Webinar Explores Tariffs, E-commerce, Omnichannel Imperatives In Grocery

A recent webinar hosted by Grocery Doppio, “Decoding Q1 2025: Tariffs, E-commerce Realities and Omnichannel Imperatives in Grocery,” provided a candid look at the grocery industry’s performance in the first quarter of 2025, navigating the complexities of new tariffs, the evolving role of e-commerce and the need for technological and cultural shifts.

The panel, featuring Gaurav Pant, chief insights officer with Incisiv; Doug Baker, VP of industry relations with FMI; and Gary Hawkins, CEO of CART (Center for Advancing Retail and Technology), delved into issues impacting grocers today.

The conversation spanned from the immediate uncertainty caused by recently announced tariffs to the long-term strategic questions surrounding digital investment and the foundational changes required to thrive in a customer-centric, AI-driven future.

Tariff turmoil creates grocery industry whiplash

The webinar kicked off with a discussion on the newly implemented tariffs, creating a sense of instability within the grocery sector.

Pant highlighted a stagnation and even depreciation in customer sentiment and spending, with reduced basket sizes and lower discretionary spending. A recent “spurt” in spending was attributed to consumer anxiety surrounding potential price increases due to the tariffs.

Baker echoed this sentiment, describing the current environment as one of “whiplash” that is making business operations and decision-making challenging. He noted a tendency toward paralysis among retailers, leading to the postponement of planned investments.

“It’s effectively how can I remove costs? At this point, you can’t even really focus on the top line that much,” stated Baker, emphasizing the strain on cash flow as consumers pull back. He further pointed out the immediate impact on goods already in transit, creating significant uncertainty in procurement.

Hawkins concurred, noting that while the grocery industry might be less impacted than sectors such as automotive, the major unknown remains consumer sentiment and its effect on both top and bottom lines.

E-commerce conundrum: Does it really matter?

The discussion then shifted to a provocative question: Does e-commerce truly matter in grocery? Pant presented data from the first quarter of 2025 report, revealing a nuanced picture:

Overall grocery sales grew by about 3.4 percent.
Digital grocery sales saw a growth of about 4.8 percent, a positive trend but not the explosive growth seen in previous years.
Digital sales accounted for 13.6 percent of all grocery sales, a slight decrease compared to Q1 of the previous year.
Smaller grocers are struggling with digital growth, with larger players capturing the majority of the gains.
Traffic and conversion remain challenging, with organic traffic decreasing significantly and conversion rates at around 1.3 percent, on the lower end of the past three years’ data.
Customer acquisition costs (CAC) increased by about $2.10 per customer.
Third-party players like Instacart maintained their dominant share.
The average profit per digital order, while improving slightly, remained near breakeven at approximately 9.1 cents in Q1 2025, compared to a loss of 11 cents in 2021.
Projections indicate a significant consolidation of the digital grocery market share, with Walmart potentially holding 40 percent by 2030, while the share of “others” is expected to decline to 12.5 percent. Regional players are particularly vulnerable in this projection.

Given this data, Pant posed the question to the panel: Why should regional players, with limited resources, invest in e-commerce? And if they do, how should they approach it?

Hawkins emphasized the alarming trend of market share consolidation toward Walmart, which is reportedly on the verge of e-commerce profitability. He warned that online share gains for giants like Walmart will eventually translate to losses in physical store sales for competitors.

He also highlighted Walmart’s successful use of e-commerce as a driver for broader digital transformation, leveraging data and AI to create a growing competitive gap.

Baker noted that, from a shopper’s perspective, e-commerce provides crucial choice. He cited research indicating that a significant portion of consumers (at least a third) would opt for online shopping if they felt unsafe in their local brick-and-mortar stores. Eliminating this option could push customers toward competitors.

He also said that retailers catering to an upper economic level are outperforming, potentially due to their customers being less sensitive to economic headwinds or tariff impacts.

Baker suggested that Walmart’s success isn’t solely about e-commerce but the value-added services built around its platform, fostering customer loyalty.

Pant acknowledged that regional players focused on high-end merchandising and produce are finding success. However, he raised concerns about whether the growth of major players like Walmart signifies the loss of one or two shopping trips per customer from other retailers, a potentially significant and under-measured impact.

Strategies for regional grocery players in digital arena

Hawkins offered a prescription for regional players to compete:

Focus on user experience: Many regional retailers suffer from fragmented and unfriendly digital experiences due to the piecemeal addition of various digital components over time. A unified, comprehensive and cohesive user experience is crucial.
Leverage data: Retailers are underutilizing available data to understand shopper behavior, identify customers defecting to competitors and personalize retention efforts.
Embrace retail media: Growing digital engagement, both online and in-store, creates opportunities to leverage retail media revenue streams.

Pant added that focusing on omnichannel operational efficiencies, such as fulfillment and curbside pickup, can provide a more justifiable return on investment. He also emphasized the amplification of the store through digital channels, noting that about 70 percent of all grocery purchases are influenced by digital interactions. Unifying the online and offline experience is key to unlocking value.

Navigating tech terrain: AI readiness, data silos

The conversation then turned to the industry’s preparedness for the age of AI and agentic technologies, given the persistent challenge of data silos.

Baker stressed the importance of not waiting to engage with technology, including AI. He advised looking for leakage in the P&L as a starting point for technology application and cautioned against separating AI from the broader category of technology.

He underscored the critical role of data quality, accuracy and completeness as the fuel for the industry’s increasingly sophisticated engine. While acknowledging that the ROI on some technology investments, particularly AI, can have a long tail, he emphasized its potential to streamline data analysis.

A key learning from recent industry events, according to Baker, is the shift from a “we need AI” approach to identifying specific problems and then exploring how AI can provide solutions.

Hawkins echoed the centrality of data, noting it as a major headline at recent industry gatherings. While he observed a growing realization among retailers about the importance of data unification and cleanup, many still struggle with the “what next?”

He highlighted the emergence of Generative AI capabilities that can automate data cleaning and organization “to help take a lot of the pain out of that.” Hawkins also emphasized that AI is increasingly being woven into existing technologies like price optimization, assortment planning and labor scheduling, making them more effective. He believes the next step for retailers is to think more creatively about leveraging AI beyond traditional applications.

“I think what’s coming next is retailers realizing that they can begin to think outside the box a little bit here,” he said.

Culture and operating model: Unsung heroes of progress

Pant steered the final part of the discussion toward the often-overlooked aspects of culture and the new operating model required for grocery retail to evolve. He argued that technological advancements alone cannot drive progress without a shift in mindset and traditional frameworks.

Hawkins said retailers need to spend time identifying processes, systems and practices that have been in place for decades but may no longer be the best approach moving forward.

“Is the retailer willing to let go of how they’ve always done it or not?” He also suggested the need to develop tech-first thinking.

Pant called it a “legacy hangover” in terms of data.

He also mentioned the injection of young talent, “which is pushing the thinking forward.”