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10/06/2021

Private Brands Make Gains in Online Grocery

Grocery has been a top retail sector since the start of the COVID-19 pandemic, with sales surging in-store and online.
Online grocery shopping

The high demand has coincided with an uptick in the prevalence of private labels from grocery retailers, and e-commerce is still a huge opportunity. That’s according to FMI (The Food Industry Association), which recently published a report on “The Power of Private Brands 2021.”

In 2020, e-commerce sales surged 69% across food and non-food retail. E-commerce sales of edibles rose 97% last year, compared to 57% for non-edibles. In terms of dollars, however, edibles and non-edibles essentially grew at the same rate. That momentum has carried through 2021, and the majority (86%) of food retailers have online sales. Plus, nearly all (95%) saw online sales increase last year, FMI found.

Shopper Insights

 

Online sales climbed as a result of shoppers being impacted by COVID-19. More online shoppers (68%) were either very or extremely concerned with COVID-19, compared to 56% of non-online shoppers.

Men were slightly more likely to be online shoppers compared to women, at 52% to 48%, respectively. Millennials are the biggest share of online shoppers, at 42%, compared to GenX, at 24%; Boomers, at 18%; and Gen Z, at 13%. Households with children made up a significant portion of online shoppers, at 44%. Suburban and urban shoppers both shopped online at roughly the same rate.

In terms of where shoppers were buying their groceries online, big-box retailers were the clear winner, according to FMI. That’s reflected even in recent 2021 earnings reports. For example, Walmart’s fiscal second quarter of 2021 earnings revealed food sales continued to increase throughout the year.

“When it comes to online grocery shopping, we see a rise in shoppers utilizing mass stores,” the FMI report found. “Mass food retailers went from 12% to 38%, a 26-point jump throughout the COVID-19 pandemic.”

Some of that share came from supermarkets, which saw their share as primary stores drop from 44% to 39%. Mass stores saw their share as primary stores rise from 26% to 33%. However, supermarkets still have a greater share of shoppers than mass stores––76% compared to 64%. Mass stores have a significant advantage for online orders, with a share of 38% compared to 27% at supermarkets.

Brand Expectations

 

When shopping online, consumers are typically loyal to the brands they know and love, whether that’s a retailer’s private brand or name brand. When it comes to searching for products by name, more shoppers are likely to look up the name brand (43%) compared to the private brand (37%). However, private brands had a moment in 2020, with e-commerce growth of 73%.

Consumers are more likely to return to private brands from finding the items in their order history or last order basket, saving in their favorites, navigating to private brand products using departments/filters or by browsing the “you may also like” list, FMI reported. 

Consumers can find 67% of private brands assortment on e-commerce platforms, helping boost sales online. In 2020, 14% of private brand sales were online, leaving big opportunities for retailers to promote their private labels. 

Private labels performed well last year, according to FMI, as 75% of survey respondents said private brands performance in e-commerce either met or exceeded expectations 75% during the past year. During the pandemic, supply chain shortages along with bigger shopping habits among consumers led to shortages of some key name-brand items, giving private brands a new light.

Many respondents were bullish on private brands, with some noting “retailers stepped up their game,” and private brands “grew quickly to fill voids where brands could not supply.” Critics of private labels noted brands lacked focus, presence and strategy. 

Despite the naysayers, retailers are looking at how to maximize private brands, with 77% of survey respondents saying their organizations have shared quantifiable private brand goals across the enterprise. More than half (52%) are boosting private brand strategies for e-commerce.

Optimizing search online for private label products will help retailers get their items in front of shoppers, while others are looking at social and digital media marketing, product recommendations, customer reviews/tags and optimizing filtering of products as the top strategies in marketing online.

“Why wouldn’t you want to make private brands highly visible in your digital experience?” Chief Retail Officer of FitForCommerce, Kathleen Kimple, said in the report. “These items will be highly visible in store, and you want to give them the same visibility in your e-commerce store as well.”