We live, it is said, in an ‘age of acceleration’: from the unfathomable ease of global communication to the profound expansion of consumer choice, the digital era has been defined by a drive toward ever-increasing speed and convenience.
This paradigm shift has hit the grocery industry hard: with major players like Amazon and Walmart normalizing ‘click-and-have-it-now’ service, consumer expectations have accelerated beyond most retailers capacity to deliver; meeting these expectations has become a defining challenge for grocers in 2021.
How Grocers Underestimated the Importance of Online Orders
For a long time, the share of U.S. grocery sales done online hovered comfortably around 2%; when we surveyed a large sample of grocers a few years back, the general consensus was that online grocery would remain at this level – a relatively minor concern for leaders and not worth the investment required to achieve more efficient order fulfilment or customer service.
By 2019, however, things had changed: the share of groceries sold online more than doubled in 12 months, reaching 4.5% according to estimates from Deutsche Bank which we explore in our report on online grocery trends. And by 2020, this growth went into overdrive, with nearly 30% of all U.S. households reportedly using online grocery services each month.
The reason for this sudden acceleration is simple: grocers began closing the convenience gap between online and in-person shopping. Increasingly, brands began offering delivery and curbside pickup options, so that ordering online no longer meant waiting around with an empty fridge or stomach.
Given the time and effort savings associated with online shopping, closing this gap immediately made online shopping a far more appealing prospect. According to our analysis, major retailers offering same-day delivery saw a staggering 400% increase in online sales in 2018, and a further 48% growth the following year.
Today, expert analysis suggests that the global market for same-day delivery is projected to continue growing at a compound annual growth rate of 20.3% between 2020 and 2027 – presenting both an astonishing opportunity and an existential challenge to business leaders.
Online Sellers Cannot Afford to Slow Down
This acceleration of online grocery service cannot be undone: with industry giants ramping up their service and an ever-growing proportion of consumers looking to buy their groceries online, grocers simply cannot afford to slow down their online offering.
Now that same-day delivery has reached a tipping point, customers are no longer willing to compromise on speed of service. According to our consumer survey data, 92% of online grocery shoppers prefer same-day fulfilment over next-day options, with 33% of consumers wanting their online grocery orders fulfilled within two hours. 65% even claim they would consider switching grocers if their normal store failed to offer a same-day delivery service.
This presents a distinct financial challenge for grocers, as such high-speed fulfilment is notoriously difficult to co-ordinate and expensive to deliver; for many, the current demand for two-hour delivery turnarounds is felt as a dilemma between losing customers and losing money.
However, automated micro-fulfillment solutions like ours dispose of this awkward binary, allowing grocers to deliver the level of service they need to in order to remain competitive while keeping costs under control and ensuring profitability.
For many grocers, this may be their only way to successfully adapt to the current e-commerce landscape.
You can read more about trends in online groceries in our report here, and let us know how you see the market changing in years to come.