The Next Norm in Grocery and CPG

Capitalize on the demand surge now, adapt to new customer preferences, and build online capabilities.

Through the pandemic, the use of e-commerce for grocery rose sharply … and first-time online shoppers have taken enough of a liking to continue grocery shopping online post-pandemic.  

The new world

The grocery and consumer packaged goods (CPG) industries exploded through the pandemic; they are the industries that experienced the most growth. With consumers taking to staying home and cooking for themselves, outings limited solely to grocery shopping, these industries have less rebuilding to do, and much more expansion and adaptation to do. 

With concerns about exposure and convenience, the directions consumers have taken their grocery shopping have been altered permanently. Through the pandemic, the use of e-commerce for grocery rose sharply from 13% to over 30%, and 35% of first-time online shoppers have taken enough of a liking to it that they have decided to continue grocery shopping online post-pandemic.

On the industry side of this change, the proportion of food and beverage sales comprised of e-commerce sales went from 3% to 15%. And, as put in a BCG article, 5%-7% is a “threshold that indicates and foreshadows an acceleration in the growth of CPG online purchases as e-commerce acceptance and adoption balloon.” Based on this, the same article projects that, through 2022, over 70% of sales growth in food and beverage will be via e-commerce.

Besides their shopping habits, consumer priorities have changed as well. With more introspection and a focus on value, the actual food people are purchasing has shifted towards the fresh and healthy side, due to more conscious lifestyles. Coupled with this, consumers are prioritizing value advantages above all else. This change in the consumer has caused a major instability for the grocery and CPG industries in customer loyalty. Because of the uncertainty surrounding safety and value, more than 15% of consumers switched up their choices for primary grocery stores, and there was a mass shift from traditional supermarkets to the lower-cost alternatives, such as discounters and mass clubs.

Companies will need to incentivize customers by showing them offers and information that cater directly to them, draw them to their website.   

Looking forward

The grocery and CPG industries must have a three-part plan looking forward: capitalize on the demand surge now, adapt to new customer preferences, and build online capabilities to succeed at a larger scale moving forward.

The first step is to actively use this current period of time, when online sales are surging, to gain more and more customers. This will involve improving analytical and promotional techniques. On the analytical side, it will be important to be able to monitor data in real-time, such as sales, inventory, and demand, in order to match the activities of consumers in the moment. On the promotional side, companies will need to incentivize customers by showing them offers and information that cater directly to them, to draw them to the companies’ sites. If these companies succeed at capturing customers’ attention, they have the potential to maintain more loyal customers post-pandemic.

The next step is to constantly update products to match consumer desires. With the new wave of conscious eating and living, the grocery industry will have to source new products and alter the layout of their stores. Options available will have to consistently be monitored and changed, and products that are fresh, local, and healthy will be key. 

Finally, the grocery and CPG industries must strengthen their e-commerce platforms in order to flourish in the next normal, with new and higher demand and changed consumers. Some aspects of the new platform that will require monitoring are assortment, availability, digital shelf, and consumer activation; in addition to monitoring these elements, companies will need to expand e-commerce implementation options, such as contactless pickup and delivery. 

In order to fully unlock the potential of grocery and CPG e-commerce, these industries will have to look into boosting their technologies through partnerships. Some capabilities that will be necessary, such as real-time monitoring of online performance, are beyond the current scope of these industries’ abilities. Being able to view customer preferences and demographics, demand, inventory, and competitor moves—all in real-time and at scale—will help inform crucial decision-making and tactical courses of action. These capabilities are not only necessary to boost grocery e-commerce platforms, but they would also help juggle the additional tasks of managing customer support, orders, warehousing, and other new hurdles that these industries will have to overcome. All around, the next normal will be a time of innovative and new business tactics, for growth in the world of online grocery.

Strategies that can help win customers in 2021

Following are some examples of tactics that worked well for some leading grocers and CPG brands, and will work well for the industry during the pandemic and beyond: 

Robust Digital Channels

Invest in mobile apps to enable easier order and pick up for customers.

Curbside Pickup Capabilities

Use geo-fence triggers to provide clear instructions and wait times for curbside pickup.

Real-Time Inventory Checks

Offer alternative products if desired items are out of stock.

Partnerships

Form a relationship with delivery partners, such as Instacart, PostMates, etc. to avoid delays in delivery.

Personalized Actions

Offer shopping lists/product recommendations based on inventory, past shopping patterns, and promotion budgets—in real-time.

Monitor Queue Lengths

Inform customers through the mobile app about the number of people inside stores, check-out line lengths, etc., so they can plan accordingly.