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Study Predicts Boom in Online Grocery Shopping

A new study reports the number of U.S. households using online services to buy food and other goods and services for the home is expected to grow from fewer than 200,000 as of now to 15 million to 20 million by 2007.

The study by Andersen Consulting said these households will represent a wide range of demographics and will spend as much as $85 billion on groceries and related purchases through online services.

The rapid expansion of online grocery shopping portends dramatic market changes for traditional retailers and manufacturers, who must develop new strategies immediately to be prepared, according to the study.

The findings stem from two years of research by the Consumer Direct Cooperative, an Andersen Consulting-led consortium of 31 organizations, including The Coca-Cola Co., Harvard Business School, Kroger, Nabisco, Paine Webber, online grocer Peapod, Procter & Gamble, Shell Oil, Streamline, and United Parcel Service.

The research consisted of interviews with more than 1,800 consumers across the U.S., the tracking of the purchasing histories of 800 online shoppers, an analyses of current business models for delivering online services, and the design and testing of potential consumer direct business models.

"Consumers across the country have made it clear that they're ready for online grocery shopping. They see it as a way to save time and simplify their lives," said Vic Orler, lead author of the study. "Consumer direct services are about to become big business, and companies need to start thinking now about how to take advantage of this imminent boom, or else they'll be left behind."

The study, entitled "Early Learnings from the Consumer Direct Cooperative," identified six major groups of potential online grocery shoppers:

  • Shopping Avoiders, who dislike grocery shopping
  • Necessity Users, who are limited in their ability to go to the store for some reason
  • New Technologists, who are typically young and comfortable with technology
  • Time Starved, who are insensitive to price and will pay extra to free up time on their schedules
  • Responsibles, who have available time and who get an enhanced sense of self-worth from shopping
  • Traditional Shoppers, who are older, avoid technology, and genuinely enjoy shopping in a store.

All except the "Traditional Shoppers" group showed at least some willingness to use online grocery shopping services, the study showed.

"Executives should not allow themselves to be lulled into complacency merely because the online industry is still evolving," Orler said. "Navigating this new market is and will be an extremely complex challenge. Our research indicates that executives have decisions to make now to position their companies for success."