American shoppers who buy snack foods online are less likely to be brand loyal, but almost as likely as store shoppers to buy snacks such as chips, candy and cookies on impulse, according to a new report from the Nielsen Co.
22% of snack purchases online are made with no brand in mind, compared with just 14% of in-store snack purchases, according to data collected via Nielsen Shopper Essentials online tools, which allow retailers to analyze the behavior of their shoppers.
Consumers’ level of brand disloyalty is higher for snack food than it is for online grocery purchases as a whole. There, Nielson found 18% of online purchases are made without a brand in mind, the same percentage as for purchases made in stores.
That might explain why private-label snack foods have a 15.5% online market share, compared with 10.3% in stores, based on data from a sample of five cooperating retailers over the 52 weeks ended May 5, 2018. The top five salty snack brands have a 26.3% market share online, compared with 31.8% in stores, the report says.
Among snack food categories, Nielsen says, salty snacks had the second-largest rate of growth in online sales over the 12 months ended March 18. That category added an estimated $207 million in online sales, behind soft drinks, at $363 million in additional online sales.
While consumers who buy online are less brand loyal, they tend to be almost as likely to buy snack foods on impulse as store shoppers who are in the actual presence of potato chips, pretzels, candy and other tempting treats. Nielsen found that 34% of their online snack-food purchases are unplanned, just below the 36% of in-store snack-food purchases.
Subscription services, which provide a routine, orderly and decidedly non-impulsive way to buy food and other goods online, are also a popular way to buy snacks. Nielsen says 12% of all snack purchases online were made via a subscription service, including 16% of online purchases of coffee pods and the same percentage for online purchases of nuts.
However, 27% of consumers choose to purchase snack foods in stock-up orders, which, Nielsen says is a “realm of snack purchases that fosters impulsive, exploratory and open-minded consumer behavior.”
Earlier this year, a joint research project Nielsen conducted with the Food Marketing Institute found that more than 70% of Americans will buy groceries online within the next decade, up from the 27% now. During that time frame, 60% of Americans will do more than a quarter of their food spending online, says Jordan Rost, Nielsen’s vice president of consumer insights.
Nielsen estimates that online sales food and beverage sales represent 13% of all dollars spent on fast-moving consumer goods (FMCGs) online. FMCGs are products that are sold quickly and at a relatively low cost. Examples include non-durable goods such as packaged foods, beverages, toiletries, over-the-counter drugs and many other consumables.
“Nielsen projects that the online market for FMCG will grow to $100 billion in the next five to seven years and the current market is growing rapidly along that curve,” Rost says. “As we’ve seen with other industries that have come online before, when 20% of consumers are buying online, the industry reaches a tipping point and adoption accelerates rapidly from there. So, we’re past the tipping point and more Americans will be buying more of their groceries online.”
That is especially true for millennial shopper. The report says 40% of millennials—now the biggest generational segment of U.S. consumers—shop for groceries online and 3% of millennials already shop for groceries on their connected, smart home devices, such as Amazon Echo and Google Home smart speakers.
The Nielsen report says 40% of millennials shop for groceries online and 3% millennials are already shopping for them on their connected, smart home devices
Online food shopping is growing fast, but still represents a tiny share of the $717 billion-plus U.S. grocery market. However, interest from grocers and investors heated up when Amazon.com Inc. (No. 1 in the Internet Retailer Top 500) acquired Whole Foods about a year ago.
Rost says the attention and resources devoted to online grocery shopping is surprising, given that e-commerce in the food and beverage sector is still maturing and maximizing in-store sales could provide a bigger immediate payoff for grocery store operators.
“While e-commerce will be a bright opportunity for the future, marketers looking for growth opportunities today shouldn’t be blind to the opportunities living in the perimeter of the store,” Rost says. “Fresh and perishable foods [in stores] generated sales nearly 14 times as high as all online food and beverage sales this year.”
In addition, he says, grocery retailers need to think holistically if they want to make e-commerce work for them.
“Grocers need to think about investing in far more than technology to ready themselves for the growth of online grocery,” Rost says. “We found, in the research we conducted with the Food Marketing Institute that just 7% of retailers say they have the culture and skills needed to build an omnichannel strategy. Adopting or building tech platforms is certainly part of the journey towards building a sustainably profitable business online, but retailers need to also invest in the people and process required to make online grocery work for them, their customers and their suppliers.”
Among the manifestations has been an ongoing battle for grocery delivery supremacy involving Amazon, Walmart Inc. (No. 3), Target Corp. (No. 20) and other major grocery sellers.
Last month, Ahold Delhaize USA, the parent company of online grocery retailer Peapod—as well as grocery chains including Food Lion, Giant Food, Giant/Martin’s, Hannaford and Stop & Shop—said it plans to launch an e-commerce technology unit designed to enhance the digital capabilities of those chains.