Digital grocery sales dip slightly, as consumers start to trade down to private label


The impact of inflation on consumer behavior is not only seen in physical stores but also in digital grocery shopping. A recent Grocery Doppio Webinar panel discussed how this shift towards private label brands is creating a challenge for grocers to adjust their delivery and pick-up services accordingly. Doug Baker, VP of Industry Relations for FMI, noted that this trend is not new, as consumers have historically turned to private label products during economic downturns.

According to data from Incisiv shared during the webinar, US digital grocery sales for the first quarter of 2023 dipped 0.9% compared to the same period in the previous year, despite the fact that many consumers are still relying on digital tools for in-store pick-up and delivery. The report also highlighted that 63% of consumers are actively searching for deals, indicating a focus on affordability. Gaurav Pant, Chief Insight Officer at Incisiv, added that loyalty is becoming harder to maintain and easier to lose.

The Grocery Doppio research revealed that 73% of digital shoppers have purchased a private label grocery brand since the beginning of the year, and only 17% are willing to pay a higher price for their preferred national brand. Pant observed that the weakness in national brands is an unusual occurrence and that grocers have a significant opportunity to capitalize on this trend. He suggested that private label brands need to innovate and listen to customer needs in order to succeed. Baker agreed, stating that private label brands must treat themselves as private brands and invest in meeting consumer demands.

Larger grocery chains appear to be ahead in the digital grocery race, with basket sizes and in-store pick-ups significantly higher than smaller grocers. Incisiv research revealed that grocers with over $10bn in sales had an average digital basket size of $149.13 for the first quarter of 2023, while grocers with under $1bn in sales had an average size of $34.89. Moreover, larger grocery stores are more likely to use pick-up over delivery (54.7% to 45.3%), while the reverse is true for smaller grocers (62.2% in delivery vs 37.8% in pickups). Smaller grocers face the challenge of catching up with their larger counterparts and need to focus on digital transformation to remain competitive.

Barry Clogan, Chief Product Officer at Wynshop, suggested that smaller grocers need to consider whether to lean on delivery or pick-up and how that will affect their bottom line. Delivery can be costly, and Baker recommended that grocers find creative ways to mix digital ordering and in-store pick-up. He cited the example of a pizza chain that incentivized customers to pick up their orders with a discount, noting that such a strategy could help offset the costs of delivery.

In conclusion, grocers need to be proactive in responding to changes in consumer behavior, such as the shift towards private label brands, and adapt their delivery and pick-up services accordingly. By investing in innovation and listening to customer needs, private label brands can become more competitive in the market. Smaller grocers need to focus on digital transformation to remain competitive and find creative solutions to offset the costs of delivery.

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