Despite unknowns, Iowa grocers increase stake in e-commerce

Customers line up for curbside pickup at the Edgewood Road Hy-Vee in Cedar Rapids after using Hy-Vee's Aisles Online to order groceries. CREDIT CINDY HADISH

With online grocery sales projected to reach $250 billion by 2025, Corridor stores are moving fast to keep expanding their offerings –  adding new digital options and thinking ahead to the future of shopping as studies show that segment set to continue its climb even after the pandemic ebbs.

Mercatus, which provides digital commerce guidance for grocery retailers, surveyed nearly 60,000 American shoppers across every region of the country last fall, finding online grocery will account for 21.5% of total sales by 2025. That’s a 60% increase over pre-pandemic estimates.

The survey showed 40% of online shoppers are likely or very likely to continue to purchase via online channels, although 78% of shoppers still prefer to go inside the store or utilize curbside pickup.

Kathy Varney is one such shopper. She first tried curbside grocery pickup as the COVID-19 pandemic began, and nearly a year later, doesn’t intend to change her routine anytime soon.

“I know the ins and outs now,” said Ms. Varney, who recently retired as a senior technical editor at Collins Aerospace in Cedar Rapids. “I love it.”

Iowa grocers, whose move to e-commerce was accelerated by the COVID-19 outbreak, are peering into the post-pandemic future to predict whether or not customers like Ms. Varney continue their online habits.

“That’s the million-dollar question,” said Amy Hospodarsky, brand manager at New Pioneer Food Co-op, which has stores in Cedar Rapids, Iowa City and Coralville.

Regardless of the future course of the pandemic, some grocers are fully plunging into e-commerce, with home deliveries, additional hires and new online options. New Pioneer is among them.

Sales on New Pi’s Co-op Cart, which launched in fall 2019, surged from just a handful of orders per day in early March 2020 to 175 daily that same month, as about 35% of its shoppers went online in response to the pandemic.

“The pandemic kind of threw us into the future,” Ms. Hospodarsky said.

Duties for some employees switched to fulfilling online orders for curbside pickup, she noted, and while those sales have leveled off to about 15% nearly a year later, the co-op will further dive into e-commerce soon by offering home deliveries.

“This is Phase 2 of e-commerce for us,” Ms. Hospodarsky said of New Pi’s new delivery service, which will be contracted out as it launches later in March.

Changes in buying habits, such as a trend toward more baking supplies as customers stayed home to cook, are difficult to predict, she said, but this spring looks to be equally promising for starter plants, which saw soaring sales in 2020, as consumers invested more time in gardening.

Fresh produce sales remain a hallmark for the co-op, Ms. Hospodarsky added, but whether or not the surge in beer and wine sales will continue the upward trend seen during the pandemic is unknown.

“In some ways, we feel we’re looking into our crystal ball,” she said.

The co-op is among the places Ms. Varney shops online, in addition to stores such as Hy-Vee and Target.

While some require a minimum dollar amount, Target does not, she noted, which makes it convenient to buy one or two items, with curbside pickup at the store.

Target is also among stores offering home delivery.

Others, like Fareway, offer only limited products via delivery – in the Boone-based chain’s case, frozen meats – but customers have been able to call in grocery orders for curbside pickup while a new online system gets underway.

Fareway is in the midst of transitioning into e-commerce. Online shopping just recently became available at select Iowa locations, with Corridor stores gradually being added. Customers will be able to place an order from their computer or mobile device and pick up their groceries the same day curbside at the stores.

“The pandemic has definitely accelerated the rate of adoption of online shopping,” Michelle Hurd, president of the Iowa Grocery Industry Association, wrote in an email. “Many of our members have added online sales, curbside pick-up or delivery, or some combination of these shopping options.”

Ms. Hurd noted that she expects online sales to level off as the pandemic subsides, but “the difference post-COVID is that more shoppers are now comfortable with online shopping and will opt for the convenience it provides when they are pressed for time.”

In 2019, online grocery sales grew by 20%, according to the Coresight Research U.S. Online Grocery Survey, and due to high demand during the pandemic, that figure surged to 36% by June 2020.

Still, although nearly half of shoppers report buying more groceries online due to COVID-19, Ms. Hurd said the number of people shopping primarily online remains low.

She added that many grocer members struggled to find enough help throughout the pandemic, and retailers have implemented wage increases and added benefits such as tuition assistance to attract and retain employees.

“I expect that hiring will remain a priority even as the pandemic subsides,” Ms. Hurd wrote.

Hy-Vee is among those, with 10,000 employees being hired for Aisles Online in its eight-state region, including 350 to 400 added in the Corridor.

“Although our staff needs have increased across all departments in our stores, the most growth has been with Aisles Online teams,” Dawn Buzynski, director of strategic communications for Hy-Vee, wrote in an email. “We are adding more personal shoppers and even created specialized positions such as produce shoppers who provide quality assurance for online customers ordering produce and perishables.”

Activity on Aisles Online quadrupled at the beginning of the pandemic, between March and May 2020, Ms. Buzynski wrote, and “although we have seen some activity leveling off because customers are choosing to shop for groceries in our stores again, use of Aisles Online still remains high and we expect many to continue to use our online platforms as their primary way of shopping at Hy-Vee.”

Hy-Vee also is in the process of hiring 1,000 pharmacy technicians throughout its region to assist with COVID-19 vaccinations, she noted.

Ms. Buzynski added that Hy-Vee anticipates more customers choosing online shopping as their main way to shop for groceries “primarily because they have tried our Aisles Online service during the pandemic and like it for its ease of use, time savings and convenience.”

Walmart was among retailers to experience a pandemic boost, as Americans ordered groceries and more from home, but those days may be numbered.

In February, Walmart’s fourth-quarter earnings fell short of expectations, even as the nation’s largest retailer reported strong growth in its U.S. e-commerce for grocery pickup and delivery.

Walmart reported e-commerce sales grew in the U.S. by 69%, an enviable number, but that represented its slowest growth rate since the start of the pandemic.