Online grocery shopping is revolutionizing supermarkets

The retailer wants delivery drivers to bring groceries right into your fridge–even when you’re not home.

Time

(Photo: Mike De Sisti / Milwaukee Journal Sentinel)

Because of people like Sarah Fracek, the supermarket industry is undergoing its own digital revolution.

It’s all because Fracek has become one of a growing number of consumers who conduct almost all of their grocery shopping online.

“I hate going into a grocery store,” said Fracek, 34, a Wauwatosa, Wis., resident who doesn’t mind spending a few extra dollars to have someone else assemble her grocery order and either deliver it or have it ready for her to pick up.

“I’m working super late, and I really value the time that I have that’s ‘me’ time,” she said.

A tech-savvy, time-starved population, led by folks like Fracek in the 18 to 35 age group, has catapulted digital grocery shopping into the fastest-growing segment in U.S. retail.

Costco rolls out two grocery delivery services to fight growing competition from Amazon and Wal-Mart. Fred Katayama reports. Video provided by Reuters Newslook

“This is no longer something to just keep an eye on,” says the Food Marketing Institute, a retail food trade group based in Arlington, Va. “It’s happening, and it’s habituating very large numbers of people very quickly to online-only providers and to the online channel for groceries.”

The organization has been surveying trends in the industry for 40 years. Its latest survey, released this month, describes growth the likes of which it doesn’t ever expect to see again: In 2017, 43% of millennials surveyed said they shop online for groceries at least occasionally — a 50% jump from 2016, with much of the growth coming among those who say they shop for groceries online “either fairly often or all the time.”

The phenomenon has attracted the likes of Costco, Walmart and Target. And it is not necessarily bad for conventional grocery stores, which are moving quickly and aggressively into the digital marketplace.

Milwaukee-based Sendik’s Food Markets introduced online grocery service in the fall of 2015.

“Research will tell you it is the fastest-growing form of all retail by leaps and bounds, far surpassing electronics and all other components of the online space,” said Mark Birmingham, vice president of administration and development for the company.

“The rate of adoption over the last 12 to 18 months — I think it’s growing faster than anybody expected,” Birmingham said. “It is the fastest-growing part of our business."

Grand Rapids, Mich.-based Meijer, which expanded into the Milwaukee area in 2015, says its online food business has grown rapidly.

The company said Wednesday it is on pace to see more than a million deliveries made from its stores by year-end.

Online customers typically pay a fee for the gathering and/or delivery of their groceries. The prices and structures of the services vary among retailers. An example: At Woodman’s, the fee for gathering and delivering an order is $9.95. If you decide you want to pick up your order and it’s under $100, the fee is $4.95. If you want to pick up your online order and it’s over $100, there is no fee, according to the company’s website.

“People want to do it, and they are willing to pay a little bit more for the service,” said Clint Woodman, president of Janesville-based Woodman’s. “We’re seeing good growth. We are looking at expanding our delivery area.”

The Milwaukee-based Roundy’s division of Kroger, the big Cincinnati-based supermarket chain, is continuing to roll out its ClickList e-commerce program at stores in Wisconsin, said spokesman James Hyland.

“Today’s customers want an in-store option and a digital option for their grocery shopping needs,” Hyland said.

Online service also can help smaller grocery operators grow.

“We look at it as a way of expanding our trade area without having to build more stores,” said Darlene Murphy, director of marketing for Metcalfe’s Market, which has has stores in Wisconsin.

Food producers also are watching the situation closely.

Hamdi Ulukaya, CEO and founder of Chobani yogurt, sees it as a kind of throwback, especially for products like his company’s.

“I see the milkman coming back, I really do, for fresh food,” Ulukaya said. “You wake up and go to the door and there’s your milk and cheese. It’s coming back to what it was in the early days.”

Digital grocery shopping essentially has been a phenomenon waiting to happen, with the industry finally catching up to the demands of younger consumers, said Jim Hertel, senior vice president of Willard Bishop, a Chicago-area food retail and production consultancy that is part of Inmar Analytics.

“Millennials are just online all the time,” Hertel said. “Now that they are forming households, it’s less about their adopting online and it’s more that they are shopping for food and doing it the way they would normally do anything, which is online.”

Fracek started using the online grocery service Peapod six years ago and places an order nearly every Sunday.

“If someone can pick out the things that I want, it’s a waste of time for me to go,” she said. “I would rather be doing something I enjoy.

“I still run into the store, but usually it’s when I haven’t planned ahead. I’ll run in to get stuff for one meal — odds and ends.”

Buying groceries online has proven to be a blessing “for someone working crazy hours and doesn’t want to go to the grocery store when you’re getting done with work at 8 p.m.,” Fracek said.

Quality still matters

For grocers, online or in person, the quality has to be the same, FMI’s survey says.

“Shoppers most often cite high-quality fruits and vegetables and high-quality meat among the attributes considered important when selecting a primary store,” the survey says. “Low prices come in right after that.”

Consumers also want to know where their food comes from and how it was produced.

“Millennial shoppers especially want to support companies that share their values and prioritize a broader good,” according to the FMI survey.

While younger adults are driving the change, the online food business transcends generations, said Birmingham, the Sendik’s executive. Seniors and those who can’t navigate store aisles so well anymore are adopting online grocery shopping.

Added Hertel, the grocery consultant: “The smart supermarket operators are recognizing that as consumers change, they are going to engage with food not any less but very differently in terms of how they order it, what they are looking to consume and how far along on the preparation continuum they are willing to go.

“I do think it’s going to be really hard to recognize the traditional supermarket five years from now,” he said.

James B. Nelson of the Journal Sentinel staff contributed to this report.

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