Grocers Rush To Reinvent Themselves

Although the digital shift brought on by the pandemic has rapidly reshaped the entire retail industry, its impact on the grocery segment in particular has been especially pronounced.

In fact, according to a new Omnichannel Grocery Report from ACI Worldwide and PYMNTS, 17.2 percent of all consumers have switched from in-store to online shopping. Ordering for home delivery has become particularly popular, as 23 percent of U.S. consumers — 57 million people — say they are ordering more groceries online for home delivery now than they did before the pandemic’s onset.

Debbie Guerra, executive vice president of Merchant and Fraud Solutions at ACI Worldwide, told PYMNTS that digitization of the grocery business, and providing options for how consumers pay for groceries, is no longer optional in the pandemic era — or beyond.

“The focus on touch-free, contactless payments has just accelerated,” Guerra said in an interview. “It really has changed — not just for [the] consumer who shopped in person at a grocer, but also the delivery services and the third-party shoppers that are being used a lot more.”

Whether it’s buy online, pay in store (BOPIS) or a surge in third-party shopping and delivery services, the way we browse, purchase and bring home our food and other household products will never be the same, even when COVID-19 has gone.

The changes affected so far this year are illustrated in the Omnichannel Grocery Report, which shows that consumers use several different purchasing channels to buy their groceries. The consumer survey in the report shows that 79.6 percent of all consumers who buy groceries report purchasing them in-store, while 63.9 percent make at least one of their routine grocery purchases online. Twenty-one percent of consumers, or 53 million individuals, are now ordering online for curbside pickup more than they did before the pandemic began, and 12 percent of consumers are now doing the same for in-store pickup.

And regardless of where they shop, they are paying differently. More than one-third of consumers who buy groceries — 65 million individuals — would be willing to switch to grocers that offer touchless in-store payment technologies, such as digital wallets, QR codes, cards on file and point-of-sale (POS) credit options.

The report also shows high levels of interest in using touchless payment options at the brick-and-mortar POS among consumers who have shifted to buying some of their groceries online, whether they use contactless credit and debit cards, digital wallets, cards on file or another digital method. Far fewer consumers are actually using these methods, however, suggesting an untapped demand for them. The research shows that 16.5 percent fewer consumers use contactless credit cards than would like to, for example, and 15.1 percent fewer use contactless debit cards than would like to.

Guerra said new-era grocery stores also need to ensure that their online merchandising efforts are as good as their highly focused in-store presentation of products. She said that’s especially true when a new middleman — delivery services — often sits between the retailer and the end customer.

“If I want to go online to make my order digitally to a grocer, the quantity and the richness of the options that are presented to me on their eCommerce site today tend to fall short of the variety of goods that you can buy in person,” she said.

The Omnichannel Grocery Report supports Guerra’s observation. It found the best opportunity to acquire new customers lies in focusing on delivering digital payment options to the 63.9 percent of omnichannel consumers who regularly use a combination of both brick-and-mortar and digital channels to buy groceries.

The remaining 36.1 percent of shoppers do not use digital channels at all. These consumers are the digital holdouts who prefer traditional shopping methods but still have a strong interest in trying digital payment options. The research shows that 43.5 percent of consumers who have never purchased groceries online would be “very” or “extremely” interested in using digital payment options, in fact, and 37.4 percent would be “somewhat” interested in doing so.

Who Is Your Customer?

The sea change in grocery behavior makes it more important to understand the customer. With the huge uptake in shopping/delivery services, such as Shipt, Guerra said it’s critical for grocers not to lose sight of who the end customer is, “particularly in those situations where a third-party shopper or delivery service is that point of interaction with the final customer. It may not always be visible that the customer who always came into the store is now coming at you through a different channel.”

And while most supermarkets accept EBT/SNAP payments from in-store customers, many have not yet integrated that service into their websites or that of the shopping service that’s picking and paying for an order. Taken together, Guerra described a triple-whammy of seamless digital cohesion that she said all grocers must have. She said that consists of “integration between eCommerce sites, making sure that [core merchandising] is as deep as possible, and then also being able to work with various providers for delivery services in a way that they may not do today.”

At the same time, she said, the increased digital traffic has brought a commensurate increase in fraud to grocers, many of whom are unprepared to deal with it.

“I think a lot of the grocers have less experience with eCommerce in general and [especially with] eCommerce fraud,” she said, noting that the chance of chargebacks and refunds is of particularly concern when there are third parties in the middle of those deliveries and different channels.

“The fraud rate in ‘card-not-present’ versus ‘card-present’ [transactions] has remained high and growing, so it becomes essential that grocers, as they shift to digital, have very effective fraud detection and prevention solutions in place,” Guerra said.

While grocers, like any retailers, want to get as many conversions or authorized transactions as possible, the fact that they now have well-known recurrent customers shopping with them through different channels poses a unique set of challenges.

“It becomes really important that these fraud solutions have the ability, based upon machine learning and broad global consortiums of data, to do positive profiling,” Guerra said.

That gives grocers confidence that this is a customer they know, can trust and that they can authorize a given transaction.

“I just think on the omnicommerce side that it’s really about the grocers being able to rapidly enable these various customer journeys,” she said.