Grocery stores may not look very different than they did two or three generations ago, but their role in consumers’ lives is changing dramatically. Where once the physical store encompassed the brand’s relationship with the consumer, it is now only one channel — part of a whole that contains grocers’ direct web and mobile digital channels, third-party aggregators and more.
“You look at a grocery store and just stand in an aisle and watch people shop — the human behavior you see in the store doesn’t look a lot different than it did 10 years ago, or 20 or 50 years ago,” John Ross, president and CEO of the Independent Grocers Alliance (IGA), told PYMNTS in an interview. “That doesn’t mean the shopper is the same, and those shoppers have a digital relationship with most of the brands and services in their lives, and so their expectation of our industry to be able to have a digital connection with them is growing and growing and growing.”
This increased expectation for connected convenience is coming from all generations, not just from those quickest to adopt digital technologies.
“COVID brought in some online ordering from demographics, particularly some of the boomers who in the past have not been as oriented around online shopping, particularly for groceries,” added Debbie Guerra, executive VP of on-demand merchant solutions at ACI Worldwide. “We’ve seen, with the millennials, the Gen-Zers, that they were already eager to continue to adopt digital payments. What has happened, though, is that as COVID continued, the ongoing shift to digital has become embedded.”
In fact, according to data from PYMNTS and ACI Worldwide’s study “What Consumers Expect From Their Grocery Shopping Experiences,” 34% of consumers now buy groceries online, and 18% of consumers prefer these eCommerce options to in-store shopping.
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Beyond the Debit Card
Additional research from the report finds that 56% of consumers pay for their in-store grocery purchases using debit cards and 51% use credit cards. Those numbers jump to 57% and 65%, respectively, for digital purchases. Meanwhile, only 43% of consumers pay for their in-store purchases with cash.
Looking ahead, Guerra predicts “more and more of a shift” toward digital payment options, which could include enabling own-device payments through QR codes, which at the time of the report only accounted for 3% of in-store purchases.
“If you look at [the share of] consumers [who] tend to favor the use of debit cards at groceries, it’s not a big stretch to think that we could see more of a shift to real-time payments from their banking accounts, and that could also drive some cost savings for grocers,” she said.
Given the costs of debit and credit card transactions for grocers, Ross said, credit card processors may be open to negotiating with grocers — or grocers will “find alternate ways” to accept payments, guiding consumers toward alternative methods.
With many consumers now more loyal to third-party marketplaces than they are to any single grocery store, it’s up to the brands to reforge direct relationships with consumers. In fact, Ross said that the biggest single concern among high-volume eCommerce retailers is “the fact that they may be creating a business model for someone else on the backs of their own shoppers.”
For now, at least, consumers tend to turn to grocers’ direct digital channels in greater volumes than third-party aggregators. Findings from the What Consumers Expect report show that while 11% of consumers use aggregators that deliver products the same day, 20% directly order curbside pickup and 23% use direct delivery channels.
One way grocers can retain these direct customers and drive those numbers is by rewarding frequent spending, using data from loyalty programs to build a more personal relationship with the customer.
“Loyalty programs can create the sense of recognition and engagement no different than if you walk in one of our stores where you’ve been shopping for 20 years, and we say, ‘Hey, Mrs. Jones, how are you?’” Ross said. “Digital technology does allow you to replicate a lot of the effects of high quality of service.”
He added that while this data personalization is a benefit to large grocers, it is “the biggest threat to the independent segment,” given that the personal relationship is at the core of how independents differentiate themselves from major chains.
The Connected Aisle
Guerra expects that self-checkout methods, especially in-aisle, will gain in popularity, removing friction for consumers. On the grocers’ side, Ross added, the shift is “inevitable, at least for the short term,” given the challenges that grocers are having staffing their cash registers.
Additionally, Ross predicts that the digital aisles will transform to meet consumers’ needs as well, evolving beyond a cookie-cutter grid layout to more brand-specific content and design “as we move into our second- and third-generation eCommerce.” Additionally, he argues that grocers’ digital stores will expand beyond their own food selections to include a range of retail categories from different sellers.
“There are a couple of things that are inevitable, but the first one is, I think we’re going to see the growth of marketplaces, food and non-food marketplaces, bought through your grocer,” Ross said. “It’s a new, much more sophisticated model, in order to deliver everything the consumer needs, which means the size of your box and the restrictions on your physical plant won’t tie you to a single way of serving your community, and that’s going to be great for the consumers as well.”