Food for thought on online grocery sales

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Online grocery sales remain a minuscule part of the food retail landscape, but they could be a good source of added revenue from customers who are making fewer overall trips to the grocery store.

The number of t i mes time- strapped consumers have gone to buy groceries at a supermarket has declined seven per cent since 2012, according to the market research firm Nielsen — a “trip compression” total of 175 million store visits, Carman Allison, vice president of consumer insights, told an audience at the Retail Council of Canada’s Store 2017 conference on Wednesday.

Retailers prefer customers visit stores more frequently, because every trip represents an opportunity for impulse buying, bumping up the total size of the grocery basket beyond planned purchases.

“We are seeing a decline on overall traffic,” Allison said. “But even though you have fewer opportunities to engage in the store, with digital, you have more opportunities ( as a retailer) to engage and interact with the consumer.”

Packaged goods bought online account for 1.9 per cent of grocery sales in Canada, according to Nielsen, but sales online are projected to grow 20 per cent a year and will account for 5.3 per cent of the market by 2020.

Packaged food accounts for just 0.6 per cent of the market currently, below that of health and beauty items, at 1.8 per cent of sales, while non- grocery staples such as pet foods and household paper products account for 3.2 per cent of online sales.

Some categories are particularly robust: while sales of baby care items have fallen three per cent in stores over the last year, according to Nielsen, they were up 59 per cent online. Sales of paper product sales rose two per cent in stores last year, and 32 per cent online.

Erin Young at online pharmacy retailer Well. ca, said many consumers first shop at the site for baby care items, but “we then see a real migration into food and then other household categories.” In addition, she said, the site has performed well with niche brands too small to be carried at national retailers.

“We give them national distribution,” she said, adding Well. ca sells “ridiculous amounts” of a $ 17 natural charcoal deodorant, “because it is a unique interesting brand that people want to discover and learn about.”

Still, Allison said, when it comes to packaged food, three-quarters of consumers say they would rather pick up merchandise in the store, and 63 per cent say they are concerned with the quality and freshness of goods ordered online, worrying about expiry dates.

“It’s consumer perception that we have to deal with,” said Allison. Half of consum- ers are concerned about the delivery process, wondering if it will “sit on the doorstep” if they are away from home.

Steve Quintin at online retailer Grocery Gateway, founded in 1998, said the firm has seen little customer cannibalization between its online business and its bricks- and- mortar grocery store owner Longo’s, which bought the e-commerce player in 2004. “We really are fulfilling different shopping needs,” he said, noting online customers “definitely skew a little bit younger and a little bit older” than the typical Longo’s shopper.

While both Well. ca and Grocery Gateway deliver, not everyone is convinced home delivery is a compelling busi- ness proposition.

“We might experiment (with home delivery), but I don’t think anybody has reached the conclusion that it is the best path forward for grocery,” Loblaw chief executive Galen Weston said in February.

Loblaw has been sticking with a test market run of “click and collect” shopping, where customers buy goods online at home and pick them up at the store. Walmart Canada, meanwhile, has expanded into home delivery of food, health and beauty items across Canada.

“You have to take some big bets on where this will go,” Daryl Porter, vice- president of online grocery operations, said Wednesday. “We have to believe as an industry that the ( growth) will be exponential,” he said.