COVID Impact on Online Grocery Shopping

In what directions would the pandemic push the grocery shopping experiences in China and the U.S. towards?

comparing average daily downloads in February to that of March 15, Instacart, Walmart Grocery, and Shipt have seen surges of 218%, 160%, and 124% respectively.

Background:

Though Americans used to buy books and electronics online and order food through delivery apps, most customers still purchased groceries in stores. During the outbreak of coronavirus, people are stuck at home, creating rapid growth in the online grocery market. This can be reflected in the increase of downloads of grocery apps: comparing average daily downloads in February to that of March 15, Instacart, Walmart Grocery, and Shipt have seen surges of 218%, 160%, and 124% respectively. [1]

Trends in the United States:

New users are joining the online grocery market: "We are seeing a larger percentage of customers over the age of 60 that are coming online," said JJ Fleeman, chief e-commerce officer for Ahold Delhaize in the United States, which owns brands like Stop & Shop, Food Lion and the online delivery service Peapod. According to a survey by analysts at Gordon Haskett Research Advisors in March, around 41% said they were buying groceries online for the first time. [2]

In reaction to the crush in demand, grocers were scrambling to adjust and hiring more workers to deal with the overwhelmed delivery and pick up network. Some grocers built automated mini-warehouses inside their stores and opened up locations to make deliveries and prepare pickup orders. Ahold Delhaize was adding web servers and offering more windows for customers to pick up their orders or get delivery.[3] Walmart had said in March it planned to hire 150,000 new employees in both its stores and fulfillment centers.[4]

Some experts predict that there would be structural changes in consumer behavior after this period. Newcomers to online grocery may discover it’s an easier and now less risky way to shop and will continue to do so even after things come back to normal. The change in customer behavior added long-term pressure to small grocers who didn’t have enough capital to invest in the shifting from stores to delivery. However, others expected these to be one-time purchases, and that after the threat of the virus dies down, many consumers will return to their habit of going to fresh produce markets.

According to Deloitte, a new class of "essential" workers is created– the food workforce. So the supply chain security, vendor relationships, and workforce management have been more critical. Also, retailers have gained social capital and loyalty through social media. Since social media became a powerful tool to know about and communicate with the customers during the pandemic, food retailers may want to consider how they can further utilize social media as part of crisis communication. [6]

Trends in China:

China experienced similar challenges brought by the increased demand for online grocery shopping, especially in delivery. Before the outbreak of Covid-19, a courier for JD.com in Beijing would deliver about 140 to 150 packages per apartment complex per day, now that’s climbed to more than 200 orders a day. JD’s affiliate Dada, which delivers for Walmart and local grocery chains, said sales more than quadrupled from a year ago during the 10 days of the Lunar New Year holiday that ended this past Sunday.[7]

However, challenges came along with the growth. The customer demand was so high that orders can take hours longer than scheduled to arrive. And available delivery slots were often cut short. [8]

Logistical challenges presented too. Since couriers can no longer send packages straight to the door due to government policy, they must call customers to pick up parcels from the front gate of the apartment complex. This lowered efficiency when some customers were asleep or not understand the policy and were unwilling to pick up deliveries. [9]

Fresh retail platforms also need to rethink their business models. Facing problems such as food material waste caused by restaurant closure and blocked express delivery, many fresh supply chain enterprises, such as meicai.cn and Caijiadayuan, began to shift their business focus from to B to to C, paying more attention to individual and family consumers, and developing community group-buying and group-sharing modes.[10]

Online broadcast rooms for a variety of agricultural products became the focus of the stay-at-home public. At present, various activities of "live broadcasting + helping farmers" are being carried out on many e-commerce platforms. According to data released by Alibaba, more than 50 percent of Tmall merchants have been live-streaming their purchases in the past month. In the whole month of February, the number of new merchants on Taobao live broadcast increased by 719 percent compared with January. On March 18, zhaopin.com jointly released the Spring 2020 Live Streaming Industry Talent Report. For the positions related to live-broadcasting, the number of job vacancies increased by 83.95% year on year in one month, and the number of recruitment increased by 132.55%. Among them, the number of part-time jobs related to live streaming increased by 166.09% year on year, more than twice the growth rate of full-time jobs.[11]

Summary

Under Covid-19’s impact, an unprecedented demand in the online grocery market presented both benefits and challenges to the grocery and food retailers. In reaction to customers’ behavior changes, the retailers will need to transform the ecosystem, adjust to the new normal and redefine resiliency to recover and thrive in the long term.

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Reference:

[1] Blacker, Adam. “Instacart and Grocery Delivery Apps Set Consecutive Days of Record Downloads.” The Apptopia App Beat. Accessed May 5, 2020. https://blog.apptopia.com/instacart-and-grocery-delivery-apps-set-consecutive-days-of-record-downloads.

[2] Meyersohn, Nathaniel. “Coronavirus Will Change the Grocery Industry Forever.” CNN. Cable News Network, March 19, 2020. https://edition.cnn.com/2020/03/19/business/grocery-shopping-online-coronavirus/index.html.

[3] lbid.

[4] Blacker, Adam. “Instacart and Grocery Delivery Apps Set Consecutive Days of Record Downloads.” The Apptopia App Beat. Accessed May 5, 2020. https://blog.apptopia.com/instacart-and-grocery-delivery-apps-set-consecutive-days-of-record-downloads.

[5] “Understanding COVID-19s Impact on Grocery & Food Retailers: Deloitte Global.” Deloitte, 1 Apr. 2020, www2.deloitte.com/global/en/pages/about-deloitte/articles/covid-19/understanding-covid-19-s-impact-on-grocery---food-retailers.html.

[6] Chengevelyn. “Contactless Delivery, Online Grocery Shopping and Other Ways Home-Bound Chinese Are Trying to Get Food and Stay Safe.” CNBC. CNBC, February 6, 2020. https://www.cnbc.com/2020/02/07/virus-outbreak-forces-chinese-to-stay-at-home-and-order-more-delivery.html.

[7] lbid.

[8] lbid.

[9] Ma, Jinqiao. “From ‘To B’ To ‘To C’, the Fresh e-Commerce under the Epidemic Is Flying out of ‘Black Swan’?” Pedaily.cn, 25 Feb. 2020, news.pedaily.cn/202002/450893.shtml.

[10] Kang, Jinan. “‘Home Economy’ to Stimulate New Consumption -" Reflections on the Epidemic ‘Series 7.” Www.kf.cn, 1 Apr. 2020, news.kf.cn/2020/0401/451947.shtml.