Faculty member explores why online grocery shopping lags in U.S.

Online purchases continue to increase in a variety of sectors of the economy, but one product category lags far behind. While Americans buy close to 30 percent of electronics and computers online, they purchase about 3 percent of groceries online, according to a Deutsche Bank Securities report.

Dr. Mohan Menon, department head of marketing and management in the Mike Cottrell College of Business at the University of North Georgia (UNG), found multiple factors that most contribute to this trend. But consumer behavior and influences on it seem to be a major driver along with technological challenges.

Menon's self-funded research involved an examination of the available numerical data about grocery shopping trends and interviews with about 20 grocery shoppers.

Menon will present these findings at the Society for Marketing Advances Conference, the second-largest academic marketing conference, set for Nov. 6-9 in New Orleans.

Menon said the first factor comes from consumers' desire for the sensory experience of the physical grocery store. Many like the smell of fresh fruits, vegetables and the bakery sections. Secondly, "when you're wandering around in the store, you discover food. New kinds of fruits, vegetables and other items," Menon said. "Many people still want the discovery aspect." Of course, stores want customers inside for the same reasons.

Though online grocery shopping lags, the market should reach $22 billion this year and is expected to grow to almost $30 billion in 2021, according to the Offers.com 2019 Grocery Survey.

While technology changes can provide opportunities and challenges for customers, implementation of the technology for online grocery ordering and/or delivery can pose a major financial obstacle for struggling grocery stores, Menon said. One of the compromise options allows orders to be made online with pickup in the store — sometimes known as click-and-pick or click-and-collect, but this usually carries an order fee of $5 or more. According to Morning Consult data, 67 percent of people believe grocery delivery should cost $5 or less, which Menon said is not financially viable for stores.

Options that offer both online ordering and delivery can cost as much as $14.99 per month, a price point that makes it tougher to gain customers, Menon said.

"As consumers, we want it convenient," Menon said. "And at the same time we want to pay very little for it."

Therein lies part of the dilemma. Menon said consumers do not consider the cost for gas and time to travel to the store and back home in traditional grocery shopping. But grocers must consider every mile they travel and the time it takes when they consider costs of grocery delivery.

This push and pull in search of convenience and low prices has led some companies to try innovative approaches. Menon said some grocery retailers have experimented with stores that have no employees, which allow customers through an app to scan everything they want to buy, walk out of the store and be charged for what they took.

Online grocery shopping has ticked as high as 20 percent in South Korea and 7.5 percent in the United Kingdom and Japan, according to figures from Kantar Consulting, but Menon said these are smaller countries with big cities that allow large numbers of grocery deliveries in a small distance. Such a model is not transferable to most places in the United States due to so much of the country being rural.

When it comes to consumer behavior, Menon said the growing list of options leads many people to become "multichannel" and "multistore" shoppers who order some groceries online and shop for others in various brick-and-mortar grocery stores. Shoppers seem to have their store preferences depending on the items.

Menon said grocery stores must evaluate the value they provide in this marketplace and adjust their service options for future growth. One possible avenue, he said, is for stores to adjust to changing shopping patterns by using excess space for an in-store restaurant that attracts more people into their stores.

"Grocery chains and supermarkets need to get in front of the trends through innovation in the space or be crushed by the competition," Menon said.