- Online grocery is growing quickly from a small base. Online grocery’s market value has grown from $12 billion in 2016 to $26 billion in 2018, suggesting that consumers are starting to get more comfortable ordering essentials and certain foods online. This newfound comfort, combined with the overall convenience of online grocery, is likely why the market is set to reach $117 billion in 2023, and there is plenty of room to grow, given that the grocery market on the whole was worth $632 billion in 2018.
- Grocers are rushing to take advantage of this potential, resulting in a highly competitive market. Both established grocery players, like Walmart and Kroger, and newcomers to the space, like Amazon, are expanding their curbside pickup and delivery offerings — the two basic components of online grocery — in an attempt to grab market share.
- The major online grocery players — Amazon, Walmart, Kroger, Target, and Aldi — are employing different strategies to find success. Amazon is leaning on its e-commerce and fulfillment capabilities to offer a variety of online grocery services, for example. Meanwhile, Walmart is using its strong brick-and-mortar footprint to its advantage. Still, others, like Kroger and Aldi, are working with third parties such as Instacart to provide their services.
- Regardless of their individual strategies, all grocers will need to crack the code of profitability. One signficant hurdle to attaining profitability is the issue of logistics. This can be approached in a number of ways, including using automation to lower labor costs, only operating a level of service necessary to meet demand, or finding ways to shrink last-mile delivery costs. Additionally, retailers will need to address consumer barriers to adoption to get the orders necessary to become profitable.
The State Of The Online Grocery Market
Online grocery currently comprises a small portion of grocery overall but is on a rapid rise. Adoption is still fairly low, with about 10% of US consumers saying that they regularly shop online for groceries, according to NPD. However, its market value has more than doubled from $12 billion in 2016 to $26 billion in 2018 — a growth trajectory that is possible because it makes up only a small portion of the $632 billion overall grocery market, according [...]