experienced in 2020, according to supermarketnews.com, that percentage rocketed to over 10% in 2020 and its estimated that 90% of e-grocery customers are expected to continue shopping online once we are on the other side of the pandemic. Some researchers also believe that approximately 25% of all grocery sales will be online by the year 2025.

Here are a few things to consider based on my own experiences and observations:

E-commerce in the grocery industry is here to stay.

Big brand brick-and-mortar chains like Walmart, Target, and regional brands like Food Lion have aggressively pushed into the e-grocery space and are continuing to expand their offerings.  Food Lion is my grocery chain and now offers Instacart delivery from more than 500 stores, which is up from about 300 stores in July of last year.  

Yes…the e-commerce trend for groceries is definitely here to stay.  Yeah, there will be some leveling-off of growth compared to the huge surge during the pandemic, but many individuals have gotten into the habit of buying groceries online, that under normal circumstances would not have…and they have influenced others to do the same.  It’s exactly what happened to me when two close neighbors finally convinced me to get on the e-grocery bandwagon.  It worked…and for many types of products I have developed a habit of purchasing online and having the products delivered or scheduled for pick-up without having to enter the store.

Grocery loyalty programs will continue to evolve.

Paid membership loyalty programs will help maintain a loyal customer base.  Somewhat like Amazon Prime, Walmart now has a paid loyalty program – Walmart+.  In the world of online shopping, it’s super easy for shoppers to migrate from one seller to another, so it’s important that online grocers evolve their loyalty programs.  Sure, I like my points and cost savings-based programs from my local grocery chains, but those generic type programs no longer create a competitive advantage.  Paid loyalty programs should include things like guaranteed delivery slots, same-day delivery, free delivery, early access to new products, a dedicated customer service line, etc.

Customer experience will still rule the day.

I know…it may sound a bit of a cliché, but it really is true.  When I was speaking to a few of my neighbors over the weekend about their migration to online grocery shopping and delivery (or pick-up), they all became accustomed to the simple convenience of it.  No more pushing a full cart through crowded stores or waiting in slow moving lines.  But they also admitted, like me, that the e-grocery experience has been far from perfect at times – for example, glitches with ordering through online portals, out-of-stock issues, missing and incorrect items at times.  I really do believe that the winners in this space will be those companies that deliver a great customer experience via great loyalty programs, ease of online ordering, product quality and availability, limited order errors…and can do it all with speed!

At BLEND360, regardless of industry, we are helping our clients ensure their customer loyalty programs are targeted and executed for the best ROI possible.

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