Expert Column: E-commerce Represents Window of Opportunity for Grocers

Today, we U.S. consumers do very little of our grocery shopping online. In this and many online shopping categories, we lag behind consumers in Europe and Asia-Pacific. But grocers should understand this as a window of opportunity to get ready, not as some kind of permanent reprieve. They must find ways to meet the online needs of their consumers as those needs grow.

It's true that we in the U.S., who seem to live our lives online, always connected through our smart phones, tablets and other devices, currently lag in online shopping. We certainly research our purchases online (63 percent), look up reviews (63 percent) and find online shopping convenient (78 percent), but we are still hesitant to make some types of purchases online.

It's Asia-Pacific that has the highest online buy rates. China and South Korea are leaders in online purchases of cosmetic products and groceries. Western Europe leads the way in CPG ecommerce. Online “trips” for fast-moving consumer goods in Great Britain have increased from 70 million in the year ending Q1 2013 to 91 million in the year ending Q1 2014; in France, trips have increased from 32 million to 42 million in that time period.

Why are Americans still somewhat reluctant to buy online in certain categories? Some 46 percent cited shipping costs, and 37 percent said they don’t trust giving their credit card information online.

But, absent some unexpected discontinuity, it's frankly only a matter of time.  Americans’ willingness to make airline and hotel/tour reservations, and to buy electronic equipment, ebooks and music (non-download) have all more than doubled in the last three years.  Grocery is much smaller, to be sure, but it's growing.

Millennials vs. Boomers

This is particularly true for Millennials. According to a recent survey, they make up more than half of those intending to use e-commerce channels for a whole range of category purchases – about four times the representation of Baby Boomers.  Just as Millennials have adopted new ways to communicate and consume media more quickly than their elders, they have learned new ways to shop. 

And of course, Millennials are “aging in” just as Boomers are aging out. It is Millennials who are creating new households, and if grocers cannot find a way to appeal to them, they will see significant losses in traffic and loyalty from new, young families.

We can’t stress this enough.  The figures may look manageable today, but, like time and tide, technology innovation waits for no man.  Amazon is rapidly launching new markets for same-day delivery, and both Google and Amazon are experimenting seriously with drone delivery.  While such innovations may seem like science fiction, who would have predicted just a few years ago that we’d be watching TV on our phones, or have the opportunity to connect with more than a billion of our “friends” for free?  I am betting that the growth curve in e-commerce is more likely to be exponential than linear, because that’s been the technology trend since Moore propounded his famous law.

The consumer is changing, and it's an iron law of retailing that the supplier must change as well.  The proof may be nascent, but it's proof nevertheless.  Grocers – and manufacturers – must over-invest now in understanding these consumers, and begin to shape the services they offer to meet their needs.

Those grocers who “fail fast,” as the signs in Facebook’s offices famously say, will be the ones with time to succeed. You don’t need that many successful experiments to thrive.

There is no reason whatsoever to think America is going to be different from Asia-Pacific.  Asia-Pacific is just further down the learning curve. American grocers should be grateful they can look across the Pacific to see what the future looks like, because very soon the future will be now.