Report: Online grocery sales will increase 10 times faster than in-store
- Online grocery sales will increase at 10 times the rate of in-store sales over the next five years, according to a report from consulting firm Brick Meets Click. The firm forecast e-commerce sales growth at 13% per year compared to 1.3% for store sales.
- Brick Meets Click also projects that e-commerce will account for 8% of U.S. grocery sales by the end of 2022 — up from 5% at the end of last year.
- The firm notes that online food purveyors that utilize a common shipping carrier, like Amazon.com and meal kit companies, will experience slower growth than so-called "in-market" companies that fulfill via direct delivery and store pickup. However, these in-market players also face stiffer competition, with large cities offering an average of ten online grocery options. “As a market develops in this way, it attracts an expanding online shopper base; however, it will also trigger switching from one provider to another among existing active shoppers as they look for a service that better fulfills the promise of a better shopping experience,” David Bishop, partner with Brick Meets Click, said in a statement.
Together with the Food Marketing Institute and Nielsen’s recent findings that online grocery adoption is accelerating — 70% of consumers set to do at least some of their shopping online by 2022 — this latest report shows that grocers must lay the groundwork for the future now.
Most chains have taken the first steps in the wake of Amazon’s $13.7 billion purchase of Whole Foods. Many linked up with service providers like Instacart and Shipt, while others added store pickup options. It’s all been in the name of leveraging their most valuable assets — their stores — to compete in the growing field.
Now, we’re seeing the giants groan to life. Amazon offers Prime Now delivery from Whole Foods stores in ten markets and will expand nationwide throughout this year, while Walmart promises the same. Target, formerly a laggard in e-commerce, will become the first chain to offer nationwide grocery delivery by the end of this year.
Pure-play providers, which often don’t have the same brand recognition and deep-rooted customer loyalty that brick and mortar grocers do, will continue to nibble at the margins. The one exception here could be Amazon and its Fresh service, which scaled back recently but could see a resurgence now that Whole Foods stores and distribution centers are in play.
For the many conventional, club and discount retailers out there that rely so heavily on their stores, e-commerce has become a drag on profits, with the costs outweighing the benefits. But as Brick Meets Click notes, grocers will have to figure out ways to make this side of the business profitable.
This doesn’t have to come purely through online sales. Innovative retailers are using e-commerce to expand their customer base and deepen their engagement with existing shoppers. Sprouts Farmers Market finds that offering home delivery expands its reach past the typical drive time. Hy-Vee offers recipes and assorted promotions alongside its Aisles Online shopping platform, while retailers like Food Lion have rolled out new mobile apps that help bridge the gap between the online and store experience.
Aggressive, well-funded players like Walmart, Kroger and Amazon are positioned to be the main beneficiaries in online grocery. Many grocers won’t be able to offer the same assets, pricing and promotions they can. But they can use their online platforms to differentiate themselves, and to build loyalty with their longstanding customers.
Most shoppers don’t do all of their shopping online, and this fact will still hold true years from now. By using brick-and-mortar locations and their online platforms to make shopping easier and more seamless overall, grocers can remind their customers of what they stand for and give them reasons to continue shopping with them.
- Brick Meets Click Online grocery forecast: What's impacting how far and fast it will grow
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