Study finds that most consumers still want to buy groceries in stores

According to a recent Forbes.com story, The Food Marketing Institute estimates that online grocery sales will reach $100 billion by 2025, or about 20% of the grocery retail market. Today it is estimated that 2.0% to 4.3% of industry sales originate online.

Amazon currently leads the way in the online grocery market, with an 18% share as of December 31, 2017.

However, a new study by Morning Consult revealed that a majority of Americans prefer the in-store shopping experience over online shopping when it comes to groceries. According to the study, 65% of consumers say they have no interest in buying food and beverages online, even when their options improve.

The study (conducted in May among 2,200 American consumers) also found the following:

• One-third of those surveyed had previously purchased food or beverage products online at least once. 
• Early-adopters of online grocery shopping consist of high-income shoppers ($100k+; 45% have purchased groceries online), GenXers (39%), middle-income shoppers ($50k - $100k at 38%), men (38%), millennials (38%), and urbanites (36%).
• Of the consumers who have ordered groceries online, 56% have only done so a few times per year.
• Of those shoppers that purchase groceries online on a weekly basis, middle-income shoppers are way ahead of those with high incomes. Affluent shoppers prefer to shop in physical stores for their weekly groceries. And since typical affluent households spend 75% more on food than the average shopper, the study describes them as store shoppers that really matter. These high-income consumers have remained loyal to shopping for groceries in person.

Based on the findings, Morning Consult stated that enhancing the in-store shopping experience is the bigger opportunity that food retailers are overlooking in their race to home delivery of online orders.

According to Morning Consult, "By trying to push more grocery sales online, retailers are depriving themselves of the opportunity to entice shoppers to spend more in-store through attractive displays, strategic merchandising, helpful and friendly personnel and mouth-watering sight, smell and taste experiences that can only be found in-store. Just go to any Wegmans to see how exciting and fun grocery shopping can be. This is where grocery stores can really clean up."

Discount grocers are getting it right... here's how

Earlier this month Supermarket News listed six reasons that discount grocers continue to grow, and provided the following background.

Ten years ago, two-thirds of U.S. shoppers reported that supermarkets were their primary grocery channel, as per the Food Marketing Institute's 2016 U.S. Grocery Shopping Trends Report. However, in 2016, only 49% of U.S. shoppers said that supermarkets were still their primary grocery channel. The average shopper is now using five to seven retail channels and two to three shopping channels on a regular basis. More than half of Americans feel overworked and overwhelmed, making convenience increasingly important.

Here are the six things that discount grocers are getting right, according to Supermarket News, and below is a link to the article that provides more detail on each point.

• Good deals attract consumers from all economic levels.
• Stores that are modern, convenient and offer a more supermarket-type experience with great value attract customers.
• Discounters benefit by offering a wide selection of products including wine, produce, health and beauty, bakery and organic products.
• Discounters are customer-obsessed about their brand and model, and keeping it very simple.
• Discounters are proving private labels can provide extremely good quality and amazing values.
• Discounters are adopting multi-channels.

Viewpoints: What discount grocers are getting right

Trader Joe's beating up Whole Foods in sales per square foot

Business Insider published an article earlier this week explaining why Trader Joe's sells nearly twice as much per square foot than Whole Foods ($1,734 PSF compared to $930 PSF).

According to the story, "Trader Joe's is cheap." For instance, Trader Joe's sells a bag of quinoa for $4.99, while Whole Foods sells it for $9.99. The story doesn't specify whether or not the bags are the same size, but I think we're supposed to assume they are. The story also doesn't specify what quinoa is. Blogger.com's spell check and I are unsure.

Anyway, the point is that consumers view Trader Joe's as high-quality but inexpensive, and despite Whole Foods' recent and ongoing efforts to lower some prices, analysts say they are not doing enough to market their bargains, so customers don't realize Whole Foods is getting cheaper.

Regarding the sales per square foot numbers, here are some stats from the story:

Trader Joe's - $1,723 PSF
Whole Foods - $937
Publix - $552
Kroger - $496
The Fresh Market - $490
Weis Markets - $335

It should be noted that Whole Foods announced in February that its stores generated an average of $983 in sales per square foot in 2013. And according to stats published by the Food Marketing Institute, the average sales PSF for supermarkets in the U.S. is $360 (based on a median total store size of 46,000 SF and median weekly sales per supermarket of $318,170).

Another reason for Trader Joe's success, according to the article, is that 80% of Trader Joe's products are in-house brands, so customers can't buy them anywhere else. In addition, the product mix is pretty creative (Chili-Lime Chicken Burgers, Cookie Butter), while the mix at Whole Foods is basic in comparison.

Whole Foods has been considered the go-to place for organic and healthy foods in recent years, but lately the competition is catching up, including Walmart.

Lastly, the story included an interesting chart illustrating the projected growth in sales for various grocery formats. Fresh, limited assortment and dollar store formats are leading the way.

Fresh format - 92.2% growth in sales through 2018
Limited assortment - 38.4%
Dollar store - 31.2%
Supercenter - 22.9%
Wholesale - 19.0%
Convenience store - 12.7%
Drug store - 10.6%
Traditional supermarket - 3.6%  

Whole Foods closing in on $1,000 in sales per square foot

Whole Foods announced earlier this month that its stores generated an average of $983 in annual sales per square foot (PSF) in 2013. According to statistics published by the Food Marketing Institute, the average sales PSF for supermarkets in the United States is $360 (based on a median total store size of 46,000 and median weekly sales per supermarket of $318,170).

In the Greater Philadelphia Market, the high-volume Giant Food and ShopRite stores are most likely generating north of $500 PSF, and perhaps even close to $800 PSF in some cases (a 55,000 SF store with $44 million in annual sales, for example).

For those immediately wondering about Wegmans, they certainly have incredible sales numbers, but with stores so large (132,000 SF in Collegeville), reaching Whole Foods-like PSF totals is nearly impossible. My guess for a store like Collegeville is about $600 PSF ($80 million in sales).