Why Are Small Grocers Leading the Digital Delivery Charge?

Small grocers are outpacing larger grocers in delivery, fulfilling a larger percentage of their digital sales via delivery than their large grocer counterparts. Is this good news?

While digital sales account for less than one percent of small grocers’ total sales, shoppers are more likely to have their order delivered from small grocers (revenue less than $1B) than from any other size grocer examined in Grocery Doppio’s latest “State of Digital Grocery Performance Scorecard.” More than 60% (62.2%) of all digital orders at small grocers were delivered versus 37.8% picked up in-store.

Conversely, digital sales at large grocers (revenue greater than $10B) accounts for 15% of total sales, with 45.3% of digital orders fulfilled via delivery and 54.7% via in-store pick-up.

What is the story behind these numbers? Are smaller grocers just better at delivery than larger grocers? Is something lacking in the in-store pickup experience that consumers prefer the convenience of delivery?  

“Smaller grocers are more dependent on third-party partners from an execution perspective,” said Gaurav Pant, chief insights officer, Incisiv. “They don't have the scale to build these advanced capabilities independently.”

A greater reliance on third-party fulfillment services — Instacart, Shipt, etc. — translates to a more significant percentage of home delivery for smaller grocers. In addition, a wonky and/or non-existent in-store pickup option at many smaller grocers contributes to the inflated delivery numbers.

“There is a large gap between small and large grocers when it comes to available resources,” said Pant. “The big questions for small grocers are always: Where do we focus? Where should we invest? What will have the greatest benefit?”

With digital sales accounting for a minuscule .8% of total sales at small grocers, outsourcing fulfillment makes financial and operational sense. However, small grocers must continue to evolve their digital offerings and provide a differentiated experience if they are going to compete in an increasingly digital marketplace.

Small grocers must evolve their digital offerings to keep pace with their larger competitors. They are leaving money on the table by allowing larger-scale grocers to take the digital lead. The average digital order at large grocers was $149.10 in Q1, while small grocers posted an average digital order size of just $34.90.

“Being in the digital grocery business is not just having a website,” said Pant. “If you think you have a website and you're selling, you’re a digital grocer, that's wrong. That's thinking from the 1990s or 2000s. Grocers need to make an active effort to do something.

“Branding what you have, having merchandise available online, making sure shoppers at least understand the value that you bring. These are all critical aspects of not just having a web storefront, but actively selling it and ensuring customers have an experience.”

For an expanded look at grocers’ current digital operational prowess broken down by grocer size, be sure to check out the full Grocery Doppio report for free here.

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