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The Future Of E-Commerce Grocery Has Arrived: 2021 Industry Outlook

The Future Of E-Commerce Grocery Has Arrived: 2021 Industry Outlook

Co-founder and CEO at GrocerKey, e-commerce grocery technology and operations.

In a year that witnessed the world navigating the onset of a global pandemic, the e-commerce grocery landscape quickly pivoted and charged forward. In the first few months of the pandemic, U.S. online grocery sales grew to roughly 40% as American shoppers started to fill their baskets online under state-issued lockdowns. 

The shift in consumer habits propelled platform adoption and provided a boon to grocer retailers in 2020. Today, with the new year upon us and the vaccine rollout now in play, retailers may be pondering how to keep up the momentum. Yet, regardless of how or when we “beat” Covid-19, the habits that have been formed during the crisis — including the shift to convenient (and safe) purchasing of essential grocery items — are unlikely to change. 

There’s precedent for this sort of rapid technology adoption. Following the SARS outbreak in 2003, for example, a still-nascent Alibaba was primarily focused on connecting American companies to Chinese suppliers. But when other countries began issuing travel warnings to businessmen, Chinese suppliers quickly turned to Alibaba’s e-commerce platform to market their goods. After adding 4,000 new members and thousands of new listings each day, the company grew by more than 50% that year — and soon became the largest online marketplace in the world. 

While today’s grocery retailers are benefitting from a similar shift in consumer habits, they must go beyond simply offering e-commerce to retain their competitive edge. On the heels of innovation, disruption is never far behind. Grocery retailers will have to discover new ways to invest in their businesses throughout 2021 to continue adapting to the sea of change. 

Here are a few trends I think will help grocery retailers ride the wave:  

Emphasis On Success Rather Than Just “Good Enough” 

In 2021, we’ll see a push to increase e-commerce fulfillment capacity to maximize revenue and fulfill customer demand, in addition to driving toward profitability. There will be a focus on increasing basket size, which is an area many retailers fail to realize the potential. We’ll also see increased measurement of customer satisfaction, as retailers look for ways to improve the customer experience. 

Reducing CapEx 

While automation and micro-fulfillment centers certainly have their place, most retailers will continue to operate by utilizing their stores as e-commerce distribution centers. Operating models will emerge that help retailers reduce capital expenses and quickly scale to meet spikes in consumer demand — without needing to allocate significant space for order staging. And speaking of space, I think retailers will commonly shift underperforming locations to dark stores to help facilitate online orders. 

A Focus On Food Safety 

As e-commerce thrives and becomes a larger percentage of overall sales, many retailers are focused on maintaining and promoting food safety — especially in light of the changing fulfillment landscape. With the above in mind, retailers will be forced to adapt their fulfillment practices to ensure they’re meeting food safety best practices. 

Increased Consumer Experience Expectations 

With shoppers becoming more comfortable with online ordering, expect consumers’ expectations to keep on rising as e-commerce becomes the norm. Grocery retailers will no longer get credit for simply having an e-commerce option; they’ll need to offer a user experience that truly makes consumers’ lives more convenient. 

Building a 40- to 50-item e-commerce basket is simply not efficient enough on the average grocery e-commerce experience today. Consumers will be looking for the ability to easily filter items by dietary preference and expect category pages and search results to adapt based on their personal browsing and purchase history. 

More Collaboration Between Retailers And Consumer Packaged Good (CPG) Brands 

With consumers turning to shopping for groceries online, it will be imperative for brands to share detailed product content with retailers, such as product images and attributes, to facilitate seamless ordering. There will also be an elevated need for collaboration for sponsored product listings and contextual banner displays via retailer-specific digital media offerings, an increasingly effective incremental revenue stream for retailers to help offset e-commerce fulfillment costs. 

These strategies should also include impulse upsell opportunities to replicate the checkout experience in the physical store and auto-replenishment tactics as a means to build loyalty for both retailers and participating brands. 

The Evolution Of Payment Options 

In the economic recovery, unemployment and underemployment issues will continue to face many Americans. I believe EBT will become a payment option on a majority of retailers’ e-commerce platforms, making online shopping accessible to a rapidly growing portion of the market. Also, don’t be surprised to see alternative payment options such as cryptocurrency introduced by progressive retailers seeking to build loyalty among younger consumers.

Retailers That Stand For Something Continue To Win

There appears to be a common thread among retailers that have thrived in an increasingly competitive landscape — they all stand for something. SpartanNash increased their focus on diversity and inclusion by providing resources to its associates, including education about the importance of Martin Luther King Jr. Day. Raley’s is committed to health & wellness by focusing on its mission, “Changing the way we eat, one plate at a time.” One of my company’s clients, Woodman’s Markets, has remained laser focused on value and variety, offering the largest assortment in the industry at highly competitive prices. Another retailer partner, Kowalski’s Markets, prides itself in operating a civic business committed to democratic principles. There are countless other examples of this in the industry, and I anticipate that retailers who excel in having a clear and well-defined purpose will continue to build market share. 


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