Pickup is poised to, well, pick up in the next few years. That’s one takeaway from the "2023 Brick Meets Click/Mercatus 5-Year Grocery Sales Forecast," which projects that the pickup model will help lead overall digital grocery sales to grow at a 12% compound average growth rate (CAGR) through 2027.
The forecast took into account an aging population and household sizes. Researchers also weighed socioeconomic factors like inflation, public health and a “maturing” online audience.
According to the joint report, pickup e-grocery sales are pegged to grow at a 5-year nominal CAGR of 13.6%, versus 10.8% for delivery and 8% for ship to home. By 2027, the share of pickup will grow to about just over half (50.3%) of digital grocery sales, driven by the expanding availability and use of pickup services across the country.
The report indicates that the pandemic-fueled acceleration of the digital marketplace will continue to settle down as consumers recalibrate their buying habits. “This forecast reflects that the projected growth of online grocery sales is slowing after the significant gains of the last two-plus years,” remarked David Bishop, partner at Brick Meets Click.
Drilling down within the e-grocery channel, the Brick Meets Click/Mercatus report also foresees increases in spending per order and order frequency rates, albeit to different degrees. Average order values over the next five years are projected to grow at a CAGR between 4.2% and 6.4%, factoring in inflation. At the same time, order frequency among active users is expected to rise from 1.9% to 3.3%, with pickup again leading the way, followed by delivery and ship-to-home.
Inflation may be ebbing a bit from record highs in mid-2022, but this report doesn't see a dramatic pullback in elevated prices. The forecast notes that grocery-related inflation will continue at a 5-year CAGR of 4.8%, moving from the 10.9% rate in 2022 to a predicted 2.8% by 2027. “Inflation fuels nearly three-quarters of the projected gains for in-store sales but accounts for less than half of the gains expected for online sales,” the researchers added.
Sylvain Perrier, president and CEO of Mercatus, shared some tips for food retailers planning for the longer-term future. “When it comes to achieving online channel profitability, my advice to grocery retailers is: Work smarter, not harder, and focus on the fundamentals,” he said. “Know who your customers are and the value you provide them. Use that insight to deliver a more personalized brand experience that is consistent and frictionless. Take steps to improve margins using simple tactics like offering lower cost Pickup services, engaging with multiple third-party delivery providers, and leveraging first-party retail media to offset the cost to serve online customers.”