Have Grocery E-Commerce Sales In The U.S. Turned The Corner?
Yes. And no.
According to a 2019 Coresight Research study, some 36.8% of U.S. consumers bought groceries online in the past year, up significantly from just 23.1% a year prior. Not surprisingly, it’s older millennials (30-44) who are leading the charge, with 45% having purchased groceries online. However, the study also found that Millennials tend to buy just a small proportion of their grocery products online, with nearly three-fourths of these customers stating only buying a small proportion of their groceries online. So, progress has been made but there is a massively long way to go to significantly alter customer shopping patterns.
Food retail is currently sitting at just 2% e-commerce penetration compared to 12% overall. And, given that food is far and away the largest retail category, its laggard position represents both the biggest challenge and biggest opportunity for e-commerce. The reasons for the low penetration are well documented, from inherently low margins and bulky multi-temp products to the consumer need for selection (ripeness of banana, trim on meat, etc.).
That said, there is so much activity being directed to this space that growth (as evidenced by the survey) is inevitable. It is also apparent that there is no one size fits all solution for grocery e-commerce and companies will continue to attempt a multitude of approaches to “profitably” get groceries to American consumers.
Equally important is who will ultimately prevail in the grocery e-commerce wars. Coresight’s survey tells us where customers are shopping today. Amazon was mentioned by 62% of shoppers with Walmart the next closest at 37%. However, Walmart had the biggest gain, up a full 12 points from a year prior and Target jumped past Kroger, mentioned by 16% of consumers. Amazon is hitting customers on all fronts, from the immediacy of Prime Now, through full-service offerings from Amazon Fresh. Walmart has focused heavily on click and collect but also offers delivery options. Target bought Shipt to provide immediacy of delivery and Kroger will soon have it all (ClickList for pick-up, Instacart for immediacy and a partnership with Ocado for automated home delivery).
Will one of these delivery methods prevail? Not likely. Consumers reported an even split between pick up and delivery, with pick up mentioned by nearly 50% of consumers as their main source of fulfillment and delivery at 48%. There are continued efforts on both of these options with Walmart rolling click and collect to over 2,100 locations today and with plans to reach 3,000 and Kroger’s aggressive move with Ocado to streamline home delivery.
It will be interesting to continue to track consumer adoption. The biggest retailers continue to bet big on grocery e-commerce being the next big thing. It will take a combination of a willing consumer and a profitable business model to see this come to fruition.