Amazon & COVID-19: A paradigm shift in grocery shopping behavior and how grocery brands should adapt

7 May 2020

The online grocery landscape pre COVID-19

In 2019 overall US grocery sales were virtually stagnant, while online sales were growing 15% YoY. In fact, Grocery was the fastest growing category across all US ecommerce.

A look to Europe sees the UK lead digital grocery buying across EU5 with 32% of internet users indicating they purchased groceries digitally in the prior year (2018). Germany ranked second with 23%. Online grocery penetration is on the rise, a Capgemini survey highlights, by 2021, more than half of respondents in the Netherlands, the UK and Germany said they will have groceries delivered once per week, as did 49% of respondents in France.

Consumers appeared to be poised to make the shift to online, even if they haven’t yet done so.

COVID-19 pandemic: An inflection point for online grocery

On March 11, the World Health Organization (WHO) declared COVID-19 a global pandemic, triggering a drastic and almost instant shift in consumer purchase behaviours. Overnight, online grocery was catapulted to the forefront of consumer’s minds as the central retail channel in these uncertain times.

Amazon was quicker than most offline grocers to refocus its footprint from offline to online, transforming select Whole Foods stores to Dark Stores to cope with consumers’ increased demand for delivery, thus managing to increase its fulfilment capacities by 60% in just a few weeks.

An RBC Capital Markets survey conducted in the US March/April 2020 found that one-third of respondents said they made their first online grocery purchase in the past month. More than half of online grocery shoppers surveyed said COVID-19 is “leading them to permanently boost their willingness to buy groceries online.”

A new normal for online grocery post-COVID and how Grocery Brands should adapt

A new normal will emerge from this pandemic; a landscape far more technologically advanced than the one we left in Q1.

No channel will reap the benefits like online grocery, where consumers were forced to change their purchase behaviors and have since discovered the benefits, and many will retain these habits going forwards. Amazon indeed anticipates that it will retain 30% of new traffic post COVID-19.

Grocery Brands must adapt and be ready for a faster consumer shift to online.

1.      Brands have to integrate Amazon in their sales & marketing strategy, as the platform will come out of Covid with increased importance within the grocery retail landscape

Before Covid-19, Amazon was already for grocery brands a powerful discovery engine and a marketing platform, as much as a retail channel.

The pandemic has increased Amazon’s importance in the grocery landscape, as it has become a new grocery retail destination for many new consumers.

Now more than ever brands must make Amazon work for their business, however challenging that initial phase may be, and should:

  • Review or create an Amazon strategy that complements the other channels within their business, keeping in mind that it is entirely possible to run a successful D2C alongside Amazon
  • Work to be invited to become an Amazon Vendor (Traditional Retail) as only gateway to gain access to Amazon’s full grocery suite (Amazon Fresh, Pantry, and Wholefoods). A winning strategy could be to start as a Seller (Marketplace) and gain sufficient traction to be invited as Vendor. This process can take time, so brands should start early
  • Utilise the content opportunities available on Amazon such as A+ pages, brand store & AMS campaigns to create a fully branded customer journey
  • Consider selection, format & exclusives to differentiate the Amazon offering vs. offline grocery or other channels
  • Invest in the right skills to grow a business on Amazon – brands need someone who knows how to optimize the platform to create visibility

2.      Grocery brands should in parallel prepare for traditional offline retailers’ shift to online

Furthermore, the launch of Amazon Go Grocery and the recent transformation of Whole Foods stores into Dark stores herald a new chapter in Amazon’s strategy, fully embracing omnichannel.

Consequently, retailers worldwide will need to react and fast, if they are to challenge Amazon & its omnichannel ambitions. It is critical for grocery brands to be ready for a quick shift to online, even within traditional grocery.

To embrace the shift of traditional retail to online, brands can already undertake the following actions:

  • Create a product pack design fit for online, with larger fonts for increased readability even if customer is not zooming and removing small text as nutritional information, and detailed description will be on the product page
  • Write detailed online product page descriptions – as space is not limited as on a pack, it is the opportunity for a brand to convey more detailed information about a product (e.g. recipe, production process, origin)
  • Explore options & timings for promotions on retailers’ online store, which can be not aligned with offline on of different nature (e.g. offer discount on delivery fee, sample of your product in customers’ basket, branded shop in shop)

People in this post: Anaïs Jollivet

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