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06/17/2021

Food Retail Benefits from Bringing SNAP Purchases Online

Capabilities enhance customer service, widen the customer base and reduce food insecurity
Bagrat Safaryan
Co-Founder and CEO, Local Express
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Bringing SNAP purchase capabilities online enhances customer service, widens the customer base and reduces food insecurity.

In the midst of the COVID-19 pandemic chaos, many lower-income shoppers and others who relied on government support were caught in a dilemma between going to a store they might consider a health hazard and staying home and living with less because they couldn’t afford delivery charges or their form of payment  typically Supplemental Nutrition Assistance Program (SNAP)  wasn’t accepted for online. As restrictions wind down and conditions return to normal, online access for SNAP recipients, where transactions are as fast and seamless as possible, remains an imperative for all grocers.  

First, a little history. Government grocery benefit programs designed to fight hunger, like SNAP that give consumers the ability to pay for products, have been in use on a nationwide scale since the 1930s. Food assistance volume declined in the late 1990s then reversed and hit a then-record high of 28.2 million with the 2008 recession. User numbers increased every subsequent year through 2013, at which point they began to decrease again. The pandemic drove SNAP usage rates to its current record-high participation, with more than 40 million households relying on the program.

Among the first actions taken by President Biden after taking office was signing an Executive Order to direct the federal government to “provide equitable emergency economic relief to working families, communities and small businesses across the nation.” As part of this action, President Biden also recommended immediate legislation for Congress to include extending the 15% SNAP benefit increase, as well as authorize the USDA to allow states to increase emergency allotments.

Digitization of SNAP

Although digitization of the government’s food benefits programs began in the early 1980s, the Electronic Benefit Transfer (EBT) system, wherein the user receives and stores their benefits electronically and makes transactions for food via a debit card inside stores, didn’t gain any real traction until the mid-90s. The advantages for grocery retailers with SNAP participants using a card-based system over paper are obvious; and conserving time and money by eliminating the counting and bundling of food stamps is the most significant. The state governments issuing the benefits also encourage digitization of SNAP benefits because it results in a reduction of paperwork and mailing costs, additionally, they are able to better control fraud and black-market usage.

COVID Impact on SNAP

Pre-COVID, most SNAP transactions occurred in-store with EBT cards. Online usage was not an option for most users. Although various pilot programs to develop online options for SNAP have been launched since 2014, user demand was not perceived to be significantly urgent. In addition, SNAP is run state-by-state, which means any changes to the system needed to be approved by the U.S. Department of Agriculture (USDA) and no entity was really incented (or properly resourced) to undertake the daunting battle to modernize/update a bureaucracy. However, lockdown conditions forced the USDA to fast-track approval for SNAP online purchasing in 46 states and Washington D.C.

In fact, 2020 saw biggest jump in the need for SNAP benefits since the program began, along with massive and unprecedented increases in funding from the federal government, all while in-store shopping was not tenable for huge swaths of at-risk people. A vast majority of SNAP recipients are impoverished, with many households receiving SNAP benefits include a child, a senior or a person with a disability, according to the USDA.

Conventional wisdom has it that most SNAP participants will have the ability to shop for groceries online when the giant nationwide grocery chains and the grocery delivery services install the payment infrastructure and customer interface essential for accepting shoppers using SNAP benefits. But small chains and independent grocery stores are the real key element when it comes to meeting demand to service SNAP users online. Crucially, a substantial percentage of SNAP users live in low-income neighborhoods and/or rural communities outside of many large chains’ established delivery zones.

The optimal online grocery store is one that replicates the in-store experience, while expanding on the advantages inherent in online shopping. There are situations, however, where SNAP users will encounter different customer experiences that present obstacles and challenges. For example, certain items in a basket may be SNAP eligible, with other items not. Also, in many cases delivery fees may be separate. The key for SNAP-eligible retailers is to design their e-commerce platform to compete for the SNAP customer by keeping the SNAP payment experience as like the consumers using other forms of payment.

From a business perspective, adding SNAP participants to their existing online customer base offers a great opportunity to increase revenue, and for independent grocers, enabling SNAP payments for their customers who are forced to shop for food online for at least the duration of the pandemic serves to maintain and even strengthens their ties to the community.

Looking forward, regardless of whether some recipients no longer need SNAP or return to in-store shopping, accepting SNAP for online transactions will ultimately increase the overall customer base and help reduce food insecurity in the process.

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