Competitive Dynamics That Shape Consumer Preferences

September 12, 2020

Price is the most important driver

In the first installment of this series, How to Win in Online Grocery, we noted that “online grocery offers a significant opportunity, which may favor the incumbents, rather than the world-renowned online leader, Amazon.” Our conjoint analysis of over 1,000 Americans who are the primary grocery shoppers for their households documented the expected finding that price is the most important driver for online grocery adoption. The respondents also highlighted that delivery is preferred over curbside or in-store pickup (though the high cost of delivery puts this at odds with achieving low prices). Unexpectedly, we found that expansive variety beyond the traditional grocery store assortment was not valued and that speed was the least important differentiator as long as the groceries were available the same day.

Finding the balance

Trying to find the balance between “cost-to-serve” and “willingness-to-pay,” we explored a model that would play to the strengths of the traditional grocery store. Our simulation demonstrated that a curated selection offered for same-day curbside pickup at a 5 percent discount could grab a significant share. But, we also discovered that over a third of our respondents would still prefer to continue going to the store rather than switch to an online model. This whitepaper explores why some shoppers resist the shift to online and remain stuck in their traditional grocery shopping habits. We also consider how competitive dynamics and investment decisions of grocery providers shape shopper habits. We look back at the history of the modern grocery store in the United States, as well as the different trajectories for online groceries in the United States, France, and the United Kingdom.

The third paper in the series will build upon the original report by conducting a new conjoint survey. Conducted in mid-August 2020, the new survey is designed to discern behavior changes adopted during the pandemic since our original survey was conducted in early March—when the US had recorded fewer than 1,000 cases of COVID-19. But before we explore how habits and preferences have changed over the ensuing six months, we prepared this report to share further analysis of the original data and to explore the related issue of how competitive reactions shape the options available to consumers as well as their behaviors (though not necessarily their preferences)...

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