Online grocery shopping and home delivery have been around for a while now, but the pandemic pushed millions of people around the globe to try these services for the very first time.
In the U.S. alone, online grocery sales grew 54% during 2020 to reach $95.82 billion, propelling it to a 12% share of total U.S. e-commerce sales and 7.4% of all grocery sales. By 2022, eMarketer projects that more than half (51.3%) of the U.S. population will be digital grocery buyers.
Increased demand for online grocery shopping in Mexico and elsewhere in Latin America has also been strong. Before the COVID-19 pandemic, according to a Kearney survey, about 43% of Mexican consumers said they shopped online for groceries more than once a month. That number jumped to 61% over the course of the pandemic. In Brazil, e-commerce rose by 68,1% in 2020, reaching BRL 126.3 billion ($24.5 billion) in sales revenue, according to data compiled by Brazilian e-commerce consultancy Neotrust/Compre&Confie. For the consultancy, the sector is likely to grow 18% in 2021.
I was among those first-time online grocery shoppers seeking a safer way to shop while the virus was at its worst. While I didn’t love the idea of some random shopper choosing my fresh meat or produce, the convenience of ordering groceries online and having them delivered to my door has grown on me. And that’s exactly what top retailers and delivery services are banking on.
“During the pandemic, many shoppers used online shopping for the first time and have been impressed by the convenience this brings, so they are likely to continue. Many of the leading retailers in [Latin America] are shifting their investment from opening new stores to bolstering their online operations and logistics, as well as implementing omnichannel initiatives in existing stores, such as click and collect and curbside collection points,” said Oliver Butterworth, retail analyst at Institute of Grocery Distribution (IGD).
Online grocery shopping and delivery services offer several benefits that promise to keep recent converts shopping this way in the future. Not only can you save an hour or two each week not going to the store, no temptations such as visually appealing end-cap or checkout aisle displays means shoppers are much more likely to stick to their list of necessities, which saves money.
Most grocery apps now offer the ability to search for and filter products based on common needs, such as organic, gluten-free, or sugar-free. And the ability to place a new order based on previously ordered products or those most popular with consumers who frequent online food platforms makes routine shopping even faster.
The rise of the “super app”
A global shift in consumer shopping behavior and preferences reaches way beyond grocery shopping, however. This has prompted some of the biggest players in Latin America to extend their retail and delivery partnerships and create a “super app” shopping experience for users.
Prior to the pandemic, Brazilian food delivery giant iFood was already seeing a shift in shopping habits with an increase in the penetration of online channels in all segments. This only accelerated further due to the mandatory lockdowns, according to iFood Grocery Director Antonio Mello.
In just nine months, from June 2019 to March 2020, iFood grew its retail network 418% to more than 5,000 partners, including supermarkets, convenience stores, pet stores, and pharmacies. Around 150 million items were ordered online during that same period. iFood is now present in more than 1,200 cities across Brazil, with grocery delivery services available in more than 400 of them.
People who already used delivery as an occasional service to order meals in restaurants started to see delivery as something essential, including delivery of convenience store and pharmacy items. On the other side, businesses, including small and medium-sized establishments with little or no technological structure, need help to understand and better serve their customers on these new channels, according to Mello.
“The importance of the iFood delivery platform is on these two fronts: bringing customers a wide variety of market offerings in addition to the security and practicality that they are already used to, [while providing] the tools for thousands of merchants all over Brazil to digitize their retail businesses quickly, including new revenue opportunities and letting them reach consumers who were not previously accessible,” Mello said.
Uber’s acquisition of Chilean on-demand delivery app Cornershop in 2019 is another key step toward becoming an ‘everything delivery’ service in Latin America, Eduardo Donnelly, regional general manager of Uber Eats in Latin America and Cornershop board member, told LABS.
According to Donnely, on Uber’s app customers can now “find dozens of mobility options, prepared food via Uber Eats, groceries via Cornershop by Uber, alcohol, pet supplies, beauty products, and specialty stores.”
Colombian startup unicorn Rappi was already on its way to becoming a super app before the pandemic hit last year. What started in 2015 as a service focused on delivering beverages and meals has expanded its reach into delivering groceries, tech goods, medicine, entertainment, travel, and live content streaming.
“We started in a small area of one city six years ago. Today we are present in nine countries and over 220 cities across the region and we are driving economic development across cities by accelerating e-commerce adoption from different angles broader than just food delivery,” said Kathleen McInerney, global head of public affairs and strategic communications at Rappi.
“Over the last year, Rappi experienced [three times] the growth of pre-pandemic times. We built our business with the knowledge that the service was an incredible market fit. However, we now have a deeper understanding regarding how our business model is able to fill a need that the region, and even we, didn’t know we had prior to the COVID pandemic. It is evident that during this time we served as a crucial bridge; connecting people with a way to fulfill their needs in a region marked by a number of high-density cities and that has seen governments frequently turn to lockdown measures as a way to manage the impact of the pandemic,” said McInerney.
So what can we expect to see next?
“Last-mile delivery is huge in LatAm, and it continues to evolve at a [strong] pace both in the region and globally. Growing numbers of shoppers have been using these services throughout the pandemic, and they have new expectations of immediacy. They now want more control over the experience so they can track their order in real-time. This area of the market is becoming increasingly competitive, and some businesses are now shortening the last mile through the use of a network of dark stores, which lets some businesses offer deliveries within 15 minutes,” said Butterworth.
In addition, pundits expect to see new add-on services, enhanced delivery methods, and seamless payment solutions emerge to drive further adoption and brand loyalty.
In January, Rappi launched Rappibank in Brazil, and in March added debit card and banking services in partnership with Itau in Chile, and in May the company announced a new partnership with Chubb, which will let Rappi users purchase insurance protection through the app.
“Because we believe merchant demand for Delivery as a Service (DaaS) will be a key driver of the next generation of e-commerce, this product enables merchants to offer delivery of any product sold on their own channels (by website, phone, or ordered in-store) in under an hour. This solution leverages Uber’s logistics expertise to move goods within their supply chain, between locations, and into the hands of their customers,” said Donnelly.
iFood plans to invest further in artificial intelligence, focusing on research and development of machine learning, logistical efficiency, and other areas related to data structure and payments. The company also announced a partnership with Grupo Pão de Açúcar, one of the largest supermarket chains in Brazil, intending to deliver greater service excellence for online market purchases. Drone delivery is on the horizon, as well.
Rappi’s biggest competitive advantage is being hyperlocal, according to McInerney.
“We have the best of each city — restaurants, convenience stores, pharmacy, e-commerce and travel, and financial services — broken down to the neighborhood level for each user. We understand [the] local needs for users, commerce, and individuals, and engineer the best possible local solution — always developed with a local, mobile-first mindset,” she added.
Are delivery services really here to stay?
Consumer expectations around delivery have shifted dramatically in the last 15 months, and all signs indicate that those expectations are here to stay globally. But who exactly is the demographic most likely to embrace shopping for groceries and other essentials in the long run?
“Millennial and Gen-Z users are highly receptive to using new mobile apps and technology, particularly if it can make things quicker or easier for them. Millennials will be immersed in the early stages of their career, and some will be starting families, making them feel time-poor. They are, therefore, the most likely to be seeking services to fit around their busy lifestyles,” said Butterworth.
Personally, while I may have aged out of that Millennial bracket just slightly, as a busy professional with better things to do than stand in the checkout line, online grocery shopping gives me the most precious gift of all: more free time to do with as I see fit.