During the coronavirus pandemic, online grocery shopping is picking up a lot of converts—at least for now. The change in shopping patterns has caused retailers to adapt quickly and could create long-term challenges as the giant retail sector accelerates its transition to ecommerce and omnichannel fulfillment.
U.S. online sales of consumer packaged goods (CPG)—the kinds of items typically sold in grocery stores—grew 56% for the one week ending April 18, compared to the same period a year earlier, according to data from research and polling firm Nielsen and Rakuten Intelligence, which tracks online sales via consumers’ email receipts.
Significant sales gain in food category
The most significant sales gain among CPG categories was food, up 69.5% year-over-year for the week ending April 18, Nielsen and Rakuten found. That increase was followed by a 57.5% surge in online sales of household care items and growth in the health and beauty care (47.7%) baby care (27.2%), pet care (22.3%) categories, according to the Nielsen and Rakuten data.
Only the health and beauty care category had greater year-over-year online growth compared to the week ending April 11, according to Nielsen and Rakuten. Hair coloring products gave the category a major boost, with online sales spiking 290.8%, along with strong growth in hand and body lotion (64.7%) and sleep aids (60.4%) purchases.
For the week ending April 11, online CPG sales grew 59.1% compared to the same period a year earlier, according to Nielsen and Rakuten. That week, online food sales 103.5% year-over-year. That increase was followed by a 58.9% surge in online sales of household care items and growth in the baby care (38.2%), pet care (32.8%) and health and beauty care (32.5%) categories, according to the Nielsen and Rakuten data.
51% of consumers bought groceries online
As recently as last summer, a Gallup survey found just 11% of consumers bought groceries online at least once per month. Now, survey data from consumer packaged goods sales and marketing agency Acosta Insights finds online grocery shopping is becoming a mainstream part of American life.
More than half (51%) of shoppers reported placing an online grocery order in the past four weeks ending April 7, according to Acosta. Among those who bought groceries online during the pandemic, 33% made their first-ever online grocery order in that period, the research found. For some shoppers, these new patterns could become permanent. 31% of U.S. shoppers surveyed by Acosta—including 50% of millennials—reported being very or extremely likely to continue using online grocery pick-up or delivery once the pandemic is over.
Acosta’s numbers came from its Custom Shoppers Community online surveys conducted March 6-12 (549 shoppers), March 20-29 (602 shoppers) and April 4- 7 (609 shoppers).
These trends are having an immediate effect on how groceries are sold and could have longer-term implications, says Jana Davis, senior director at Acosta.
“In the near-term, retailers will need to hire additional workers to keep up with increasing pick-up and delivery orders, and they should expand their time slots to ensure reasonable wait times,” Davis says. “Some chains are even going so far as to convert a limited number of stores to online-only fulfillment to keep up with increasing demand.”
The federal government considers supermarket companies to be “critical infrastructure” and requires them to operate during the COVID-19 outbreak. Grocery retailers report they are hiring thousands of employees, expanding omnichannel options and redeploying resources to keep up with the demand for online grocery orders for curbside pickup and home delivery.
Target redeploys existing workers and hires more
At Target Corp.—a mass merchant that also sells groceries in stores and online—the fallout of the pandemic has changed its business dramatically. Since stay-at-home state orders began in March, Target’s online sales of items like food and beverage and health and beauty essentials have soared, requiring operational changes to meet that demand.
The retailer is adapting in several ways, a spokesman says. Changes at Target (No. 12 in the 2020 Digital Commerce 360 Top 1000), include redeploying store team members to pick, pack and ship orders to meet the increased demand for shipping orders to customers’ homes, he says. The retailer also has boosted staffing levels for services like order pickup and drive-up fulfillment and has added more parking spaces for its drive-up service, he said.
The Target-owned Shipt delivery service, meanwhile, has added more than 80,000 new in-store shoppers during the pandemic. Plus, the number of shoppers using Shipt is on track to double its pre-pandemic number by the end of April, the spokesman says. Shipt has also doubled its support team to help handle call, chat, and email volume, the spokesman says.
Unfortunately for Target, the increased demand for necessities has been bad for its bottom line. The retailer reported April 23, the need to make numerous COVID-19-related changes—including enhancing pay and benefits for staff members during the pandemic—reduced its first-quarter profits. Also, a shift in category mix toward lower-margin categories such as food and beverages and home and beauty essentials—and away from more lucrative apparel and accessories—also hurt profitability, Target reported.
While Target stores remain open, online sales also continue to soar during the pandemic. Since the beginning of April, digital sales—grocery and otherwise—have grown 275%, Target reported.
Walmart hires employees, works with Nextdoor
In March, as consumers went online to stock up, online grocery sales at Walmart Inc. (No. 3 in the 2020 Digital Commerce 360 Top 1000) reached nearly $900 million, according to data analytics firm 1010data, which tracks online sales via credit and debit card transactions. That was an increase of 21% from February 2020 and 99% from the previous year. Walmart, a mass merchant, is also America’s largest grocery retailer by sales volume.
On April 17, Walmart announced it met a previously announced goal to hire 150,000 additional employees in response to the pandemic and planned to hire another 50,000 workers across its stores, warehouse clubs, fulfillment operations and distribution centers. To recruit those workers, Walmart says it worked with more than 70 companies that have furloughed workers. Walmart had hired about 85% of those new employees for temporary or part-time roles.
On April 23, Walmart and social media channel Nextdoor Inc. launched a joint program called Neighbors Helping Neighbors, intended to help U.S. consumers assist their neighbors during the COVID-19 pandemic. The program allows Nextdoor members to request assistance—or offer to help others in their communities—with shopping for their essential items at Walmart. This program is designed to provide a contact-free way for vulnerable community members to coordinate the pickup and delivery of their groceries, medications and other essentials with a neighbor who is already planning a shopping trip to a local Walmart store.
Nextdoor members who seek help or want to offer assistance can do to do so via Nextdoor.com or the Nextdoor mobile app, which is available for iOS and Android smartphones.
Target and Walmart are far from the only retailers moving fast to address the increased demand for online grocery shopping. Below is a summary of how some other major grocery retailers have responded to the challenges posed by the COVID-19 pandemic:
Like Walmart, Albertsons Cos. (No. 74 ) recruited additional staff by reaching out to employers that furloughed workers during the pandemic. In late March, Albertsons says it secured partnerships with 17 companies, including other retailers and companies in the hospitality sector, to help fill 30,000 positions.
Albertsons also joined the United Food and Commercial Workers International Union (UFCW) to seek a temporary designation of “extended first responders” or “emergency personnel” for supermarket associates. Such a move would ensure that the workers get priority for testing and provided personal protection equipment during the coronavirus outbreak.
Albertsons did not respond to inquiries about the current status of its COVID-19 response.
Amazon.com Inc. (No. 1 in the Top 1000) says it is dealing with an “unprecedented demand for grocery delivery” by hiring new workers, expanding the availability of grocery delivery and putting new online grocery customers on waiting lists.
In an April 12 blog post, Stephenie Landry, vice president of grocery at Amazon wrote that increased safety protocols at Amazon’s Whole Foods Markets and other facilities have “created limits in our ability to increase the capacity of our delivery services.” Despite that, the ecommerce giant has added grocery pickup from roughly 80 stores to more than 150 and also plans to expand grocery pickup at Whole Foods.
In addition, Amazon will adjust store hours for select Whole Foods Market locations to focus exclusively on fulfilling online grocery orders during this time and has opened its new grocery store in the Woodland Hills neighborhood of Los Angeles as a temporary online-only store—focused exclusively on fulfilling grocery delivery orders.
Also, Amazon has temporarily asked new Amazon Fresh and Whole Foods Market delivery and pickup customers to sign up for a waiting list. Customers can use those services once they receive invitations.
“While we have increased order capacity by more than 60% due to COVID-19, we still expect the combination of customer demand and restricted capacity due to social distancing will continue to make finding available delivery windows challenging for customers,” Landry wrote.
To meet the increased demand for delivery services during the pandemic, Texas grocery store operator H‑E‑B announced April 23, it and its Favor delivery unit, now offer express 2-hour delivery. H‑E‑B is providing the service from its H-E-B, Central Market and Joe V’s stores in Texas. Customers choosing express delivery customers can choose up to 25 items from a selected list of groceries and essentials, such as dairy, meat, produce, beer and wine and other things. For a limited time, H-E-B is charging express delivery customers a $4.98 fee (regularly $9.95) and $10 tip, which goes entirely to the delivery driver.
H‑E‑B acquired Favor, an app-based on-demand delivery service, in February 2018. Previously, H‑E‑B doubled the Favor service area statewide by launching 75 new markets and expanding the delivery footprint of existing markets. This move enabled H-E-B and Favor to expand its senior support program to every H-E-B, Central Market and Joe V’s store in Texas.
On April 14, Kroger Co. (No. 13), said it started accepting Supplemental Nutrition Assistance Program (commonly called the Food Stamp Program) benefits at curbside pickup points. The service allows customers to shop online for groceries on Kroger.com or the Kroger app and pick up their order curbside at a nearby Kroger store.
In an April 1 statement, Kroger Co. (No. 13) reported the COVID-19 pandemic “triggered a significantly greater lift in sales across both physical retail stores and digital channels in March” compared with February, but did not provide specific figures. The grocery retailer also says it expects “volatility in sales throughout the year as the impact of COVID-19 on the consumer evolves” and that several factors will affect full-year financial results, such as:
- Continued investments to help customers and associates through the COVID-19 pandemic
- Delay of some cost-saving initiatives to focus all resources where they are needed to address the impact of COVID-19
- Uncertainty surrounding the longer-term impact of COVID-19, including the length of travel and other restrictions, on food and grocery sales, fuel and alternative profit streams
- The potential long-term shift in customer behavior toward eating more food at home
Also, like Albertsons, Kroger joined the UFCW-led effort to seek a temporary designation of “extended first responders” or “emergency personnel” for supermarket associates to ensure that they are prioritized for testing and provided personal protection equipment during the coronavirus outbreak.Favorite