Renewed shopper focus key to boosting online grocery business

With the coronavirus pandemic driving more U.S. consumers to shop online, it’s time for grocery retailers to take a closer look at how to retain and grow this segment of customers, according to strategic advisory firm Brick Meets Click.

According to the latest Brick Meets Click/Mercatus Grocery Shopping Survey, U.S. monthly active users of grocery delivery and pickup services totaled 37.5 million households at the end of August, up 133% — or 21.4 million — from 16.1 million a year ago. On the delivery side alone, monthly active users (at least one delivery order in the past month) numbered 22.1 million in August, up 180% from 7.9 million a year earlier. 

Such growth, Brick Meets Click noted, has spawned “new realities” for grocery retailers: an increased online share of grocery spending dollars and higher shopper expectations for e-grocery services. As a result, grocery retailers looking to build on their e-commerce gains and fend off competition will need to focus on how to draw more online customers, boost order size and improve the customer experience, said Barrington, Ill.-based Brick Meets Click, which focuses on how digital technology is reshaping food sales and marketing.

“If you want to catch more fish, you need to fish where the fish are, and winning back lapsed customers represents the strongest and nearest-term opportunity,” explained David Bishop, partner at Brick Meets Click. “We estimate that the size of the lapsed customer segment includes 23.6 million households who received one or more grocery delivery or pickup orders since March 2020 but none during the month of August.”

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Customers age 60 and older represent another key segment where brick-and-mortar retailers can step up online business. The survey, which polled 1,817 U.S. adults who participated in the household’s grocery shopping, found that monthly active users over 60 accounted to 30% of users who had groceries shipped to them via a parcel carrier, yet only 20% and 18% of delivery and pickup users, respectively, Brick Meets Click reported.

The research, too, showed that a shift in the customer mix toward more frequent users has propelled an increase in online basket size, with the average order value up 32% year over year in August. Specifically, Brick Meets Click said, the share of customers placing four or more online orders within the past three months with a specific grocery or mass retail provider rose to 56% in August from 43% a year before, whereas the share of first-time customers dipped to 23% from 25% in that time span.

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Average order value also grew based on the number times a shopper used a specific service within the last three months. Customers who completed their first order with a specific grocery or mass retail provider spent an average of $76, yet that dollar ring rose to $91 ( 20%) for their second order, $97 ( 7%) for their third order and $101 ( 4%) for their fourth order. After that, average spending leveled off, the study found.

“These insights suggest that as more customers become regular users of the service, retailers will need to improve their merchandising capabilities. That includes cross-, suggestive and up-selling in order to build larger rings,” Bishop stated. “And while allowing customers to customize dietary and/or product preference is helpful, integrating past-purchase from in-store transactions will offer a more seamless way to support personalized recommendations.”

At the same time, consumers shopping online for groceries are using more fulfillment methods. Thirty-four percent of all monthly active users received grocery orders via two or more methods (ship to home, home delivery or store pickup) in August, up from 15% from August 2019, based on a previous Brick Meets Click survey. A bigger share of households also is shopping online across retail channels. The August 2020 survey showed that nearly one in five monthly active users of a grocery service used a mass retail service versus one in seven in August 2019.

Improvements to the ship-to-home experience and “seamless and positive experiences” with mass retail providers will frame expectations for online grocery customers going forward, Brick Meets Click pointed out. In that regard, the first order is paramount to boosting a customer’s lifetime value for a retailer. The August 2020 survey revealed that customers placing an initial order with a service had a 52% chance of completing another order. That percentage rose to 84% for customers placing a third order.

“Despite the new realities of online grocery shopping, the customer experience remains a key driver of grocery retailers' success,” according to Sylvain Perrier, president and CEO of Toronto-based grocery e-commerce provider Mercatus. “To sustain and grow online brand affinity, grocers must ensure that the digital channel complements retailers’ overall brand strategy and physical retail channels to create a consistent and seamless experience in line with what consumers want today.”

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