Online grocery shoppers love brands and fair trade over low price

Grocery is the next battleground for online commerce, having seen a temporary surge in the COVID-19 pandemic that companies now aim to capitalize on. However, brand managers and retailers find themselves uncertain about the implications for their consumer segments and products, including national versus private label brands, organic products, and fair-trade products.

Based on unique single-source data on attitudes and behavior of over 20K households with over 4M purchases across 5 years, my peer-reviewed paper with Philipp Brüggemann uncovers key differences between offline-only and also-online grocery shoppers. Despite their preference for convenience, online-also shoppers tend to be younger, reside in larger cities, and exhibit more positive attitudes toward buying local and environmental responsibilities. These consumers care less about price and are more likely to buy national brands online compared to offline. Morever, they express more favorable attitudes toward organic and fair-trade products and buy them more than offline-only shoppers do. These cross-sectional differences are attributable, in part, to demand-driven factors and, in part, to supply-side effects.

GfK Consumer Panels & Services provided us with German household panel data from 2016 to 2020, sourced from?GfK Consumer Panels & Services. This dataset comprises 4,142,485 instances of both online and offline purchases across product categories including chocolate, coffee, hair shampoo, and laundry detergent, reported by an average of 21,428 households. We augment this data with annual questionnaires completed by the same households, detailing their demographics and attitudes. Here's how the data looks like:

From a consumer demographics perspective, the empirical findings indicate that offline-only shoppers tend to be older and reside in larger households, potentially leading to a higher familiarity with and preference for private labels. Thus, retailers have an opportunity to strategically target online grocery shoppers with innovative private label offerings to expand their market share in the online domain. This strategic approach has the potential to mitigate the substantial disparity in market share of private labels between online and offline channels, particularly considering the relatively smaller differences in consumer attitudes. These findings underscore significant potential for retailers to leverage the online channel for the distribution of private labels.

As to organic products, the typical attitude-behavior gap is reversed online: consumer behavior diverges more significantly than their attitudes alone would indicate. While online-also consumers say they like organic products (more than offline-only consumers do), they buy them in even higher volume online. This points to the influence of supply-side factors, such as the assortment of organic products offered by retailers, and how easy it is to find and compare them online. Online retailers, in particular, have the advantage of curating their organic product selection more effectively due to the limitations of physical shelf space, potentially nudging consumers with lower organic product attitudes to purchase them.

Our analysis yields similar findings regarding fair-trade products: better attitude among online-also shoppers, and even more purchases. The disparities in both consumer attitudes towards fair-trade products and the offline and online purchase patterns of also-online grocery shoppers are pronounced, statistically significant, and exhibit comparable effect sizes. This alignment between consumer attitudes and behavior suggests a primary demand-driven effect between the online and offline channels, underscoring the importance for retailers and brand managers to align their assortments accordingly.

How to help shoppers try out online grocery? Loyalty cards are used more by also-online shoppers than by offline-only shoppers. Targeting offline-only consumers who already engage with loyalty programs presents an opportunity to foster their transition to also-online shopping, driven by the familiarity with loyalty schemes.

Study Limitations: what should we research next?

Beyond the focus on a single country, our empirical inquiry focuses on four product categories. While we deliberately encompass a diverse range of products (chocolate, coffee, hair shampoo, laundry detergent), alternative product classifications may yield disparate findings concerning purchases. For instance, fresh produce might exhibit distinct behaviors due to the inability to physically examine items online, which is particularly pertinent for perishable goods like fruits and vegetables. Moreover, the prominence of coffee presentation in the online realm compared to offline settings could influence outcomes. Therefore, we advocate for researchers to explore supplementary product categories and potentially incorporate context-specific considerations.

Another limitation pertains to the absence of longitudinal analysis after the Covid-19 pandemic. Particularly pertinent is the inquiry into whether the pandemic instigates enduring transformations in online and offline grocery shopping behaviors, or if individuals who adopt online shopping during the pandemic revert to their prior habits (offline-only grocery shopping) post-pandemic. Companies that proactively anticipate this trajectory can tailor their online assortments accordingly, thereby attaining competitive advantages.

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