How Grocery Stores Should Respond to the Growth of Online Markets

During 2020-21 online grocery shopping soared from 3.4% to double digits as Covid-19 made customers reluctant to go into stores. Post Covid, online grocery shopping is still high, forecasted by Forrester (2021) to hit 10.4% in 2024. How will grocery retailers service this new demand stream? What they should not do is continue the common model of picking from their store shelves for free if the customer picks up the order. Compared to customers shopping in the store and going through checkout, the authors’ analysis shows that this more than doubles labor requirements and destroys all profit. Instead, they need to choose one of three models: 1) Double down on the traditional in-store model 2) Offer online services to those specific customers who are ready to pay extra for the convenience, either as service charges or higher product prices 3) Become more efficient at online by fulfilling from select store backrooms using automation.