Online Grocery is ‘Failing,’ Finds TABS Study

Online grocery shopping has failed to gain momentum in the last few years, according to TABS Analytics' fourth annual Food and Beverage Study.

Just 4.5 percent of consumers regularly buy consumables online compared to 78 percent of consumers regularly purchasing them from brick and mortar grocery outlets. Regular online grocery purchasing has yet to break five percent in the four years TABS has conducted this study. It increased a mere half a percentage point since the 2015 study.

Meanwhile, Amazon garnered a two percent increase in shopper penetration from 14 percent in 2015 to 16 percent in 2016, the TABS study found. Amazon was the only online shopping domain to increase shopper penetration in 2016.

“This study underscores that online grocery is failing,” said Kurt Jetta, CEO and founder of TABS Analytics. “For the fourth year in a row, consumers have turned their backs on buying groceries online no matter how much online grocery retailers try to entice them. Sixty-nine percent of consumers never buy groceries online. With only 15 percent of consumers stating loyalty to shopping for groceries online, this is not a sustainable business model, especially when you consider the industry loyalty rate benchmark is 70 percent. Food companies and grocers need to figure out why there is such a high level of dissatisfaction with the online channel before they continue to invest any further in it.”

The survey panel for the study, conducted in August 2016, consisted of 1,000 geographically and demographically dispersed consumers between the ages of 18 and 75. The 15 consumables categories analyzed were carbonated beverages, salty snacks, cereal, yogurt, water, ice cream, cookies, fruit juice, refrigerated juices, crackers, frozen pizza, frozen novelties, candy, popcorn, and isotonics (sports drinks).

Other findings from the study:

• For the fourth year in a row, the traditional grocery channel continued to dominate all other shopping channels. Target had a four percent decrease in regular shopping trips from 29 percent in 2015 to 25 percent. Costco, Rite Aid, and BJS all registered a two percent decrease in regular shopping trips compared to 2016.
• Over a quarter of Millennials are heavy buyers of food and beverages, compared to 35 percent of households with children who are heavy buyers of these consumables.
• Just 20 percent of households with no children are heavy buyers.
• Millennials are also harder to target with deals than other demographic groups since their participation in deals is well below the national average, particularly circulars and free standing inserts.
• Most of the directional changes in category trends are due to the decrease of heavy buyers.

“TABS Analytics Fourth Annual Food and Beverage Study backs up that CPG manufacturers and retailers need to make a significant investment in promotional activity to sustain and grow their businesses. Weaker promotions are directly correlated to weaker sales trends,” said Jetta. “Sustained promotional levels of 15 percent to 20 percent of sales are needed to kick-start declining sales trends and bring heavy buyers back.”