Shopper Behavior: The New Reality in Grocery – Grocery Podcast S4 E2

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Shopper Behavior: The New Reality in Grocery – Grocery Podcast S4 E2

Shopper Behavior has been fundamentally changed by the pandemic. Big moves by Amazon, Walmart and H-E-B are examples of how some retailers are responding to market demand. But are these moves right for every grocer’s business? Our survey with research firm Incisiv revealed the key factors that determine retailer banner loyalty for 60K grocery shoppers across the US.

Sylvain and Mark kick it off with a discussion about Amazon’s new brick and mortar stores, equipped with contact-free and seamless checkout technology. Countering Amazon, Walmart announces their launch of Walmart+ and we consider why data might be driving their interest in social media platform, TikTok:

“It’s been reported that a strong percentage of the TikTok users actually have an Amazon Prime account…it would give Walmart a big plus in what they could do with the data and being able to market to a consumer base that I don’t think normally shops at Walmart.”

H-E-B’s new partnership with Swisslog marks their first investment into Micro Fulfillment Centers (MFCs), powered by AutoStore. As retailers consider MFCs for their businesses, Sylvain suggests looking at these criteria:

  1. Online order volume, consistency and disbursement across geographies
  2. Opportunity to amalgamate into an MFC location
  3. Last-mile costs, such as moving products to delivery pickup locations

As of 2020, eGrocery’s New Reality is: accelerated growth, well beyond pre-pandemic estimates. Projections from our survey data estimate online grocery will account for 21.5% of total grocery sales by 2025. It’s clear that shopper behavior has fundamentally shifted.

“What we realize is that from collecting data from 60,000 shoppers, a very small subset of people will go back to shopping in store.”

When it comes down to what key factors determine lasting shopper loyalty to their local brick and mortar store, it’s all about convenience: proximity, value & product selection.

Sylvain notes just how much convenience impacts shopper loyalty. “When I talk to consumers who don’t know what I do for a living, don’t know that I work for Mercatus, they’re new to e-commerce, the reality is after their fourth experience, it’s extremely sticky. And the main driver is guess what? Convenience.”

Learn what grocery shoppers today value in their online shopping experience. Listen to the full podcast for more insights and download the report.

 

Enjoyed this podcast? You might also like:

Rick Watson on why Walmart joined the Instacart Marketplace

Autostore’s Andrew Benzinger on Grocery Micro Fulfillment

 

Sylvain Perrier:

Ladies and gentlemen, welcome to Digital Grocer Mercatus’ Podcast. I’m your host, Sylvain Perrier, President and CEO of Mercatus Technologies. And as always, joining me from the safety of his bat cave is Mercatus’ Vice President of Marketing, Mark Fairhurst.

Mark Fairhurst:

It’s very good to be back.

Sylvain Perrier:

It’s great, and I can’t believe this is Episode Two of Season Four. It’s exciting.

Mark Fairhurst:

Is it. It is. We’re still working out the kinks.

Sylvain Perrier:

Yeah, we are.

Mark Fairhurst:

We’re getting there.

Sylvain Perrier:

Yeah, and it’s funny enough, we are recording. which we’ve never done before, we’re actually a recording on a Sunday.

Mark Fairhurst:

Yeah. Like you said, it’s the opportunity to do this in a little more relaxed environment.

Sylvain Perrier:

Yeah. You’re not having to rush off of a call, rush off of a meeting, and then worry about getting everything done, post show editing and then you’re rushing off to another meeting. It makes it that much more difficult that much more riskier for a mistake.

Mark Fairhurst:

Yeah, absolutely.

Sylvain Perrier:

Quite frankly, right?

Mark Fairhurst:

Of course. We never make mistakes though.

Sylvain Perrier:

Well, tell me about it. So there’s a lot happening in the industry today. So since our last episode, Episode one of Season Four, Amazon opened up their grocery store.

Mark Fairhurst:

Yeah, big news. A lot of media coverage and the trade.

Sylvain Perrier:

Yeah. And we ended up getting a story on Winsight Grocery.

Mark Fairhurst:

Yeah.

Sylvain Perrier:

Which was we talked about what can Amazon do that some of the other traditional retailers can’t do? And I mentioned and said, “The reality is Amazon will be able to integrate technology into the experience”, which it’s easier for them to do because they’re not dealing with years of legacy. And I’ve always said, grocery retailers will be strong depending on where the executive group and their CEO grew up. So if they grew up towards operational ranks, they’ll be really good at that. If they grew up through the marketing ranks, again, they’ll be really good at that their brand and so on. But the reality, that doesn’t exist in Amazon. So there’s things they’re doing at the store in Woodland Hills, they’ve integrated the Amazon Echo devices to help you find products in the store.

Mark Fairhurst:

Yes.

Sylvain Perrier:

And you and I both know, planigram compliance at a grocery retailer will vary from, I’ve seen as low as 30% and I’ve seen some cases, some retailers are really, really good at it. They’ll get north of 85%.

Mark Fairhurst:

Yeah. I mean, they’ve had the benefit of being able to do this from the ground up.

Sylvain Perrier:

Right.

Mark Fairhurst:

And applying, in some circles it’s a dirty term, Silicon Valley Mindset.

Sylvain Perrier:

Mm-hmm (affirmative).

Mark Fairhurst:

But they are coming at it from a technology perspective.

Sylvain Perrier:

Yes.

Mark Fairhurst:

100%.

Sylvain Perrier:

Yeah, absolutely. I mean, we also saw the cart that they actually deployed.

Mark Fairhurst:

Yep.

Sylvain Perrier:

And that’s to facilitate checkout, and the reality, if you look at the way that cart was designed, they’ve taken that whole camera system that would have been part of the ceiling and they’ve shrunk it down into the cart so when you’re actually putting an item into the car, it’s scanning it as you go. At Mercatus, we have experience designing that type of technology. Our first incarnation was Springboard Retail Networks where we designed that type of technology. It was tested at Loblaws. It was tested at Bloom. So we’ve seen the difficulty of building something like that and trying to bring it to realization. And the reality is, it’s a tough business model. But I appreciate the way Amazon’s doing. I think it has, to a certain extent, some merit.

Mark Fairhurst:

Yeah. And again, it’s 100% focused on removing the friction from the checkout process. I mean, you go into a grocery store, what is the one thing that still remains a bottleneck in getting in and out of the store? It’s the checkout.

Sylvain Perrier:

Well, I dread it. I dread it for two reasons. I avoid grocery retailers where I have to self bag my groceries. I avoid that. I avoid it because I’m not good at it, I’m not speedy. I feel guilty that I’m holding up the line for the people behind me. And trust me, I’ve had my share of shoppers look at me really strange.

Mark Fairhurst:

The dirty looks.

Sylvain Perrier:

The dirty looks in grocery retail, in the aisles from fellow shoppers.

Mark Fairhurst:

I’m sorry I didn’t work my way through high school bagging grocery bags.

Sylvain Perrier:

Right. Right. I didn’t, I didn’t. I didn’t so I’m sorry I’m not an expert at it. I’m sorry I’m hogging all the room by the bread aisle. It’s not my fault. Sorry.

Mark Fairhurst:

And God forbid you crush something when you get home.

Sylvain Perrier:

Right. Well, God forbid, I buy the wrong bread.

Mark Fairhurst:

That’s true.

Sylvain Perrier:

God, I feel bad for the bread makers of America now hearing our story. So I avoid that first and foremost too. It’s just the lineups and I try not to use self checkout. Not that I don’t like it, but if I find if you have more than five to 10 items it’s not as convenient. I don’t know all the PLUs and so on.

Mark Fairhurst:

Yeah. And I think they’re doing a good job now of trying to keep the terminals clean. I mean, the store that I go to they’ve actually hired a person and that’s all they do, is every time someone uses the checkout, they go and wipe it down. It gives you pause for concern.

Sylvain Perrier:

Yeah. It went dark here. I think one of my lights went out. But I’m just going to stay like this now. We’re on a roll.

Mark Fairhurst:

Let’s do it. You’re mysterious.

Sylvain Perrier:

Mysterious.

Mark Fairhurst:

Mysterious Mr. Perrier.

Sylvain Perrier:

Yes, you get to see me in my natural state of darkness.

Mark Fairhurst:

See, this is one of the things that we have to cope with.

Sylvain Perrier:

That’s right. That’s right.

Mark Fairhurst:

We’re going on. Keep calm, carry on.

Sylvain Perrier:

Yes. Did you know the Sobey’s has re-introduced brown paper bags?

Mark Fairhurst:

No, I didn’t. So Sobey’s is one of the large Canadian grocery retail chains.

Sylvain Perrier:

Yeah, owned by the Empire Group out of Stellarton, Nova Scotia, and that was the retailer that actually bought Safeway out in Western Canada. And I appreciate the fact that, is it environmentally safe and friendly? There’s a lot of debates on that, but I think the reality is our neighborhood is funny. They’re re-using those bags to cover school books. Like we used to do as kids, the parents.

Mark Fairhurst:

That was [inaudible 00:07:00]. You used to color them.

Sylvain Perrier:

And I’m seeing kids doing arts and crafts with them, so I think I applaud them for that and just somewhat eliminating plastic and so on. And I think that’s great.

Mark Fairhurst:

But it’s just another example of how this pandemic has just turned the cart upside down when it comes to what we were doing and what we’re doing now.

Sylvain Perrier:

Yeah. And so the other news is TikTok. I mean, I think it’s been a contentious relationship with the White House in terms of the rhetoric around data privacy, that the app is insecure. And this really just picked up steam when, I think if you remember this, Mark, when Amazon issued a notice to its employees to say, “Hey, by the way, we think this app is an issue. There’s some security risks. We’d prefer if you are running a company phone or a phone that has access to sensitive Amazon data that you don’t have the application installed.”

Mark Fairhurst:

Right. Right.

Sylvain Perrier:

So you’ve seen a lot of companies forward in trying to acquire the U.S. side of TikTok. So we’ve seen Microsoft.

Mark Fairhurst:

Yep.

Sylvain Perrier:

We’ve seen Oracle come to the table in terms of Oracle managing infrastructure and so on. But I think the one name that stood out the most, and I wanted to get your thoughts on this, is Walmart actually trying to cut a deal.

Mark Fairhurst:

Yeah, at first glance you think, what the heck does Walmart want to do with a social media platform, especially a platform whose demographic skews so young? But when you start to think about it, it makes sense. From Walmart’s perspective, they’re driving hard, they’re driving hard to reach an audience that normally would not purchase from them, but maybe eventually one day will, or at least their parents will purchase from them.

Sylvain Perrier:

Right. Right. Yeah, it’s also interesting because this is all happening at the same time that Walmart announced Walmart Plus.

Mark Fairhurst:

Yep.

Sylvain Perrier:

And it’s $98, I believe. It’s less expensive than an Amazon Prime Membership and there’s some significant advantages within the Walmart Plus package. So we’re talking about discount on fuel, for example, which I think is something like five cents a gallon, and Walmart’s partnered with a series of fuel stations across the United States.

Mark Fairhurst:

Yep.

Sylvain Perrier:

And I did a quick calculation. So if you take an average car, spending $36 to $40 a week on gas and you calculate the five cent discount.

Mark Fairhurst:

Yep.

Sylvain Perrier:

It ends up being a saving of $42, and that’s half of the membership. Close to half, right?

Mark Fairhurst:

Yeah. I’ve heard other comments, what took Walmart-

PART 1 OF 4 ENDS [00:10:04]

Mark Fairhurst:

You know, I’ve heard other comment, what took Walmart so long? It’s not something completely out of the experience that other retailers have, regional retailers do. But when you scale it across the size of business that Walmart has, it is a value add for those shoppers.

Sylvain Perrier:

Yeah. I think that this idea of them controlling TikTok will give them access to data, and it’s been reported that a strong percentage of the TikTok users actually have an Amazon Prime account.

Mark Fairhurst:

Yep, yep.

Sylvain Perrier:

And so it would give Walmart a big plus in what they could do with the data, in being able to market to a consumer base that I don’t think normally shops at Walmart.

Mark Fairhurst:

Yeah. That’s a great point. This is something that I think Scott Galloway’s brought up on his show, he talks about algorithmic commerce and how that’s now the leading strategic driver for a lot of these investment decisions. I mean, the reality is we’ve been doing algorithmic commerce for years, just on our platform. What are your thoughts on how he’s framed that?

Sylvain Perrier:

Yeah, it’s interesting that Scott comes up with the context of a-commerce at the same time as the movie the Social Dilemma was released on Netflix. And that there’s a really impactful line that’s shared in that movie, which is, now, large corporations, and the Facebooks, the Googles of the world, and I think pretty much any social platform, we’re trading now on human futures.

Mark Fairhurst:

Predicting behavior.

Sylvain Perrier:

Well, predicting it and then changing it, right?

Mark Fairhurst:

Influencing.

Sylvain Perrier:

So, really influencing it. And I think the context, like even at Mercatus when we decided to launch personalization, the rationale behind it was, it was a very simple rationale, quite frankly. When you look at transactional data for any given household, you could easily do a series of things. One is reverse compile the makeup of that household. A basic example of that is if they are buying adult diapers, if they are buying certain elements that are more conducive to a senior citizen, then you can reasonably deduce that it’s an older household. You can also look at the amount of money they’re spending, it could be a fixed income household, as well as the number of individuals in the house, right? So I don’t think most… If, for example, if they’re buying Old Spice deodorant and other things, there’s a man in the house. And if they’re buying feminine hygiene products, then you can deduce there’s a woman in the household.

Sylvain Perrier:

So this becomes really interesting. But what you can also tell is, if you know the makeup of the household, what is it that they’re not buying with you as a retailer? Where are they going? That’s that famous [delta] that we always talk about. Are they going to an adjacent retailer in another vertical? For example, an [RX play 00:00:13:27], in Canada it would be Shoppers Drug Mart, in the United States it would be CVS. Are they going there to buy their health and beauty products? Why are they not buying them with us? And the concept’s always been, can we, at the very least, use a piece of content on the mobile app or the website to influence their behavior? And we’ve seen that be very successful with a lot of retailers. But this notion on trading on futures is one step ahead of, I think, what our concepts were at the time, and what I’m… Right?

Mark Fairhurst:

Yeah, yeah. Yeah, I agree. I mean, when we approach it, we do it from the perspective of speed and convenience for the shopper, and offer that capability to the retailer. So you’re building your basket, last thing you want to do… You have a 70-item basket, likelihood of you re remembering everything that you need is pretty low. So if you have this prompt saying, “Hey, last time you bought cantaloupe, do you want another cantaloupe?” that’s the convenience factor. But when you start getting into influencing other behavior, that’s where I think consumers will start to have some concern. We’re not there yet, at least as far as e-commerce platforms go, but it’s coming. And I think Walmart’s decision gives you an indication as to what their thoughts are.

Sylvain Perrier:

Yeah, I would agree. I think when you hear the words trading on human futures, it’s also the rapid commoditization of humanity. And what that means is you’re leaving a series of very powerful companies manage that, and to the benefit of whom? For sure, to their benefit. I mean, their stocks reflect that. But also, is it also to the benefits of the advertising agencies who represent large CPGs? And I don’t think even, talking to a lot of CPGs lately, because we launched our ad network, that even they’re reaping the rewards. I think there’s this really abstracted middle here of this data, these models that are being built, and they’re to the benefit of whom, in the long run? And I think that’s what we need to be mindful of.

Sylvain Perrier:

Now, luckily, in the world, like you said, in the world of e-commerce and specifically in grocery, we’re just not there at all. And I think you’re right, Walmart is going to be the first step into this. It’ll be interesting. I’ve always wondered, there’s a couple of things… Luckily, in California there’s good legislation in CCPA. I think this at some point will become a federal law, and it will start to change the landscape. But unfortunately, right now there are more important things to deal with in the US.

Sylvain Perrier:

The latest piece of news, H-E-B has formerly announced their partnership with the folks over at Swisslog, which is great. It’s going to be, for H-E-B, their first venture into implementing MFC technology. Swisslog is a company that actually reps and installs AutoStores technology. And what was it, Mark, we interviewed the VP of sales for AutoStore?

Mark Fairhurst:

Actually, it was earlier in 2020, this year. It was shortly after we came back from San Diego.

Sylvain Perrier:

Yeah. And it’s really interesting, because most people might not know this, and I encourage you to go back to listen to that episode. The reality is the way AutoStore kind of came about, it was an integrated circuit manufacturer. It’s a company.

Mark Fairhurst:

Out of Norway.

Sylvain Perrier:

Out of Norway, that basically said, “There’s got to be a better way for us to manage our own warehouse in terms of picking and packing and so on.” And they invented their own technology to do this. And they did it really well, and it was extremely efficient, so much so that a friendly company, just down the road, a stone’s throw away, as I’ve been told, the CEO came over and said, “You know, I really like that technology, and I’m wondering if you’d be willing to implement it into our location.”

Sylvain Perrier:

Now, I think that’s great. You know, I’ve been getting a lot of phone calls from some retailers, some of them that are not Mercatus customers, saying, “Hey, I think we’re considering doing an implementation of an MFC solution.” And then when we start talking about costs of implementing, what’s the breakeven point… But I think more so as the educational piece here for retailers, and for those that are listening that work in retail, I think you have to take the approach that, what is the volume? Is it consistent? Is it geographically dispersed? And if it is, is there an opportunity to amalgamate into an MFC location? But also, be mindful. What are going to be, not just your last mile costs, because if you’re doing delivery, what are going to be the costs of getting those orders into the hands of the stores that may be acting as fulfillment points? So think of the whole hub and spoke model in this context. So I think you’ve got to go in with eyes wide open.

Mark Fairhurst:

Yeah, absolutely. And to your point, understanding where your shoppers are purchasing now, the volume, the consistency of that volume. The pandemic has skewed much of everything. In our own, we’ll talk about it shortly, our own research is showing that there are changed behaviors and those behaviors will continue going forward. So I definitely think it’s something that a lot of retailers will be looking at very, very closely.

Sylvain Perrier:

Absolutely. I think it’s going to be really critical at this point for how retailers are going to approach the market with the surge that they’ve seen from the pandemic. And I don’t know if most people know this, we’re now starting, in Canada, to deal with a shortage of toilet paper, paper towel, and cleaning products.

Mark Fairhurst:

I tried. I got the last package of Bounty on Friday.

Sylvain Perrier:

You did well. I went to two different locations, I got-

PART 2 OF 4 ENDS [00:20:04]

Sylvain Perrier:

No, I went to two different locations, I got two packs, and I’m divvying them up with my neighbors, I’ve become a paper towel pusher at this point.

Mark Fairhurst:

It’s different, it’s paper towel. It’s not toilet paper as much as paper towel.

Sylvain Perrier:

Right. Right. And it’s not glamorous to be one of those types of pushers, but I think this is a sign of the times. And again, if you’re a retailer, yes, it’s and great, you’re thinking about MFC. We wish the team over at HEB the best of luck, but I encourage you to think about, how are you going to fulfill for the consumers. We’ve seen this in our research. It’s not all about delivery, pick up in many locations has a higher demand.

Mark Fairhurst:

Yep. And it’s consistent. It’s consistent.

Sylvain Perrier:

Absolutely. Absolutely. [crosstalk] Now let’s go into the research, and I want to give some context to everyone about this. We, for the last, I believe, three years, three or four years, I think this is something we started in 2017, even before Mark joined Mercato’s. My background is in research and research technology, for a better part of my career. And I was always fascinated that, when we were talking to retailers, there was really no data available that would explain, what are consumers thinking about? What are their sentiment on price sensitivity for certain services? What do they prefer? Delivery, pickup and so on? Why do they shop at their preferred retailer? What would cause them to change?

Sylvain Perrier:

So, went out, secured permission from a lot of our customers at the time, and even non-customers, to say, “Let us draft a research piece, a survey, we’ll let you administer it, meaning you can email out to your customers, it’ll be branded to you, and we’ll collect the data. We’ll prepare a benchmark report, and we’ll share your individual report, data, results, with you.” And for us that became very valuable for our product teams, valuable for marketing, and even more so, valuable in having real strategic conversations with retailers.

Mark Fairhurst:

Yeah. And that’s probably the real reason that we continue to do this. It’s a lot of work, but it’s to have that dialogue with our retailers, who, look, they’re extremely busy, even busier now, more so than ever, to give them that guidance that they need to help run their businesses.

Sylvain Perrier:

Absolutely. Absolutely. Now, historically for the three, four times that we’ve done this, we never shared this data outside of our four walls, and the results. And there were valid reasons. I think at the time we were debating, “When is the right time for Mercato’s to step into the realm of being an authority in this space?” Meaning, leveraging our research and our knowledge, and presenting that back out to the industry in the most unbiased way possible.

Sylvain Perrier:

So this year we decided to do that, and it’s been nothing but amazing. And the pickup of the numbers, it’s a prediction, right? It’s a model that we did different this year, actually the last two years. We actually went out and recruited a research firm out of Chicago, called, Incisive, a lot of smart data scientists and researchers. And they took our survey, changed it around a bit. Still maintaining ability to compare against the previous year. And we went out to market and we launched it. And like I said, the results and the pickup have been amazing.

Sylvain Perrier:

And I’m just going to switch here to the ability to see this first page here. Give me one second.

Mark Fairhurst:

So this is, just to pick up on that. So the survey itself, really with the benefit and the help of our retail partners. So we distributed it this summer, June to be exact, Incisive helped collect the responses. And to your point, the reason we wanted to have a third party, an accredited research firm help is, in previous years the data may have appeared to be self-serving. And we knew that this year, more so than ever, the appearance of being unbiased, and a better authoritative when it comes to the insights that we’re producing, was important. So we went to market, collected about 60,000 responses across 20 states in the US, and collected about, it’s amazing, 48 million data points.

Sylvain Perrier:

[crosstalk] It’s been amazing.

Mark Fairhurst:

Yeah. And as a result of that, we’ve come up with some pretty powerful insights that we can go through.

Sylvain Perrier:

So, Mark, let’s talk about who’s responding to this survey.

Mark Fairhurst:

You’re talking about in the media?

Sylvain Perrier:

Well, more so the demographic profile.

Mark Fairhurst:

Right, right. So we went across all of our clients, these are participating clients, shopper base, most of it, as you can see here, gender-wise, about 71% female, 24% male. It’s a very traditional perspective as to who’s doing majority of the household buying. Age-wise, the majority in the 45 to 64 category. Another 30, 31%, of over 65, and the millennial audience comprises the remaining 20%.

Sylvain Perrier:

Yeah. Which is a good split. So let’s get into the summary results.

Mark Fairhurst:

Sure.

Sylvain Perrier:

So let me just jump in here. I think, what we’ve noticed coming out of this, is that the reality of why people are, let’s say, loyal to their existing retailer, it’s fundamentally because of a few things. One is proximity, two is value, and ultimately it’s product selection.

Mark Fairhurst:

That’s right.

Sylvain Perrier:

And in the pandemic, we saw some significant changes to that. And probably the most significant one is, you saw roughly 60% of consumers just naturally transition out of their existing, or their preferred retailer, simply because of concerns. And, Mark, do you remember what some of those concerns were?

Mark Fairhurst:

Yeah. First and foremost, product availability. COVID, concerns about COVID, ranked second. And what was the third one? Do you have that?

Sylvain Perrier:

I think a lot of it was, so there was the concerns of COVID and then product availability, but also there was the operational challenges of time slots that were missing.

Mark Fairhurst:

Correct, yep. Time slots.

Sylvain Perrier:

So people were just, “Let me see if I can buy basics here.” And then eventually if they can’t find it, they would just go to the next retailer, and so on, and so on, and so on, and just shift.

Mark Fairhurst:

Yeah. And I think that insight, that they still preferred a brick and mortar experience over a pure play eCommerce provider, is one of the other interesting insights that were uncovered from the responses.

Sylvain Perrier:

Now, the one thing that we’ve noticed coming out of this research is that, and I think this is where this prediction that we made has caught the industry a little bit off guard here, is shopping online in this vertical has fundamentally changed.

Mark Fairhurst:

A hundred percent.

Sylvain Perrier:

Right? I think that the most earliest predictions were, at one point years ago, it was a hundred billion by 2025, that was revised by the Austin team at FMI to being north of 140 billion by 2025. And now, we chose, so first of all, we chose to do our survey, not at the height of the pandemic, this wasn’t in April, it was mostly post-May, Mark, I think. May, June.

Mark Fairhurst:

Yeah, June, mostly, three weeks in June.

Sylvain Perrier:

Three weeks in June. So we made that conscious decision. And so what we realize is that, from collecting data from 60,000 shoppers, is that the reality is a very small subset of people will go back to shopping in-store.

PART 3 OF 4 ENDS [00:30:04]

Sylvain Perrier:

… go back to shopping in store. And they are typically, and again, Mark, correct me if I’m wrong here, they are typically over the age of 60, 65 plus.

Mark Fairhurst:

Yeah. We saw a huge influx of seniors, and you experienced this yourself, purchasing online for the first time. And that demographic is reporting a very high sticky factor when it comes to continuing. I think overall, the numbers worked out to about maybe 7% of online shoppers would revert to in store, leaving approximately 36% of new online shoppers continuing to purchase online, which is huge, huge when it comes to the adoption factor of e-commerce in grocery generally.

Sylvain Perrier:

And this is where it gets extremely interesting in the model that we’ve adopted here. And the reality is going to be what we think, and I’m going to put this graphic up here so I can really bring it home for everyone, is we know that in 2019 grocery e-commerce in the total vertical, right, so the vertical would have been just north of a billion, represented roughly 3.4%.

Sylvain Perrier:

And we were heading toward in 2020, roughly 4.3% of again, still north of a trillion dollar market, but that has jumped up to 10.2%. And if you look at the CAGR, compounded annual growth rate, we’re estimating that in the vertical alone, by 2025, and the vertical itself will probably hit 1.1, maybe 1.2 trillion, that grocery will be, online, 21.5% of that. It’s a big number. It’s 250 billion. It’s 107, 110 billion more than the most recent prediction, I think, that was done end of 2019. It’s a pre-COVID number.

Mark Fairhurst:

Yeah. Yeah, FMI’s and Nielsen’s number was, I think, early February, 2020.

Sylvain Perrier:

Right. I will say a few things. We’re fortunate at Mercatus because not only do we have great retailers that allow us to survey their customers, we also provide back infrastructure for them to report on, right? So we’ve integrated Tableau and so on. And any of the transactional data that flows through us, they have access to report on it.

Sylvain Perrier:

We’ve seen some retailers in the nation go into a four to five X in revenue, and yes, in certain markets we’re seeing a decline, weekly decline, 5%, 7%, 8%. And I think that’s also been reported by David Bishop and his team at [inaudible 00:03:32]. We saw a decline. I think it was the month of June we hit 7.2 billion just for that month in sales. And in August we went down to 5.4 billion.

Mark Fairhurst:

What David is calling the new normal in grocery retail, there’s definitely been a shift from food back to outside of the home as a result. I think the key point here is that August number is still about 200 million more than the April number, which is really at the height of the pandemic.

Sylvain Perrier:

Okay, that’s a great point. I’m glad you shared that. But also, to add to that, we’re also seeing certain markets where the sales are not really declining.

Mark Fairhurst:

No.

Sylvain Perrier:

And we’ve talked about maybe the next interesting piece of research would be, could we overlay this data against a map that says, well, political figures in this geographical area have made these decisions, these are the number of cases we’re seeing for COVID, and so on.

Sylvain Perrier:

And would that help make better decisions for a retailer? No, not really. I mean, because then you’d wonder, well, what’s the next prediction, the next decision that’s going to be made that may be affecting this, and I don’t think we know.

Sylvain Perrier:

But what I think is true here, when I talk to consumers who don’t know what I do for a living, don’t know that I work for Mercatus, they’re new to e-commerce, the reality is after their fourth experience, it’s extremely sticky and the main driver is, guess what? Convenience.

Mark Fairhurst:

That’s right, that’s right.

Sylvain Perrier:

Right?

Mark Fairhurst:

And it’s the same thing that we’ve seen in our research. COVID has changed behavior. This is not something that any of the experts in the industry expect to have a full-scale retrenchment. We feel blessed to have provided and continue to provide an essential service. And it’s something from our perspective, we feel quite proud. And we’re working hard to make sure that our systems continue to support consumers that view it in those terms.

Sylvain Perrier:

This is exciting and I think Mark and I have been talking about this. I had the pleasure of having a chat with a CEO of a pet food supplier, one of the largest in the country, headquartered out of North Carolina. And I was kind of getting what’s his impression, vis-a-vis what he’s seeing. And they, get this, they saw a massive explosion on their side as well. And the demand for high-end pet food, which, taking care of the family pet. I’m hoping we can bring him on for guest.

Mark Fairhurst:

Yeah, that would be great.

Sylvain Perrier:

So who knows where these numbers are going to end up? I mean, this is the beauty about doing research or making a prediction based on what you have in front of you and what you’re seeing from consumer temperament. So I’m excited to see what that’s going to end up. Mark, as always, it’s always fine to record an episode with you, certainly on a Sunday. I feel like this is taking a form of an NPR show.

Mark Fairhurst:

It’s laid back Sunday afternoon.

Sylvain Perrier:

It’s laid back. Is Diane Riem still alive from NPR? God, she was so old when I used to listen.

Mark Fairhurst:

I don’t think so.

Sylvain Perrier:

We should get Diane Riem on a show if she’s still alive. She’s great. I love Diane Riem. So, hey Mark, can you share with our guests how they can get a hold of us?

Mark Fairhurst:

Sure. I think the best place to go is digitalgrocer.com. You can reach us at our website. You can reach us on YouTube. And when you’re there, please hit the like and subscribe. That’ll give us some good feedback and we can continue giving you more content that you love to hear. Provide your comments.

Sylvain Perrier:

Yeah, absolutely. And if you have any questions, just don’t hesitate to reach out to us through our social channels, even you can go on LinkedIn. We’re equally there as well. Be more than happy to kind of tackle a subject on a future show. Ladies and gentlemen, thank you so much for listening. Peace.

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