How can Regional Grocers Compete with Walmart Online?

Walmart's Growing Market Share in eCommerce

Walmart has been steadily increasing its market share in the online grocery sector, significantly impacting regional grocers across the United States. According to a recent report by Brick Meets Click and Mercatus Technologies Inc , Walmart captured a staggering 37% of U.S. online grocery sales in Q2 2024. This represents a substantial gain from previous years and has put immense pressure on smaller, regional players but also the big guys like Kroger, Albertsons, Publix, etc.? The data in the Brick Meets Click report is compelling but unfortunately not surprising. Walmart has been investing significant dollars and resources in technology to enhance the customer experience to grow their online grocery business and the price and convenience is stealing once loyal customers from many regionals.

Why is Walmart investing so much energy on growing their eCommerce business?? According to Bricks Meet Clicks Grocery e-commerce sales are predicted to grow 3 times faster than in-store sales. Could it be that online grocery/click and collect wasn’t just a COVID fad?! While not growing at the explosive rate it did during the pandemic, customers are continuing to enjoy the convenience of a digital order.? In 2024, we have seen the online grocery business normalize a bit, but it is not going away, especially among millennials who have more than doubled their penetration of the eCommerce grocery business in the last five years from 14% to over 30%.?

Online grocery sales are predicted to increase at a compound annual growth rate of 4.5% over the next five years — more than?three times faster?than the 1.3% rate forecasted for in-store.

Walmart has gained market share in several areas including.

• Rural and suburban areas: As the famous stat goes 99% of the country’s population lives within 15 miles of a Walmart.? Their 4,600+ stores in the US provides Walmart an extensive store network and provides a convenient pickup option for customers.?
• Price-sensitive consumers: In this inflationary period Walmart's reputation for low prices attracts budget-conscious shoppers seeking online grocery convenience.
• Time-strapped customers: Walmart's efficient fulfillment processes and delivery options cater to busy consumers who value convenience.

The good news is that all hope is not lost.? There are solutions that several regional grocers have already implemented and have significantly reduced their exposure and grown their loyal base of customers.

Regional grocers can’t do much about the sheer number of locations Walmart has but they can combat the customers they are taking.? They need to focus on their unique strengths in their communities and leverage technology to enhance the customer experience. Here are just a few ways retailers have defended and even expanded their turf:

• Hyperlocal focus: Emphasize locally sourced products and partnerships with regional suppliers to differentiate offerings.
• Personalized experiences: Utilize customer data to offer tailored recommendations and promotions throughout the process.
• Enhanced convenience: Explore innovative 1st and 3rd party delivery options and implement technology to enhance pickup.
• Order Management and Fulfillment engine: It’s not enough to have a great front end ordering process. A comprehensive order management and fulfillment solution is necessary to own the entire experience and scale order volume.? There is nothing worse than having a great website/mobile app with a high conversion rate but not having the capacity to fulfill the volume in a timely manner.
• Pick up enhancements – While delivery is growing, pickup still dominates the fulfillment preference for customers.? Pickup is expected to grow faster (5.4%) than delivery (4.4%) and ship-to-home (2.8%) with pickup predicted to account for nearly 47% of all online grocery sales come 2028. Expanding pickup windows, utilizing location technology to shorten wait times and enabling upsells during the pickup process will help close the gap and increase an already larger basket size.
• Strong loyalty programs: Reward repeat customers with exclusive discounts and benefits across the store.
• Reduce Substitutions – If you are utilizing a perpetual inventory solution use that data to integrate into your front-end eCommerce sites as well as your fulfillment engine to educate customers and associates that those items may be out of stock soon or simply in the back room.? It is a unrealistic to think that we can completely eliminate substitutions altogether, but with integrations between eCommerce and inventory systems you can significantly reduce the pain for customers and associates. Substitutions are typically the number one complaint from customers as they don’t get 100% of what they want from their shopping experience.? Minimizing subs and handling the communication when they do happen should be a major focus of anyone’s eCommerce program.

Regional grocers can level the playing field by adopting technologies that help with all the above.? Some retailers have the IT resources to build some of the solutions required to enhance their eCommerce ecosystem.? However, the majority either don’t have the resources or the expertise to build themselves.? The good news is there are plenty of Cloud-based solutions and technology providers that specialize in these solutions.? This can help regional grocers get to market faster, with less internal resources and most likely without significant upfront investment.