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Groceries account for more than $600 billion per year in sales, making it the largest retail category in the country. However, less than 1 percent of food and beverage sales takes place online today. Supermarket retailers that do not offer e-commerce surely have been investigating, as they should. Grocers understand that shopping habits are changing.
Today’s consumers are using smartphones and tablets every day to research products and make purchases. They are getting used to buying products when they want and how they want. Most of this activity has been in areas such as home electronics and household goods, but grocery has the potential to increase e-sales quickly.
Researcher BI Intelligence estimates that between 2013 and 2018, online grocery sales will grow at a compound annual growth rate (CAGR) of 21.1 percent, reaching nearly $18 billion by the end of the same period. For contrast, offline grocery sales will increase by only 3.1 percent annually during the timeframe.
Executives not impressed with the BI forecast and the need for e-grocery shopping point to the large number of supermarkets in most parts of the country. In fact, some towns and cities are over-stored. It’s convenient to shop for groceries and take advantage of weekly sales, right?
Wrong. Most shoppers would rather not lug home big boxes of diapers, bulky paper towels and toilet tissue, and heavy containers of laundry detergent. Not surprisingly, those nonperishables have been popular items for grocery e-commerce so far. What’s more, many people don’t like grocery shopping at all –- especially if they can order products online for at-home delivery or in-store pick-up. That option will be popular with aging Baby Boomers, perhaps out of necessity.
My hunch is that Millennials will be the demographic segment that truly embraces online grocery shopping. This group, which includes those born between 1980 and 1995, is tech savvy. They are starting families that will account for the bulk of retail food purchases in the coming years.
When more shoppers get accustomed to ordering groceries online and having them delivered the same day, e-grocery shopping will really take off. Safeway already offers same-day delivery if groceries are ordered before 8:30 a.m. So does Peapod, the wholly-owned subsidiary of Royal Ahold that works with Ahold USA supermarket companies Stop & Shop, Giant Food Stores (Giant-Carlisle) and Giant Food (Giant-Landover).
The major grocery chains around the country will offer online grocery shopping sooner rather than later. They will figure out the obstacles of logistics and delivery costs. If they don’t, companies like Fresh Direct, Amazon Fresh and Instacart will eventually take away market share. Grocery independents have a stake in online shopping as well. That’s why the National Grocers Association (NGA) will present a workshop on that topic at the NGA show in Las Vegas, Feb. 8-11.
Grocery e-commerce: It’s time to get on board!