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Maybe there’s some stuff that people just don’t really want to buy online.
That’s one of the undercurrents to the the TABS Analytics Fourth Annual Food and Beverage Study, which concluded that online grocery shopping hasn’t caught on.
In TABS survey of 1,000 U.S. consumers ages 18 to 75, only 4.5% of respondents said they regularly buy food and beverages online, compared with 78% who do so at brick-and-mortar grocery retailers. While online grocery purchasing edged up from 3.9% in the 2015 study to 4.5% for 2016, it hasn’t broken 5% in the four years that TABS has conducted the survey.
“This study underscores that online grocery is failing,” stated Kurt Jetta, founder and CEO of TABS. “For the fourth year in a row, consumers have turned their backs on buying groceries online no matter how much online grocery retailers try to entice them. Sixty-nine percent of consumers never buy groceries online.”
Just 15% of consumers polled reported loyalty to shopping for groceries online, according to TABS. “This is not a sustainable business model, especially when you consider the industry loyalty rate benchmark is 70%,” Jetta noted. “Food companies and grocers need to figure out why there is such a high level of dissatisfaction with the online channel before they continue to invest any further in it.”
TABS’ study analyzed 15 consumables categories: carbonated beverages, salty snacks, cereal, yogurt, water, ice cream, cookies, fruit juice, refrigerated juices, crackers, frozen pizza, frozen novelties, candy, popcorn and sports drinks.
In a blog post, Jetta said TABS’ findings were disputed by Kevin Coupe of MorningNewsBeat.com, who he described as a “noted CPG industry blogger.” Coupe seemed to disagree more with Jetta’s and TABS’ conclusions than its numbers.
“I think it is absurd to suggest that there is no path to success for e-grocery and that it is a failing concept,” Coupe wrote in his response to the TABS study. “First of all, I know retailers that are doing a pretty good job in e-grocery … and they tend to be the companies that have a made a real cultural (and yes, financial) investment, understanding that it is a long game that they’re playing. Nobody is suggesting that online grocery will decimate traditional bricks-and-mortar stores … but it would be foolish to suggest that the trends that have changed virtually every retail category will fail when applied to grocery.
“It will take longer, and there certainly will be failures. And the business model probably will go through various iterations,” Coupe stated. “But the next generation of consumers is going to want the next generation of retailing to be available to them.”
Kurt Jetta
Jetta explained that, so far, the facts and data don’t support claims of a coming boom in online grocery shopping.
“Why does online have to completely ‘disrupt’ grocery just like it has other sectors?” he wrote in his blog post. “TABS studies have shown that that the online channel performs very well in the baby, vitamin and premium cosmetics categories where the purchase frequency is low, items per transaction is relatively low and the item cost is high. But the dynamics for grocery are just the opposite: Purchase frequency is high, units per transaction is high and cost per unit is low.
“Online grocery has been around just as long as those other categories, which are succeeding, while grocery is failing,” Jetta added. “A loyalty rate of 15% to the format, while the brick-and-mortar norm is 75%, is a recipe for inevitable demise.”
Amazon was the only online shopping domain to increase grocery customer penetration, from 14% in 2015 to 16% in 2016, TABS found. Walmart.com remained flat in penetration at 12% in 2015 and 2016. Overall, grocery retail banners’ online shopping penetration fell from 16% in 2015 to 11% in 2016. Target.com had a grocery penetration decrease from 7% percent in 2015 to 5% in 2016, which TABS said reflects the retailer’s exit from curbside pickup service.
The 2016 survey also revealed that 78% of consumers regularly prefer to shop in brick-and-mortar grocery stores, the fourth straight year that channel has dominated in the study. Overall, the grocery shopping channel was stable versus 2015, according to TABS. Target saw regular shopping trips tail off, from 29% in 2015 to 25% in 2016. Costco, Rite Aid and BJ’s Wholesale Club, TABS said, all experienced a 2% decrease in regular shopping trips.
The grocery retail channel, too, remains the market leader in food and beverage purchases, with a 26% share of consumers regularly buying at a specific outlet (defined as six or more times a year), TABS reported. Grocery’s share was nine points higher than that of its closest rival, Walmart. Only Target, Dollar, Costco and Walgreens exceeded the 5% share mark.
Meanwhile, the online share of regular purchases inched up but was only 1.6%, TABS said, adding that the uptick stemmed from an increase in the expansion of curbside pickup services nationwide. Still, the survey found, only 1% of consumers indicated use the online channel regularly for grocery shopping.
