Despite all the excitement about the potential for online grocery shopping, most consumers still prefer buying their groceries at the store. In fact, less than 4% of groceries are bought online. It’s not the fault of grocers. Most now offer online ordering for delivery or curbside pick up at the store.

So why are consumers reluctant to buy grocery products online?

Old habits die hard

The weekly trip to the grocery store is a deeply ingrained ritual. Many enjoy the hands-on shopping experience. Brick-and-mortar stores are still seen as delivering more strongly across all areas of shopper expectations, including freshness, price, personal engagement and returns.

Trust

This is probably the biggest hurdle. Most surveys indicate that “shoppers don’t trust others to pick the best or freshest items”. Allowing someone else to choose their produce and meat is hard for most shoppers. They just don’t trust others to make those choices. The grocery industry has invested heavily in online infrastructure, but hasn’t come up with a viable strategy to gain shopper trust.

What if the number of online grocery shoppers never rises above 10%?

 For most grocery retailers, whose business model is designed for brick and mortar sales, that would probably be OK. In a business of tight margins, online ordering adds costs from delivery and handling to website maintenance. But even if the percentage of online shoppers remains low, grocery retailers will still want to maximize their online market share.

So, what’s the strategy?

It appears, at least in the near term, online grocery shopping could be more of niche segment. So, category managers may need to focus their marketing strategy. For example, thirty-something Millennial families might be a good segment to target. Many have two incomes and young children. They want the convenience of grocery delivery and can afford to pay for it.

Plus, Millennials are now the largest segment of the workforce and are the driving force for growth in categories like produce. They’re more likely to be open to changing their shopping habits vs. older groups because their buying rituals aren’t as deeply ingrained.

Meal kits are popular with this group. Like online grocery shopping, meal kits might be a bit over-hyped, but consider what industry leaders are doing. Kroger has an in-house meal kit, called Prep+Pared, which it started expanding last December. Albertsons acquired meal kit maker Plated last year. Some Plated kits are available in Safeway and Albertsons stores, with a full rollout planned for later this year. Walmart is also offering meal kits on store shelves and online.

Busy Millennial parents might appreciate the ability to order a meal kit online at work and grab it at a curbside store pickup on their way home or have it delivered to their doorstep. Reach them via email. Entice them with a daily special. Build your customer base. Gain their trust. In time they may start to purchase all of their groceries online.

The opportunities are out there. Look beyond the hype. Connect the dots. Develop a niche. Be more than a category manager — be a category leader.

Unlike other types of brick and mortar retail, the convenience store (C-store) industry has actually doubled in size over the past 30 years — and it’s still growing. Why? One reason: you can’t fill up your gas tank online and 80% of all auto fuel is purchased at C-stores.

But while gasoline drives about 60 percent of sales at a typical C-store, what customers buy inside the store accounts for most of the profits. However, some categories like cigarettes, once a key profit generator, are falling.

More Margin from Munchies

For C-store operators, foodservice success is essential as it represents 22% of sales and 34% of profits. To fatten their bottom line, C-stores have been adding higher margin, prepared foods.

Here’s a taste of what some C-store operators are doing:

• LaCrosse, Wis.-based Kwik Trip’s Cheese Mountain pizza accounts for about 20% of the chain’s hot food sales which is available by the slice, whole baked in the store or refrigerated to take home and bake. Take-and-bake is the fastest growing segment for Kwik Trip, followed by whole pies baked to order.
• Wawa Inc.’s build-to-order hoagies drew crowds to its new location in Washington last month. Many of Wawa’s quick-service items are built to order, so the food is made fresh by staff onsite. Wawa also offers a touchscreen ordering system so customers can easily create personalized meals.
• Sheetz, headquartered in Altoona, Pa., offers made-to-order cappuccinos, lattes, espressos and mochas all made on the spot from Italian espresso machines. Customers can also order custom food options through touchscreens. On National Coffee Day Sheetz offered free cold brew to customers who ordered through their app.
• Casey’s in-house bakeries serve cookies and donuts made fresh from scratch. Casey’s has also found success in its initial trial of a pizza delivery service and offers a discount on gas to customers who buy pizza.
• Dash In’s new 5,600-square-foot store in Chesterfield County, Va., offers customers an open kitchen and bar with craft beer and free wi-fi.

Increase size of basket with impulse sales of snacks and candy

Obviously, impulse sales are highest at checkout. Alan Tobin, senior manager, c-store category strategy and insights for The Hershey Co., noted; “Retailers have a huge opportunity to increase basket sizes through maximizing merchandising in this space … About 75 percent of candy sales from a counter unit are incremental. With 47 percent of purchases being unplanned, and more than 80 percent of purchases consumed within an hour, a candy and snacks consumer is in the market for these products on pretty much every trip.”

To take advantage, Twice Daily, located in Kentucky and Tennessee, also displays candy and snacks on the way to and from destination zones, such as the beverage cooler and fresh food area.

What’s driving new foodservice concepts?

Millennials. C-stores appeal to Millennials (ages 22 -36).  And that’s good news because this group is now the largest segment of the workforce and their buying power is growing rapidly. These younger customers love the convenience of a one-stop shop. Bankrate data shows that 54% of Millennials eat out at least three times or more each week. As a percentage of expenditure, Millennials spend more than Generation X and Baby Boomers on food away from home.

What do Millennials want?

• Have it their way – made to order meals as noted in the examples above.
• Buy local – natural and locally grown including fresh prepared foods, like meal kits, sandwiches, pizza and chicken.
• Spice is nice – they want to taste more extreme flavors. Some C-stores are offering spicy new dishes with Sriracha, as well as habaneros, ghost peppers, harissa and sambal.
• Single serving size – Millennials prefer single-serving options, such as a mini pie or slice of cake slice rather than a whole, full-size dessert.
• Quality is key and will bring them back – e.g. beverages can be enhanced by filtering the water used to make coffee, iced tea fountain drinks, and in the ice machine.
• Early bird – focus on breakfast and coffee. Remember, most Millennials are now in the work force so get ‘em early!

“C-stores are in a great position to really capture that breakfast crowd by looking beyond just doughnuts … to having a robust coffee program and really robust breakfast sandwich program made to order.” – Eric Richard, education coordinator, for the International Dairy Deli Bakery Association (IDDBA).