, but for now we’re still in early days. The growing pains of this transition could be a major gamble of investment for many retailers, particularly ones without the structural support to handle expansion into this highly competitive arena.
At their core, both a play towards e-commerce and an expansion of loyalty programs are a means of customer retention; and retention will be critical to protect the gains made during 2020. As restaurants reopen, we will likely see some sort of pendulum shift back to in-person dining; or, worse-case scenario for grocers, pent-up demand for out-of-home dining could send the grocery industry into a negative growth trajectory near-term.
Online promotions and discounts are overwhelmingly being funded by the retailers themselves in these early stages of e-commerce market development. Retailers currently have thin margins to absorb new customer discounts such as 20 percent off a first order or $50 off the first three orders. Further, retailers haven’t needed to run these types of offers in stores because location and convenience have driven new customer acquisition, and promotions are historically funded by brands.