In 2020 and 2021, online grocery growth soared. Now, companies in the space are facing major roadblocks on both sides of the Atlantic, as soaring inflation and consumers’ return to their lives away from home impact sales.
United Kingdom-based grocery technology company Ocado announced in a trading update published Wednesday (May 25) that it is cutting its growth forecast for the year from 10% to low single digits.
“Since Ocado Retail’s Q1 trading update on the 17th of March, the trading environment has deteriorated, as has been widely reported in industry data,” the company stated, “with the cost of living crisis compounding the impact of a return to more normal consumer behaviours as restrictions have ended and many people return to the office.”
The impact of inflation can be seen in declining order sizes. The company noted that customers are purchasing “one or two fewer items per shop” than they were before prices skyrocketed, leading to a 9% decrease in average basket value.
This trading update was not the online grocery company’s only major announcement this week. On Monday (May 23), Ocado announced that it has entered an agreement to acquire robotics startup Myrmex for 10.2 million euros (about $11 million) to boost automation across Ocado’s fulfillment centers in a move to improve order economics over time.
Overall, online grocery adoption is significantly higher in the United Kingdom than in the United States, according to PYMNTS’ November study, “What U.K. Consumers Expect From Their Grocery Shopping Experiences,” created in collaboration with ACI Worldwide, which drew from a September survey of more than 2,500 U.K. consumers. The study found that about a third of U.K. consumers prefer to shop for groceries online to shopping in stores. This share is more than twice the 15% of U.S. grocery shoppers that said the same.
Get the study: What U.K. Consumers Expect From Their Grocery Shopping Experiences
Instacart Makes Changes to Rating System to Attract, Retain Employees
As adoption of online grocery channels grows, aggregators are struggling to attract and retain enough pickers and drivers to fulfill demand. In a move to improve gig workers’ experience, Instacart announced changes to how the company uses customer ratings.
Specifically, the company stated Tuesday (May 24) that it is making it easier for high- but not top-ranked to get priority as orders come in, and it is forgiving more low ratings due to factors that have little or nothing to do with shoppers’ performance.
“Our reimagined ratings system was developed in close collaboration with the shopper community to better support their needs,” John Adams, vice president of Shopper and Fulfillment Product at Instacart, said in a statement. “By delivering on shopper feedback to make the customer ratings system even more fair, accurate, and reliable, we’re taking another step in ensuring that shoppers feel heard and supported through their experience.”
The demand for same-day delivery options such as those offered by Instacart is there, according to data from PYMNTS’ recent study, “Satisfaction In The Age Of eCommerce: How Online Merchants Are Cultivating Long-Term Customer Ties,” created in collaboration with eCommerce fraud management platform Riskified, which drew from a survey earlier this year of 2,100 U.S. consumers. The study finds that 40% of online grocery customers say the availability of same-day delivery is important to them, and 14% report that these options are the most important feature an online grocer can offer.
Read more: Four Key Ways Online Merchants Can Unlock Consumer Trust
FreshDirect Brings Back Hamptons Rosé Delivery
Online grocer FreshDirect is bringing back a service to designed to meet the needs of some of its highest-value customers: New Yorkers who spend their summers in upscale beach towns.
The company announced last Thursday (May 19) the return of its “Rosé Express,” launched last year, which offers two-hour delivery of rosé and other wine, beer and spirits to customers in the Hamptons and Montauk, popular summer destinations on New York’s Long Island.
“When we introduced the Rosé Express last summer, our goal was to provide a unique and convenient service for our customers in the Hamptons,” Dave Bass, managing director at FreshDirect, said in a statement. The positive response was overwhelming and after an outstanding first season we are excited to bring the Rosé Express back.”
Kroger Opens New eCommerce Fulfillment Center
In additional Ocado news, United States’ leading pure-play grocer Kroger announced Wednesday the opening of a 61,000-square-foot customer fulfillment center (CFC) to fulfill digital orders in Central Ohio in partnership with the U.K. online grocery company. The move comes as online grocers look to boost their omnichannel offerings to meet the evolving needs of today’s consumers.
“Our delivery business continues to accelerate with the growth of fulfillment and spoke facilities,” Gabriel Arreaga, Kroger senior vice president and chief supply chain officer, said in a statement. “This expansion will further our commitment to create career opportunities and serve shoppers fresh food fast through interconnected, automated, and last-mile solutions across America.”
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