Grocery Ecommerce to Outgrow In-Store Sales Tenfold

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Grocery Ecommerce to Outgrow In-Store Sales Tenfold

05/07/2018
Grocery Ecommerce to Outgrow In-Store Sales Tenfold

By 2022, nearly one-tenth of total grocery sales will be online, expected to grow 13 percent each year compared with the 1.3 percent compound annual growth rate expected in-store, new research from Barrington, Ill.-based retail consultancy Brick Meets Click (BMC) reveals.

Online grocery sales should reach more than 8 percent by the end of that year, according to BMC, which gathered the results from a market model it developed over the past five years that incorporates market, competitor and shopper elements from its grocery insights platform, Grocery IP.

“This illustrates the impact that online is having on how grocery retailing is conducted,” said David Bishop, partner at BMC, which will discuss the results further in an upcoming webinar. “Our forecast numbers show steady growth, and this supports the case for two important points. First, online grocery is already important and will become even more important in the near term, and second, the store will continue to be the place where grocers make most of their sales – but the growth of ecommerce puts even greater pressure on retailers to find ways to make this part of the business more profitable.”

The forecast covers all departments sold by brick-and-mortar grocers across fresh and packaged goods, excluding only pharmacy. The forecast for online sales is driven by a framework that divides the market into two distinct types – pure-play versus in-market providers – and accounts for key growth drivers related to accessibility, attractiveness and acceptability.

“It’s critical that retailers understand how far, how fast and where online grocery will grow in their markets so they can more effectively adapt their strategic plans and make investment decisions. Analyzing online sales by provider type while leveraging drivers of growth helps us more accurately and confidently gauge the direction and speed of growth for the different online types over the next five years – whether at the national market level or in specific metro areas,” added Bishop.

The forecast is based on the reality and complexities related to understanding U.S. online grocery today, and shows that the two online provider types are at different stages of their life-cycles:

  • In-market providers have physical stores (or other facilities) in close proximity to shoppers and fulfill via delivery and/or pickup methods. These include brick-and-mortar grocery retailers with online grocery services; online delivery providers like Peapod, FreshDirect or AmazonFresh; and third-party personal shopper services like Instacart, Shipt or Prime Now.
  • Pure-play providers use ship-to-home via common carrier. These include, but aren't limited to, Amazon.com (Pantry, Subscribe & Save, etc.) and niche players (meal kits, natural foods, pet supplies, etc.).

“Brick Meets Click expects that in-market provider growth rates will vary from market to market, depending on the mixture of competitive options that are available.  In the top 50 markets, which account for 55 percent of the population, our assessment reveals that there are already 10 in-market services available on average,” Bishop explained.

Growth rates will be affected by not just the total number of online grocery rivals, but also the range of value propositions offered by different trade channels like club, grocery and pet, as well as the various fulfillment options like delivery or pickup.

“As a market develops in this way, it attracts an expanding online shopper base," Bishop said. "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.”