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07/09/2020

5Qs for Paul Hartley on the future of online grocery sales

Al Urbanski
Real Estate Editor & Manager
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Paul Hartley
Paul Hartley

Of all the changes COVID-19 has visited upon the retail industry, the catalysis of omnichannel operations might end up having the most profound and long-lasting effect. 

In March and April the use of online grocery shopping and delivery apps was 400% higher than it was during the same months last year. And it may not have been Amazon and Instacart that reaped the key benefits, but the Publix’s and Walmarts that new online grocery shoppers have done business with for decades. Will this trend continue to accelerate after the flu subsides? We found no person better to ask than Paul Hartley. The managing director of consumer and retail research for Escalent eats data like this for lunch and dinner.

Paul, tell us, who are the winners and losers when it comes to the incredible rise in online grocery ordering since March? 
Amazon’s online consumer business is bigger than all other e-commerce in the country combined. If you look at the online grocery business, you’d think they’d be killing it, but they’re not. Amazon has struggled with demand and logistics here. The winner here is Walmart. Once baby boomers have gone online to do grocery shopping, they’re going to go to the brand they’ve trusted for decades. They’re not willing to experiment. 

How have online-only offerings performed, from startups Instacart to established giants like Amazon?
I don't think any of them fell down. Amazon has a huge infrastructure and it’s hard not to deal with them, but grocery is different. Stuff melts, rots. It has to travel a shorter distance. It’s better if it comes from within a few miles, and I don’t think Amazon has been able to cope with that. Walmart has a massive footprint and it gave them a huge advantage during the pandemic. I think their speed in ramping up for increased demand set them apart. There are a lot of problems at Instacart with ramp-up. 
 

Food is better if it comes from within a few miles, and I don’t think Amazon has been able to cope with that.

During the pandemic, many retailers struggled with fulfillment from the surge in online orders. What are the big challenges for retailers and how can they overcome them?
The number one thing that really pisses people off is the delivery window. The stuff you ordered from Amazon for delivery in two days wasn’t getting there in two days. It’s like when you make a time window appointment with your cable provider and they miss the window. It’s common for Instacart to say “We’ll be there between four and six,” and then you get a call at nine. Another thing is when they make crazy substitutions. That certainly causes people discontent. We have high expectations of what gets delivered to our doors these days. 

Do you think this elevated use of online grocery services is sustainable, or will it fall back to previous levels?
This is the thing that shocked me the most. We did a survey and a quarter of respondents said they would decrease online grocery purchases slightly, but continue to use them at a different level. They won’t use it as much as they did during COVID, but will be using it more than they did before COVID. There’s still a low enthusiasm for online grocery shopping, but they have found it convenient to have stuff delivered to them. 

Will what’s happened in the pandemic affect how brick and mortar retailers operate online going forward?
We’ve created an artificial hype cycle with COVID, but don’t think online grocery shopping is ever going to go down to what it was. This is a very big revelation. Brick-and-mortar retailers have been shown an opportunity. Consumer attitudes are changing as well. Twenty years ago, most of us thought “Who’s ever going to buy clothing online? The want to try it on.” Now we buy clothes online all the time. Department stores deplored Amazon. Now Kohl’s is accepting Amazon returns in their stores and will give you a 25%-off coupon when you bring your Amazon purchases back. We all change, even when we think an issue is insurmountable.