With necessity being the mother of invention, one in five shoppers has already turned to online grocery shopping for the first time due to Covid-19.
And among the holdouts, more than half soon plan to start ordering groceries online because of the virus, according to our COVID-19 survey.
Even when life gets back to somewhat normal, online grocery looks like it will be here to stay at a level far higher than could have been previously predicted. Already, online penetration has surpassed double digits and could exceed 10% by the end of the year.
Before the coronavirus outbreak took hold in the U.S., online penetration was only around 4.5% in 2019, with a projected climb to 5.7% in 2020, as Deutsche Bank previously forecasted (Deutsche Bank. “Food Fight Round 2: Convenience & Digital Gaining Ground,” 12 November 2019). While this growth had been causing grocers to reexamine their e-commerce strategies to serve more customers in a financially and operationally sustainable way, expansion was steady, not exponential.
Demand may have been limited in part by shoppers still wanting the physical experience of seeing, feeling, and smelling their groceries to find the perfect items. At the same time, supply only started to really grow over the past couple of years, spurred by Amazon’s acquisition of Whole Foods in August 2017. The number of major retailers that offered curbside pickup nearly doubled over 2019, while the number of same-day delivery options expanded by nearly 50%.
So shoppers haven’t had much time to get used to these new options, and retailers haven’t had much time to fine-tune their e-commerce strategies. But that’s all changed in an era where time no longer seems to move in a straight line. Covid-19 has been a force majeure, upending the status quo.
We estimate that the online share of grocery orders has surged to over 10% today. This growth has been spurred by the 20% of U.S. consumers who have turned to online grocery for the first time, along with significant usage among existing online customers. Altogether, more than half of consumers now use online grocery due to the virus, since the physical appeal of grocery stores has largely been replaced by a desire or necessity to stay home.
And grocers are making changes on the fly to meet this sudden demand. For example, in March, Texas grocer H-E-B launched a new service with Favor to offer free grocery delivery (other than a $10 gratuity for the Favor Runner) to those aged 60 or older. Services like Instacart have also been booming, with the company making quick changes to its platform, such as expanding order-ahead capabilities. Grocers and delivery services are also hiring rapidly to meet demand.
The Biggest Online Grocery Wave Is Yet to Come
While the promise of a vaccine looks very likely, life is unlikely to get back to normal anytime soon. Neel Kashkari, head of the Federal Reserve Bank of Minneapolis, said in a recent CBS interview that “we should all be focusing on an 18 month strategy for our healthcare system and our economy.”
For grocers, that means preparing for a growing wave of online orders, considering 70% of consumers in our survey say they’re likely to continue ordering groceries online during the pandemic. New customers will start to order online, and even after the crisis ends, those using online grocery now plan to still make the majority of their grocery purchases online.