AI analysis reveals 8% growth opportunity in grocery e-commerce
SymphonyAI’s largest-ever shopper study offers surprising insights in five critical areas
SymphonyAI’s largest-ever shopper behavior study, analyzing data from 72 million households and 1.3 billion transactions from dozens of retailers around the globe over six months, has uncovered five crucial trends that collectively present an 8% growth opportunity for grocers. The comprehensive analysis leveraged advanced AI models to identify patterns in shopping behavior, basket composition, and channel preferences at a time when digital engagement with grocers is on the upswing.
(Study findings were shared during the webinar “Winning the 8% Grocery E-Commerce Opportunity.” Listen to the replay and receive a copy of the research.)
Top five opportunity areas and growth drivers
- E-commerce drives growth and loyalty: The SymphonyAI shopper study revealed that 81% of customers new to a retailer’s online channel have never shopped in their physical stores. This surprising reality represents a significant opportunity for market expansion for retailers who offer a positive experience and retain new shoppers. That’s because e-commerce baskets are typically three times larger than in-store baskets, and when customers become omnichannel shoppers, they spend 15% more overall, according to study results. While there is some initial cannibalization of 5-6% in the original channel, this is more than offset by a 21% incremental spend in the new channel. Shopping frequency increases by 9% and basket size grows by 6% when in-store shoppers begin using e-commerce. Retailers can capitalize on this trend by implementing targeted basket offers and encouraging repeat purchases through personalized communications made possible by AI.
- Seasonality impacts grocery e-commerce behavior: Seasonal patterns play a crucial role in e-commerce success, with Q4 presenting retailers the highest opportunity to gain new online shoppers and then carry that momentum into Q1 which shows a a consistent 6% increase in customer penetration. . The research identified specific seasonal opportunities across quarters, from post-holiday pantry restocking in Q1 to summer preparation categories in Q2 and holiday baking in Q4. A notable finding shows that improving Q1 customer retention from 38% to 50% alone can drive 1% revenue growth. The shopper data analysis revealed that maintaining strong in-stock positions during key seasonal transitions and implementing targeted promotional strategies during these periods can significantly impact performance.
- Convenience drives small basket growth: The analysis revealed a significant shift in shopping patterns, with small baskets (fewer than 20 units) now representing a larger proportion of transactions than large baskets. These small basket transactions are showing impressive growth of 10% in both sales and baskets as shoppers make smaller purchases more often. Popular categories for small baskets include alcoholic beverages, baby products, and laundry detergent. Small basket shoppers are driving 15% sales growth compared to 4% for other shoppers, and adding just one more category to half of these small baskets can drive 0.75% growth. The research identified specific product affinities that retailers can use, such as spirits with mixers, food supplements with frozen fruits, and laundry detergent with shampoo, to mention a few.
- Pack size optimization is critical: Consumer preferences for pack sizes vary significantly between online and in-store shopping. Categories such as processed meat, instant and canned foods, baby milk, and carbonated drinks show strong preference for larger packs online. Conversely, products like jam, butter, and red meat tend to sell better in smaller sizes through e-commerce. The study suggests that optimizing pack size availability and visibility could drive 4.5% category growth. Regional analysis showed that European consumers tend to prefer smaller pack sizes compared to US shoppers, highlighting the importance of market-specific assortment optimization strategies.
- Organic products are growth opportunity: The e-commerce channel shows strong potential for organic products, with 41% of online customers buying organic compared to 31% in-store. Organic products account for 6.7% of online sales versus 5.1% in-store, and organic shoppers purchase three times more frequently with 1.5 times larger baskets. Despite a current 2.2% decline in organic customers, certain categories continue to perform well, including frozen foods, bakery, healthy foods, salads, cereals, and fruits. Regaining just 1% of organic shoppers could increase organic sales by 1.7%. Top performing retailers recognize this trend and have implemented dedicated organic landing pages and educational content to drive engagement and encourage sales.
A connected retail strategy is essential for e-commerce success
E-commerce penetration stands at 7% of total retailer sales overall, representing a 20% decrease from a pandemic high of 8.4% total sales, but well above the pre-pandemic level of 4.3%. The channel has demonstrated greater resilience to the inflation impacts of recent years, with in-store units per customer declining 10% over three years while e-commerce saw only a 2% decline.
Another notable insight from a CPG perspective is that brand loyalty is notably higher in e-commerce, particularly in health and beauty care, beverages, pet food, and snacks. That’s good news for CPGs who benefit from the endless aisle possibilities of grocery e-commerce to offset in-store space constraints.
The research concludes that retailers who effectively implement targeted strategies to capture these five opportunity areas can achieve significant e-commerce growth. This success requires an integrated approach to customer acquisition, retention, and experience across channels to deliver the seamless experience shoppers expect.
In addition, e-commerce success requires robust data analytics and AI-driven decision-making across the enterprise due to the interconnected nature of retail operations. Merchandising, marketing, operations and supply chain must function in harmony to win with e-commerce. It’s why it is essential for retailers to embrace a a connected retail strategy and unified data platform that facilitates the rapid discovery of insights to inform sales strategies and operational excellence to win with e-commerce.
Get all the grocery e-commerce insights you need to win the 8% growth opportunity by clicking here.
