In this 5-week series, “COVID-19’s Wake-Up Call: Food System Realities Reimagined,” experts from across the AVENIR GLOBAL network and global food system are exploring five new “food system realities” brought on by COVID-19, paired with reimagined possibilities and thought starters to help bring these possibilities to life.
COVID-19 revealed foundational cracks in the global food system at all levels. But it has also expedited innovation and positive changes that were long overdue, especially in food e-commerce. There may be a return to “normalcy” in our shopping routines when all is said and done; but, when it comes to the rewiring of our digital food experiences, or where and how we shop for groceries or tonight’s dinner, we will emerge from COVID-19 fundamentally changed.
Digital disruption was already burning through grocery barriers at the end of last year. But now, 2020 has turned it to a wildfire-pace. In the United States, online grocery sales grew 22% in 2019, and this has surged to 40% so far this year, propelled by high nationwide demand from COVID-19 lockdowns.[i]
Almost half of shoppers in the United States reported buying more groceries online or making online purchases because of COVID-19.[i] Pandemic behaviors of stockpiling groceries and supplies fueled an unprecedented frequency and quantity in online grocery purchases. While panic buying has begun to ease, the affinity for bulk buying and pantry stocking isn’t dying down.
Consumers want what they want when they want it; and it’s easier than ever – even in a pandemic (thanks, digital technology) – for them to get it. But what’s at the heart – or stomach – of customers’ desires?
Consumer behaviors shift when values shift, and that’s been made crystal clear by COVID-19. The COVID-19 disruption significantly altered what customers value, like heightened emphasis on safety, affordability and convenience, and, as a result, behaviors are changing rapidly and dramatically.[ii]
As noted in a recent article from AT&T Business, the pervasiveness of digital experiences in our lives is such that we don’t compartmentalize our expectations anymore. We’re busy. We need help. We’ll pay more (just not the cost of shipping) for said help. Enter digital conveniences to provide the answers.
The expectations food providers must meet are now set by consumers’ best experiences across all categories – from on-demand entertainment bingeing, to seamless meal-delivery at a push of a button, to convenient crowd-sourced ride-sharing services like Lyft and Uber.
As shoppers embrace digital experiences in all aspects of their lives – especially during times of social distancing – there is no longer a perceived barrier to outsourcing their food buying responsibilities. This newfound convenience is likely to stay as social distancing restrictions are loosened.
But let’s not forget that this behavior also reflects a striking technology, geographic and socioeconomic divides. It is a luxury to access this click & collect technology, pay premiums for delivery and avoid the grocery store altogether. Given the food security issues playing out globally due to COVID-19, we can’t lose sight of these stark divides in food access. If your product cycle can accommodate food donations, consider building them as smaller, steady installments into production planning.
At its core, online grocery delivery is largely unprofitable. As an AT&T survey finds, profit-per-order has worsened for 3 in 5 retailers who offer online ordering. Other than fulfilling from distribution centers or vendor drop-ship, all other forms of online order fulfillment are margin negative or neutral. To put that into perspective, Walmart will reportedly lose $1 billion of its $21 billion e-commerce revenue as a result of its challenges integrating the Jet.com acquisition and rough margins from its next-day delivery operations. And let’s not even get started on the unrecouped costs of packaging for delivery, and its impact on the bottom line…and the environment.
In addition, online bulk-buying behavior means higher volume of essentials filling shelves and warehouses, while fewer SKUs and new brands make it into the mix. Essentially, the little guys are being pushed out of mainstream grocery offerings. Young Foodies, a community for small and medium-sized food brands, is launching a new direct-to-consumer sales channel, Mighty Small, which is one example of how this issue is being addressed The hope is to help smaller brands that have seen their shelf space squeezed during the COVID-19 crisis.
Interested in discussing how we can help bring these possible paths to life? Our team has expertise across the food system. We are in this together to build for resiliency – drop us a line at [email protected].
Kristen Ingraham, based in New York, NY, is a Senior Vice President at Padilla. She leads digital integrated marketing and business development for the agency’s Food + Beverage Practice.
[i] Coresight Research. (2020, May 07). US Online Grocery Survey 2020: Grocery E-Commerce Market Research Report. Retrieved June 16, 2020, from https://coresight.com/research/us-online-grocery-survey-2020-many-more-shoppers-buying-more-categories-from-more-retailers/
[ii] Rogers, K., & Cosgrove, A. (2020, April 16). How COVID-19 could change consumer behavior. Retrieved June 16, 2020, from https://www.ey.com/en_us/consumer-products-retail/how-covid-19-could-change-consumer-behavior
[iii] Verdon, J. (2020, March 25). Changes in Consumer Buying After Coronavirus Pandemic. Retrieved June 16, 2020, from https://www.uschamber.com/co/good-company/launch-pad/changes-in-consumer-buying-after-coronavirus-pandemic