Online Purchases Expected to be 21.5% of Grocery Sales by 2025

The entire online grocery business is projected to reach $250 billion in five years.

September 22, 2020

ALEXANDRIA, Va.—E-commerce will account for 21.5% of total grocery sales, worth $250 billion, within five years, according to a new survey of 60,000 U.S. shoppers from Mercatus, an online grocery vendor, and Incisiv, a research firm.

GroceryDive.com reports that 43% of shoppers are now buying groceries online compared to just 24% two years ago. While COVID-19 concerns and convenience largely account for the boom over the past six months, research indicates that retailers should continue to focus on optimizing both online and in-store shopping going forward. The survey also suggests that grocery retailers can attract the growing number of consumers ages 45 and older who have recently turned to new shopping strategies, with 35% trying online grocery orders for the first time and 46% opting for new conveniences, like curbside pickup. That population is likely to continue those recent shopping habits, the report notes.

The report also found that shoppers are loyal to their local grocer when it comes to in-store shopping, but they’re less loyal when shopping online, according to Amar Mokha, COO and benchmarking lead at Incisiv.

During the early stages of the pandemic, 30% of shoppers surveyed said they switched their primary shopping destination. Of these, 60% said they switched brick-and-mortar stores, and 40% said they switched online providers. Just 8% of those surveyed said they shifted to a pure-play online grocer like Amazon, indicating how much shoppers value grocers having both physical and e-commerce operations.

While COVID-19 has disrupted shopping habits, the study predicts online sales growth will stabilize but continue to increase even as shoppers migrate back to in-store shopping. A monthly survey from Brick Meets Click and Mercatus found that the average order value for online grocery set a record of $95 in August. That same month, delivery and pickup sales dropped to $5.7 billion from the peak in June of $7 billion.

Online grocery services’ expanding user base and growing shopper satisfaction point to an “optimistic” future for grocers, said Neil Stern, senior partner at McMillanDoolittle, a retail strategy and consulting firm. But there are several obstacles that could make that $250 billion estimate difficult to reach by 2025.

Grocers would need to heavily invest in updating their infrastructure and technology, Stern said. He pointed to Kroger’s partnership with Ocado on automated warehouses and the agreement between H-E-B and Swisslog to build automated micro-fulfillment centers. Getting the infrastructure in place takes time and resources. “Even if the demand is there for the consumer, it's not that easy to fulfill it,” he said. 

Successful online grocery retailers will also need to focus on meeting customers’ expectations and seamlessly offering online and in-store shopping. Real-time inventory visibility is vital, with 66% of survey respondents who use online shopping rating it as “very important.” Plus, grocers need to improve pickup and delivery slot availability, promotion and coupon availability and product substitutions to boost customer loyalty online.

Of the 60,000 survey respondents across 20 states, about 71% were female, just under half were ages 45 to 64, and 31% were ages 65 and older.

Advertisement
Advertisement
Advertisement