Overview

Grocery delivery is gaining traction with the popularity of online payments and mobile apps. It brings a lot of conveniences. Although most customers are still accustomed to the traditional mode of shopping, grocery delivery is becoming more and more popular. Traditional retailers are adapting to the change. As for August 2019, more than half of the grocery stores in the United States were offering home delivery or store pick-up options, in addition to 25 percent that were planning to integrate online grocery services in their offering in the coming year[1].

There are many reasons for more people to choose grocery delivery. Apps make it easier for customers to budget, plan meal lists and track spends. They also easily use the filter to find everything they want. When you calculate the cost, the membership and delivery fees are a rather small proportion. As exhibit 1 shows, a survey in 2020 by CivicScience indicated that 12% of U.S. adults have used and liked these services, which is up 50% from last year, and 16% are planning to give it a try[2]. When comparing two of the most popular grocery delivery services, it’s clear that Amazon has captured the attention and interest of more potential customers.

Exhibit 1. Consumer results from the consolidated questionnaire for Prime Now Experience & Instacart Experience (additional information in PDF)

A survey in 2020 by CivicScience showed that 12% of U.S. adults have used and liked these services, which is up 50% from last year, and 16% are planning to give it a try[1].

[1] Amazon has captured the attention and interest of more potential customers.

Of those who like grocery delivery the most, the largest demographic is adults aged 18-24. Younger customers are more likely to have used and enjoyed grocery delivery, while those in the 35-54 age group are more likely to give it a try, as exhibit 2 shows. Besides age, the interest in grocery delivery also correlates with income. Customers often have to choose between convenience and price, due to factors such as membership fees, delivery fees and commodity prices. Grocery delivery often requires electronic devices and the use of Apps, which are more accessible to younger and higher-income populations. And delivery services are more developed in large cities, so people are more likely to use these services. Therefore, we can see from exhibit 3 that the customers with higher income are more inclined to deliver, while the customers with lower income are less likely to accept this method.

Exhibit 4 reveals what kind of shops are more popular. Those who have already used and liked grocery store delivery happen to be big fans of specialty stores such as Whole Foods and Trader Joe’s. However, the greatest interest comes from those who shop at stores known for lower prices, such as Sam’s Club and Walmart. This echoes the data around the price, suggesting that there is plenty of room for expansion in the direction of affordable, accessible stores. Grocery delivery companies would be wise to keep an eye on price. Doing so could help them tap into a large group of interested consumers as long as they can strike the right balance between convenience and affordability.

Growth From the Pandemic

Online grocery shopping has had a renaissance as the coronavirus pandemic has sequestered more people indoors. As exhibit 5 shows, the number of people who say they are doing more grocery shopping online has risen from 11% on March 1 to 41% on March 22 from CivicScience data[3]. This marks a sea change for companies such as Amazon, Instacart and Walmart that have been investing heavily in grocery delivery.

Exhibit 2. Questionnaire Breakdown and Extensive Analysis (additional information in PDF)

Exhibit 3. Questionnaire Breakdown and Extensive Analysis (additional information in PDF)

Exhibit 4. Questionnaire Breakdown and Extensive Analysis (additional information in PDF)

Exhibit 5. Questionnaire Breakdown and Extensive Analysis (additional information in PDF)

Post Pandemic

As the crisis of the epidemic passed, most functions of society were reopened to people now in 2021. Supermarket supplies are gradually returning to normal and people are free to shop for groceries. As life slowly returns to pre-pandemic normality, customers have the opportunity to reevaluate their shopping behaviors and which business models they want to support. So how have people chosen so far, since the crisis was gone?

Exhibit 6 shows that a large part of the population has retained the habit of buying groceries online, as many have realized the convenience of this method through their experience during the pandemic. Over 60% of online grocery shoppers plan to buy groceries online more frequently or at the same frequency as during the crisis[4].

During the crisis of the 2020 pandemic, consumers quickly changed their consumption behavior. People are starting to use express delivery services instead of going out and waiting in long lines and risking illness. At another turning point in the post-pandemic era, companies will not miss an opportunity to form or solidify consumer habits.

Research has shown that many consumer decisions, such as which coffee to buy, are habit-driven. After all, consumers would take hours in the supermarket if they had to ponder each product choice. Like these choices, ordering groceries via app has become a habit for many people that don’t require much deliberation. Rather than planning meals for the next few days, consumers might factor in the option to rapidly order anything they need[6]. Habits are formed when these decisions are reinforced by a few positive experiences.

Although the price of items delivered by express delivery may be higher plus shipping costs, the convenience seems to be worth it. Ordering easily via app becomes tempting, and there are no obviously compelling reasons to resist. Many companies will also throw in initial discounts for first-time customers[6].

Once a consumer has ordered rapid delivery a few times, the service is likely to replace past behavior, like a quick trip to the corner shop. If the the consumer then continues ordering rapid delivery, a habit is formed. In fact, research shows that consumers who perform a behavior regularly for about six weeks have created a habit[5]. As a result, the grocery delivery services market is poised to grow by USD 631.84 billion during 2020-2024, progressing at a CAGR of almost 29% during the forecast period[7].

Currently, rapid grocery delivery is only available to consumers in top cities. Despite the stereotype that such services would mostly be used by younger consumers who are experienced with app-based services, one of the biggest drivers of growth in the grocery delivery market is older customers. According to Coresight’s survey, 62% of current online shoppers between the ages of 45 and 60 and 55% of those over the age of 60 plan to continue to use those services as frequently or more frequently after the pandemic[5].

Market Share

Some apps partner with multiple large vendors to offer a wide range of options. Many well-known stores also have their own apps. These apps offer different types and breadth of products and have different membership policies and delivery prices. consumers have a lot of choices to compare their advantages and disadvantages to decide what services they want.

As the exhibit 6 shows, by far, Amazon and Walmart remain the top venues for online grocery shoppers, but respondents to the survey reported that gradually they’re shopping online for groceries less at the two retail giants. According to the survey, from 2020 to 2021, 9.4% fewer customers bought from Amazon and 1.4% less from Walmart, while Target, Costco and Whole Foods Market increased by 5.4%, 2.1% and 1.3%[3].

Future Outlook

Because of the pandemic, the online grocery market swelled to $55.5 billion in 2020, an 81% increase from 2019, and that growth is expected to continue, albeit to a lesser extent in 2021[5]. The impact of the pandemic has led many people who would not have used the service to join in, and as the crisis of the pandemic passed, a large number of customers, including a large number of the elderly, continued to use the service as they experienced its benefits and formed habits. Such a huge opportunity has led more and more businesses to develop and improve their delivery systems, which will result in users being shunted to different platforms according to their preferences. As the popularity of such services increases, customers have more choices, especially in terms of price, and merchants have to adjust their strategies to cope with increased competition accordingly.

Exhibit 6. Questionnaire Breakdown and Extensive Analysis (additional information in PDF)

Exhibit 7. Questionnaire Breakdown and Extensive Analysis (additional information in PDF)