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TABS Analytics is out with its 2016 Food and Beverage Study, positing that "online grocery shopping continues to be weak, with just 4.5 percent of consumers regularly purchasing food and beverages online compared to 78 percent of consumers regularly purchasing food and beverages from brick and mortar grocery outlets.

"Although regular online grocery purchasing increased by half a percentage point since the 2015 study (from 3.9 percent in 2015 to 4.5 percent in 2016), it has yet to break five percent in the four years TABS has conducted this study."

The study only identifies one "bright spot" in online grocery shopping - Amazon, which is says realized "a two percent increase in shopper penetration from 14 percent in 2015 to 16 percent in 2016, the TABS study found. Amazon was the only online shopping domain to increase shopper penetration in 2016."

The study goes on: "Walmart.com remained flat in penetration at 12 percent in both 2015 and 2016, while the grocery banners, overall, dropped from 16 percent in 2015 to just 11 percent in 2016. Target.com saw a two percent grocery penetration decline from seven percent in 2015 to five percent in 2016. The decline in Target.com penetration mirrors their exit from the curbside pickup service."

Kurt Jetta, CEO and founder of TABS Analytics, suggests that the study results indicate that "online grocery is failing. For the fourth year in a row, consumers have turned their backs on buying groceries online no matter how much online grocery retailers try to entice them. Sixty-nine percent of consumers never buy groceries online. With only 15 percent of consumers stating loyalty to shopping for groceries online, this is not a sustainable business model, especially when you consider the industry loyalty rate benchmark is 70 percent."

The TABS study also suggests that companies that focus on appealing to millennials are making a tactical error, since those shoppers are not the center of the food retail target.

"Unlike the cosmetics industry that thrives on millennials buyers," the study says, "just over a quarter of millennials are heavy buyers of food and beverage consumables, compared to 35 percent of households with children who are heavy buyers of food and beverages. Just 20 percent of households with no children are heavy buyers.

"Millennials are also harder to target with deals than other demographic groups since their participation in deals is well below the national average, particularly circulars and free standing inserts. Despite an uptick in participation in 2016, millennials use of circulars remains a full 12 percentage points below the study average of 42 percent. The gap for free standing inserts is even larger at 14 percentage points below the study average of 34 percent."
KC's View:
A couple of things here...

While I don't doubt that Amazon is doing better than everybody else when it comes to online grocery, and that traditional grocers are seeing mixed results in the segment, I think it is absurd to suggest that there is no path to success for e-grocery and that it is a failing concept.

First of all, I know retailers that are doing a pretty good job in e-grocery ...and they tend to be the companies that have a made a real cultural (and yes, financial) investment, understanding that it is a long game that they're playing. Nobody is suggesting that online grocery will decimate traditional bricks-and-mortar stores ... but it would be foolish to suggest that the trends that have changed virtually every retail category will fail when applied to grocery. It will take longer, and there certainly will be failures, and the business model probably will go through various iterations. But the next generation of consumers is going to want the next generation of retailing to be available to them.

And speaking of generations ... of course it makes more sense to market largely to people with kids rather than to millennials without kids. That said ... those millennials will have kids pretty soon, and they'll be the center of the target, and they'll demand different products and services from the stores with which they do business. Ignoring them now would be a mistake

Right now it is hard to figure out how to do all this stuff. One has to have more compelling stores while trying to figure out the online business, and one has to market to families with kids while adapting to the differing demands of millennials and succeeding generations. But it strikes me as critical to do all this stuff ... sort of like the guy who used to spin plates on the old "Ed Sullivan Show."