Surprisingly low adoption rate of online grocery shopping amongst Gen Y and possible solutions

This is an interesting time for the Online Grocery industry. According to the latest IBISWorld report, the industry is expected to rapidly grow in the next 5 years and reach $10 billion in revenue with the growing competition of pure and brick and mortar online grocers. With that said, the online grocers have tested out different distribution models and services in an effort to find a way to gain market share in this scattered market, and the landscape of the industry is constantly changing accordingly. Developing an in-depth understanding of the wants and needs of Generation Y is one of the key success factors. With a sample size of 331 millennials, this survey aims to get a better sense of the millennials online grocery shopping behaviour through 13 questions.

The majority of the respondents have a high school or some college degree working part- or full-time. They are more likely to be single living in a small city. With a limited budget on hand, they go on to shop online where they can compare prices and get good deals. However, the online grocery shopping adoption rate by the millennials is remarkably low. As opposed to a quarter of the respondents that never shop online, there were more than 75% of them that do not buy groceries online. Those who never shop for groceries online are highly concerned about the quality and freshness of the food and privacy and security in electronic payment. On a side note, there were some respondents that do not buy groceries online because online grocery stores do not serve their city. In the follow-up question, they were asked if they would be interested in online grocery shopping if it is available in their city; more than half of the respondents said yes. On the other hand, the other Generation Y that takes advantage of the online grocery shopping said that they could manage their budget more effectively because they pay less for groceries and make fewer impulse purchases online than in store. Although most the millennial online grocery shoppers make purchases daily, vitamins and other health products are on top of their shopping list followed by meat, fish, and other deli items. Millenials want more than just faster and cheaper delivery. They want the personalised shopping experience. On top of that, they demand to see locally grown produce.

In conclusion, the Gen Y is indeed afraid of buying groceries online. In spite of the convenience and cheap prices that the online grocers offer, they prefer in-store shopping experience that they can handpick their groceries without having to worry about privacy or security at the check-out stand and waiting or paying for delivery. Perceived advantages and disadvantages on online grocery shopping leave an ample room for the online grocers to improve. What the survey results suggest are that online grocers need to put a greater emphasis on the effectiveness of their distribution channel and secure payment method to attract more consumers and generate more revenue. Strategic decisions on market expansion that have a high potential to serve more consumers will be needed in not so distant future. The personalized shopping experience could mean different things: providing service on multi platforms, suggestions made for an individual user based on their past purchases or coupons. Providing services such as locally grown produce to satisfy a high level of social consciousness of the millennials are also another important actions to make.

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Somi Kang – Market Research & Consumer Insights Intern, Pollfish