In order to adapt to the circumstances of 2020, you may have ordered click-and-collect groceries, maybe you purchased everything to come right to your door, or maybe you checked up on a retailer’s website to see what was in stock before running out to get it just in case. All of these behaviours are tied to the online shift in the consumer-packaged goods market, where some consumers are now looking to digital means to fulfil their grocery needs.
A higher percentage than ever choose to become online shoppers, and these habits will continue into a post-pandemic environment.
The challenge for marketers within this multi-billion dollar industry, the customer, is now fragmented, unlike many other industries. There are omnichannel shoppers, those who will go exclusively digital, and others who will remain loyal to the brick-and-mortar storefronts we all know.
We have created profiles for the above segments and mapped out their habits using Vividata, the leader in Canadian cross-media and consumer research. Pulling from the Fall 2020 and Winter 2020 consumer research studies.
If you are not familiar, the Principal Grocery Shopper (PGS) is a persona based picture of the individual you will most likely see examining those delicious strawberries, grabbing a loaf of bread or pulling a pizza out of the freezer.
Historically, this individual has skewed female. Until 2019, only minor incremental changes were seen in shifting the percentage of male and female PGS closer.
In 2020, those numbers began a shift, with a 40% male / 60% female split emerging.
Similar to spikes in the housing market, COVID19 appears to have accelerated that shift, with significant single-year jumps being registered.
Clearly, the pandemic has ignited a significant shift in buying patterns, along with roles.
Although COVID has been a significant accelerant, these trends were already in motion, as noted above. With a larger portion of 25-35 living in single-person households, along with an increase in the rate of divorce, paired with the ageing baby boomer generation, we were primed for a change.
Though household roles have made a dramatic change to the PGS segment over the last few decades, the one consistent was around the preference towards brick-and-mortar. The Conversation reported that 81% of Canadians preferred physical vs. virtual environments; in a sense, we were locked into what we had always known as consumers.
Though online CPG shopping has existed in varying forms since the 90’s, it became more accessible across Canada with Loblaws launching their click-and-collect grocery back in October 2014.
The last year and the emergence of the COVID19 pandemic has accelerated online adoption and introduced it as an option to many who otherwise were hesitant to use this new method. The desire to stay safe has pushed traditional brick-and-mortar shoppers into trying out digital grocery to where half of those who identify as their households PGS have tried online CPG shopping in the last year.
Across the board, e-commerce skyrocketed in 2020, peaking in the Spring with a 99.3% growth from February to May 2020 and seeing a 110.8% increase YOY from May 2019. Aiding the growth were investments from retailers in items such as the tools for using their respective e-commerce platforms, allowing for a smooth path to purchase for consumers.
Traditionally, the PGS has used brick-and-mortar for CPG shopping and has only seen minor shifts toward digital over the last decade.
We expect that the next few years will see online adoption grow at an exponential rate in creating omnichannel shoppers. As online shopping is reaching more of the PGS segment, grocery and department retailers are investing in online programs that will make in-store to online shopping an easy and seamless transition. Walmart has pledged over $2.6 billion to e-commerce and distribution over the next five years to ride the wave of those who will continue to look for ways digital can improve convenience. Though many will continue to shop in-store for CPG most of the time, COVID has forced the PGS to sample what online grocery can offer, and as those offerings develop, they may be less hesitant to switch over to online shopping when they can.
The Exclusive Online Shopper
The online shopper, found within the 25-54 age cohort, has a deep preference for digital experiences.
Usually more digitally literate than the brick-and-mortar shopper, the online shopper utilizes online spaces to research, engage, and shop for their household goods.
In Canada, we have seen an explosion in sales year-to-date, with Fast Moving Consumer Goods (FMCG) dollars seeing a growth of 12.6% (2.7 times higher than the total FMCG growth in 2019). For products most often shopped online, grocery only held 3% pre-COVID but has skyrocketed to 25% in 2020. This means that consumers are deciding with increased frequency to shop for their groceries online most of the time instead of in-person shopping.
The online shopper is looking for flexibility, and according to our research, 30% of online grocery shoppers are willing to pay extra for the convenience that it brings them. The demographics that will continue to shop online for their groceries in the future are those who use it for its time-saving ability.
According to the Toronto-based Solutions Research Group (SRG), “57% of households with kids have purchased groceries online during the pandemic, compared with 35% of empty nesters.” This shows that the convenience aids those households that have, traditionally, a more chaotic lifestyle that online shopping will offer them over time.
And with a rise in innovation from CPG retailers, the online grocery battle is far from decided in Canada.
While more than a quarter (26%) of online grocery shoppers purchased from grocery banners controlled by Loblaw Companies Limited (including Real Canadian Superstore, Loblaws/Instacart, and Maxi), both Walmart (17%) and Amazon (11%) are also in the mix, followed by Empire/Sobeys (10%) and Metro (5%).
The industry also has players such as Uber Eats, Doordash, and Skip the Dishes to contend with, which have a combined share of 7%. Albeit, they do not compete in a number of categories across the spectrum of those listed above.
These companies are all seeing growth in online grocery and continue to develop their offerings to make the transition as easy as possible. While some choose a fee for online grocery (Loblaws), others have adopted a subscription service to retain customers (Walmart and Uber Eats). As the battle for online grocery continues, we anticipate seeing more subscription-based programs and certain incentives that come with them to retain the customers made during COVID-19.
Online shopping will continue to grow across all markets, including CPG, and look to target a younger, more digital intuitive generation. Of the consumers who switched during the pandemic to online, 68% were Millennials (aged 25-40). As Generation Z reaches maturity in the coming years to become PGS's, we anticipate those online CPG shopping trends will increase. The digital innovation from brands paired with demographics comfortable in an online space will further the exclusively online shopper's growth.
The Brick-and-Mortar Shopper
The brick-and-mortar shopper, typically found within the 40-59 age cohort, is less likely to continue with digital learning in the next five years and will visit the store in-person for most of their needs.
Though most consumers shop brick-and-mortar, this audience is less likely to ever make the switch over to partial online shopping and will choose to exclusively run out to the store for their household goods.
Since the COVID-19 pandemic began, the PGS is choosing grocery stores and department stores more often for food due to the ability to use click & collect services or purchase all required items at one store, limiting the number of outings. 76% of PGS’s are choosing the grocery store for their food needs most of the time, and 9% choosing a department store.
This is expected to differ as 2021 continues to open more small businesses safely, but the habits built-in during the pandemic of buying in large quantities over fewer visits will remain for a time. According to MacLean's, "For the first time in 20 years, the average Canadian is visiting the grocery store no more than once a week. Before COVID-19, the average was nearly twice a week."
Not only are brick-and-mortar shopping visiting less, but their shopping choices have shifted to reflect their financial situations, visiting those stores that focus on value and budgeting. Since COVID-19, the Female PGS is buying food more often at Walmart and No Frills, particularly in the 25-39 age groups. Male PGS indexes high for food shopping at Costco, particularly 25-49-year-olds, and Walmart for 25-39-year-olds.
We expect that the need to shop at budget-friendly grocers and department stores will continue for some time as all PGS demographics are affected by the recession. Stores that offer budget options or frequent discounts will entice more of those who shop in-stores and will continue to draw in those who do not want to shop online to save on delivery or subscription prices for online offerings. Bargain shopping will only grow through 2021 as households look to stretch finances over and through the crisis period.
As consumers decide whether to shop online or to opt for the brick-and-mortar, safety plays a huge role in whether shoppers will create new habits.
Canadian Grocer has reported that 1-in-5 Canadians would stop visiting grocery stores if health and safety practices were not up to their expectations. And while these attitudes may diminish as the crisis does, shoppers will continue to hold stores they frequent to a higher level of accountability than pre-pandemic.
Brick-and-mortar shoppers will expect to see safety measures continue and investment made into the experience of their stores.
The Emerging Omnichannel Shopper
The omnichannel shopper is 25-59 and chooses to shop in both an online format and run into the store for their household goods whenever each is most convenient.
Certainly, the pandemic has aided the growth here, but a trend that was already well in motion before March of 2020. Like many industries, COVID19 accelerated those trends that were already set in motion.
Though across the preference remains for the brick-and-mortar, more than ever customers are relying on digital formats. Even in those moments which the consumer may pick the physical store, consumers are still doing pre-trip research within the online environments.
Though marketing to each of the customer segments may differ slightly, the data shows that the majority of the population will move toward a dual approach for CPG shopping. The PGS may use digital means for coupons, occasional delivery, and planning ahead for a large grocery list and still choose to shop in-store to pick up a meal for dinner or in the pursuit to try a new recipe or item. Right now, 66% of shoppers are choosing an omnichannel approach, and in the next five years, as companies are able to catch up to the rise in e-commerce over 2020 with their digital innovations, the numbers will travel from the brick-and-mortar percentage into omnichannel.
The emergence of the omnichannel shopper means those that have not already invested in a robust e-commerce platform, an intuitive app, and/or building a presence online will fall behind.
Those companies that were already primed to deal with an online shift are the ones coming out on top—case in point, Walmart. A major player in the space, showcasing YOY growth of 97% in Q2/2020.
On the other end of the spectrum, those retailers who were slow to market are scrambling to establish online experiences to compete with their competitors.
From a marketer's perspective, a massive opportunity is now on the table. Those who have in the past struggled to compete against the likes of Procter & Gamble may now have a fighting chance.
That opportunity can be punctuated with the segments we have highlighted, as, in a sense, they are not traditional within this space. They offer a look to the future, a fragmented future that savvy marketers can capitalize on. A focus on areas that others may not or on emerging consumer segments may provide a path to brand growth for years to come.
Each consumer segment's needs vary, and the strategic approaches for each should meet the consumers where they are most comfortable. The marketing strategies planned in previous years will, over time, fail to provide the impact they do today as consumers fragment.
Those who are shopping online with more frequency are those who use it for time-saving and convenience. The marketing should reflect a busy life, a multi-generational household, or a multi-tasker. CPG advertisers should be picking marketing methods that will reach these demographics in a digital space and express how choosing their online offerings will bring them convenience and efficiency.
Use marketing methods that appeal to those who have less time. Social media is a quick way that the online shopping demographic checks in on friends, and increasingly on brands, to look for new things. Having information or offers available on digital platforms makes getting in front of online shoppers a seamless process. You will need to be meeting the online shopper in an online space at every turn of the customer journey and placing importance on the ease of completing those purchases in that space.
Those who choose to shop brick-and-mortar most of the time may have more time on their hands (the elderly, retired, or adults without young children) and should be marketed as an experience.
Marketing to in-store shoppers should showcase the shopping experience, showing off the aisles, the cleanliness, and the interactions with staff. Those who chose to shop in store during the pandemic may have only experienced leaving the house for this one task that week, therefore marketing to brick-and-mortar shoppers should show off the safe and helpful interactions in everyday shopping and reach this demographic through means that also give way to experience such as TV or newspaper.
The omnichannel shopping journey could be in both a digital space or a physical one. The strategies for omnichannel shoppers should go both from digital to brick-and-mortar on the customer journey and vice versa. You should be accounting for first touchpoints happening in both locations and purchasing decisions being the same. Creating a plan that works hinges on being able to track where your audience is along their buyers journey and meeting them where they will be, whether that be online or in-store.