Steep Rise in Number of Consumers Buying from Online Grocery Stores

The number of consumers buying from online grocery stores is growing exponentially year over year. Find out why, and what they’re looking for in an e-grocery retail experience.

70% of Consumers to Shop Online Grocery Stores by 2025

According to the “Digitally Engaged Food Shopper” report from Food Marketing Institute (FMI) and Nielsen, online grocery stores could reach $100 billion in annual sales and generate 20 percent of all grocery sales in the U.S. by the year 2025.

According to the FMI/Nielsen study, 23 percent of U.S. households shopped for groceries online in 2016, up from 19 percent in 2014. For the 18-34 age bracket, the numbers are even higher, with 28 percent having shopped in 2016, up from 21% in 2014. The FMI/Nielsen study identified five key trends that are shaping the increase in sales for online grocery stores:

• Consumers are increasingly buying more groceries across channels
• Center store categories like non-perishable snacks, dry packaged goods and non-food items are already migrating online and this migration will continue/expand
• Grocery retail brands and manufacturers are already exploring tech and online selling options
• Online grocery stores are expected to reach maturity and saturation faster than other industries that migrated to the internet previously
• Younger, digital native consumers coming into their own adulthood will speed up the expansion of the segment even further

The MorganStanley.com chart below shows how sales of online grocery stores are expected to increase by product categories, indicating again how much more widespread e-grocery shopping will become in the U.S. over the next year.

As more shoppers opt for the convenience of buying groceries of all kinds online, the face of the entire grocery industry will change. For instance, several traditional brick and mortar grocery chains are now experimenting with some type of online grocery e-commerce model in addition to doing business-as-usual:

• 3^rd party grocery delivery service Shipt recently began delivering Costco orders in Tampa FL with plans to expand to 50 markets, and more than 30 million households by the end of 2017.
• Amazon, which experimented with and then shuttered its initial online grocery experiment, is now experimenting again with three brick-and-mortar + tech hybrids in Seattle: convenience stores called AmazonGo, drive-in grocery kiosks, and a hybrid supermarket that mixes the best of online and in-store shopping.
• Walmart, largely considered the brand currently best-positioned to rival Amazon in the online grocery space, has been expanding its e-grocery business, concentrating on the ‘click and collect’ model which enables shoppers to pick up their orders at more than 600 stores.
• Whole Foods has also partnered with Shipt and InstaCart for grocery delivery services.
• Whole Foods rival Sprouts Farmers Market has a new alliance with Amazon Prime.

Last Mile and Grocery Delivery Services Also Benefit from Online Grocery Shopping Trends

As e-grocery expands, it’s worth pointing out that third party grocery delivery companies like Shipt and InstaCart will likely be joined by several other national and regional grocery delivery services, spawning a whole new subset of transportation businesses.

After having more than doubled from 8 percent in 2015 to 19 percent in 2016, the number of U.S. shoppers who are likely to shop at online grocery stores in 2017 is projected to increase by double digit percentage points to 31 percent this year. (The 2017 Grocery eCommerce Forecast by UNATA and brick meets click™)

When broken down by category of shopper, a Harris Poll survey reveals that Millennials, college graduates, parents and people living in urban regions are all more likely to shop for groceries online than their counterparts.

Online Grocery Stores Need to Overcome 12 Objections to Win More Consumer Trust

While nearly 70 percent of U.S. shoppers prefer shopping for books online, only 5 percent say they prefer to shop for groceries online. Building trust by delivering high quality products, especially fresh products, will be priority #1 for online grocery stores if they want to gain market share. According to MorganStanley.com, here are the top reasons why people prefer to shop in local stores instead of buying groceries online.

Conversely, there are reasons that online grocers can use to help persuade shoppers to choose e-grocery over brick and mortar grocery store shopping trips. Statista.com lays out the factors that people say makes food a good fit for online shopping.

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