While 2019 got off to a rocky start, with a partial government shutdown and trade challenges attributed to tariffs, consumers at the close of 2018 were buoyed by their strong household financial health and were spending accordingly—particularly in e-commerce. That’s according to IRI’s new Consumer Connect report, Consumer Confidence Reflected in E-Commerce Growth.
Notes the report, nearly 55% of consumers said their households were in good financial shape in Q4-2018, up 4% from Q3-2018 and 2% from Q4-2017. At the same time, the e-commerce channel grew a whopping 35.4% to $58.9 billion for the 52 weeks ending Dec. 30, 2018. While IRI says these sales account for just 11% of total Consumer Packaged Goods retail sales, e-commerce accounts for 64% of total omnichannel growth.
According to IRI, consumers are becoming increasingly comfortable with online purchasing, and retailers of all types are upping their online offerings, working to enhance the shopper experience with simple navigation, assortment, good values, and delivery options.
“Millennial and Gen X consumers are more at ease with online purchases than older generations, and as e-commerce becomes more of a routine, those shoppers are migrating offline efforts to save money to their online practices,” says Joan Driggs, Vice President of Content and Thought Leadership for IRI.
“Pure-play retailers garner more than half of all online CPG purchases, but traditional brick-and-mortar retailers continue to invest and win share of the e-commerce pie,” says Sam Gagliardi, Head of E-Commerce for IRI. “It is incumbent upon the future success of these traditional retailers to invest in the shopper experience both in-store and online.”
Non-food items, particularly personal care and homecare products, top online purchases. IRI E-Market Insights—the group’s online sales measurement and insights platform—reports that vitamins, pet food and supplies, and skincare products are the top- selling items. Pet food and supplies are often bulky items that are inconvenient to purchase off store shelves. Vitamins, typically purchased for specific health benefits, are likely considered easier to shop for online through keyword search and with access to additional information.
Specifically, Q4 Consumer Connect survey respondents—including 29% of total U.S. consumers, 45% of millennials, 35% of Gen Xers, 27% of boomers, and 14% of seniors—say buying online allows them to find lower-priced beauty and personal care product options. These results closely mirror their responses regarding homecare products, with 30% of total consumers, 43% of millennials, 36% of Gen Xers, 27% of boomers, and 19% of seniors saying they find lower-priced options online.
While fresh and frozen items rank among the bottom of e-commerce sales categories, there are signs of significant growth, indicating that retailers—likely with the support of such flexible options as click-and-collect—are starting to crack the code on delivering fresh and frozen items online.
Millennials and Gen Xers, the two generations most likely to find value in shopping online, are also the generations that report having the most difficulty affording needed groceries (34% of millennials, 36% of Gen Xers). Fifty-four percent of millennials and Gen Xers report they are less likely to make impulse purchases when buying online. With this in mind, e-commerce should be touted as a tool for helping shoppers stick to their budget. Overall, 50% of total respondents report they are less likely to make impulse purchases online, including 49% of boomers and 44% of seniors.
The report also notes that 38% of all consumers like ordering online and picking up in the store, because it is convenient and is a good way to avoid shipping fees. In fact, 49% of millennials, 48% of Gen Xers, 38% of boomers, and 24% of seniors feel the same.
In addition to purchases of bulky or heavy items, such as pet food, shoppers are increasingly going online for more sensitive purchases. IRI E-Market Insights reports that gastrointestinal and adult incontinence products are among the largest e-commerce growth categories. Says IRI, these products are not what people imagine themselves needing, so when these occasions arise, it’s both a comfort and a convenience for shoppers to learn about and order products online.
“E-commerce sales will continue to climb in 2019 and beyond, with retailers increasingly investing in better ways to engage shoppers, including with improved navigation and mobile access, delivery and payment options, and endless aisle assortments,” concludes Gagliardi.