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Online shopping habits over the holidays: consumers spending more on premium items, but cutting back in general

September 29, 2022

It’s well known by now that grocers and CPG companies, along with many other industries, rapidly expanded their online shopping services at the height of the COVID-19 pandemic. And while the pandemic isn’t over, the upcoming holiday season includes other disruptive forces that are shaping the ways people shop during this busy season.

Recently, 84.51° conducted an anonymized study of 400 consumers who shopped at one of Kroger’s 25+ banner stores, uncovering insights into holiday shopper behavior. Here are key insights into how online shopping habits have evolved and major drivers behind this year’s holiday online shopping behavior.

The evolution of online shopping habits since the pandemic

As shops, restaurants, gyms, and other businesses shut down in response to the pandemic, consumers increasingly grew attached to their mobile phones, apps and other mobile devices. When the holiday season rolled around in 2020, online retail had a massive captive audience.

With very few alternative entertainment and travel options, online spending took off. Retail sales between November and December 2020 rocketed up 8.3% YoY from 2019 to $789.4 billion and online sales alone were up 23.9% at $209 billion, according to the National Retail Federation.

The 2021 holiday season was another strong year for online spending. But whereas the last two years were windfall years, 2022 is shaping up to be very different. Inflation is at the top of shoppers’ minds as they find higher prices on food, gas, household supplies and other essentials. And consumers have returned to in-store grocery shopping, but still want the option of shopping online for items that aren’t at their local stores.

As online shopping habits evolve, it’s more important than ever for brands to understand how customers prefer to shop and deliver the right experience.

Expected increases in online grocery spending over the holidays

At a time when excitement is high for a holiday season that isn’t marked by shutdown orders and social distancing rules, our research shows that despite elevated prices, shoppers are willing to spend more on premium items during the holidays.

In fact, 93% of shoppers plan to buy brands and products similar to or more premium/expensive than what they typically buy. Meanwhile, online grocery sales are expected to grow 20.5 percent this year, reaching $147.5 billion, according to Insider Intelligence/eMarketer.

Actionable tip: Holiday excitement will only get brands so far. Maximize shopper excitement for the holidays by not only ensuring that your premium and/or limited items are available online, but make the online purchase experience effortless. Reducing customer effort leads to happier customers, positive word-of-mouth, higher repurchase rates, and lower costs (e.g., less time spent resolving customer complaints).

Creating an effortless online experience includes:

  • Making sure your online inventory is up to date
  • Allowing shoppers to easily apply coupons
  • Making it easy for shoppers to carry shopping carts from their mobile device to a website or other channel
  • Personalizing the experience, e.g., recommend alternatives for premium items that are sold out based on previous purchases
  • Provide tracking updates for purchases

Shoppers may be willing to spend more during the holidays, but the brand that provides an easy and convenient path-to-purchase experience wins far more wallet share.

The effects of inflation: still cutting back overall

The Consumer Price Index hit 9.1% in June, the highest rate in over 40 years, while the Producer Price Index was even higher at 11.3%. What this translates into are higher prices across numerous categories.

Consider food. Prices for food overall increased 10.4% for the 12 months ending June 2022, the largest increase since February 1981, reported the U.S. Bureau of Labor Statistics. And prices for food eaten at home rose 12.2% over the last 12 months, the largest increase since April 1979.

As a result, households of all income levels are feeling the effects of inflation. Per our research, a $35-49k salary is purchasing close to $250 in groceries per month, while $50-74k salaries are covering $275 per month, which are both up from a year ago. Although they’re willing to splurge on premium holiday items, households are cutting back wherever they can and looking for value in their purchases.

Actionable tip: Deliver a timely and relevant customer experience to retain valued customers

In addition to offering sale items, dig deeper to understand which promotions at which levels resonate with customers during the holidays and respond in real time. For example, a quick-turn research tool like Real-Time Insights enables brands to provide a relevant and timely experience by receiving real-time insights into shopper behavior on a live dashboard to inform targeting opportunities, communication strategies, and product improvement areas.

Online shopping habits lead to greater spend per order, though lower order frequency

When it comes to online shopping habits, the behavior of Digital Dabblers—those who occasionally use ecommerce—and Digital Champs—consumers who do the majority of their shopping online—greatly differ. Our study found that Digital Champs spend significantly more than Digital Dabblers and pick up more units online overall. And during the holidays, Champs make far more shopping trips online (50%) compared to Dabblers (15%).

Actionable tip: Understand customer behavior to deliver the right experience

Tailoring online and in-store experiences according to how consumers prefer to shop is critical for maximizing sales. For instance, the knowledge that Digital Champs spend more and purchase more units than Digital Dabblers could influence the amount and type of inventory that is available online versus in stores.

This reinforces the importance of having both strong in-store and online strategies to drive engagement across household types, knowing some visit more frequently while others spend more per visit.

At the most basic level, a company could launch a structured process of learning about consumers’ intent and motivations and conducting experiments to leverage them, gradually scaling up from there. At the other end of the spectrum, companies can invest in research and big data analytics or engage consultancies with specific expertise. In-depth consumer research gives companies a detailed understanding of behavioral and attitudinal drivers that affect spending decisions. The most sophisticated firms are making data insights part of a broad strategy that involves every function across the value chain, from product development and marketing to sales and customer service.

Turn insights into activation

Grocers and other retailers have been on a roller coaster ride over the past holiday seasons as the pandemic, supply chain challenges, and inflation controlled how and where consumers spent their dollars. Although in-store shopping has returned, online shopping continues to be a major part of the holidays.

And as online grocery shopping continues to grow, utilizing customer insights to deliver the right experience at the right time is essential. Armed with the knowledge that shoppers are willing to spend more on premium items during the holidays while scaling back in other areas enables brands to plan accordingly. Tailoring inventory and operations to accommodate Digital Dabblers and Digital Champs is another smart way for brands to use their resources strategically and reduce waste.

Learn more about what to expect this holiday season

The holidays are fast approaching. Learn more about consumer insights and strategies that can help your company better engage shoppers and drive loyalty instead of basement bargains. Check out our new white paper, Holidays 2022: 8 key shopper insights and how brands can respond to win the in-store and digital shelf this season.

Download the white paper If you’d like to learn more about the evolution of online grocery shopping and how to build strategies around them, here are some additional pieces that might interest you:

Progressive Grocer: How Will Consumers Shop This Holiday Season? New research from 84.51° is shining a light on how consumers feel today about grocery shopping amid the pandemic and record inflation, as well as how they’re likely to shop this upcoming holiday season.

Winning the Digital Aisle - Kelsey Crookes and Peter Johnson: On this episode, guests Kelsey Crookes and Peter Johnson talk about the shift of grocery shopping from in-store to online.

What's in store for omnichannel retail? The knowledge you need now to meet consumers where they are shopping. Consumers are grocery shopping online more than ever. The path to purchase continues to evolve. Initially, pandemic-driven safety concerns drove them to their computers and smartphones to order everything from diapers to toilet paper.

KEY TAKEAWAYS

  1. Despite economic pressures, holiday shoppers are willing to splurge on more expensive grocery items.

  2. Online shopping habits lead to greater spend per order, but lower order frequency.

  3. Understanding the differences between Digital Dabblers and Digital Champs is key to connecting with customers.

  4. Make the online shopping experience effortless to turn one-time customers into loyal customers.

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