How will online shopping transform the grocery business?
A new report from the Food Marketing Institute and Nielsen projects that consumer spending for online grocery shopping could reach as much as $100 billion or 20 percent of total dollar grocery purchases made by consumers by 2025. Those figures, the parties report, are the equivalent of 3,000 grocery stores based on volume.
The research, according to a CNBC report, puts the current market share of online sales at 4.3 percent of total spending for food and beverages. Using their most conservative projection, online grocery sales would roughly double by 2025.
A wide variety of companies from brick and mortar retail (Kroger, ShopRite, Walmart, et al) as well as online (Amazon.com, Door to Door Organics, FreshDirect, et al) are today offering Americans the option of home delivery or store pickup for grocery orders. Companies ranging from Costco to Whole Foods are working with third parties to enable home delivery.
Today, according to the research findings, 23 percent of U.S. households are buying food online. Among these, 60 percent expect to spend over a quarter of their food dollars online.
Younger and more digitally-engaged consumers who have yet to become regular grocery shoppers will help drive further adoption in the years to come.
Center store products representing 40 percent of the segment’s volume are expected to migrate online.
In a press release to announce the report, executives spoke of the grocery industry being at “a tipping point” and of the window to respond “narrowing” for food retailers and their suppliers.
One of the biggest challenges facing grocers is the matter of profitability, a point of frustration going back to Streamline and Webvan in the early days of online grocery. Many believe that store pickup is the key to achieving profitability in the notoriously tight margin grocery business.
- FMI and Nielsen Release First Set of Findings on the Digitally Engaged food Shopper – Nielsen/Food Marketing Institute
- The Digitally Engaged Shopper – Nielsen/Food Marketing Institute
- Online grocery sales set to surge, grabbing 20 percent of market by 2025 – CNBC
- Will Online Grocery Sales Cripple Kroger and Safeway? – 24/7 Wall St./Yahoo! Finance
DISCUSSION QUESTIONS: Do you see online grocery adoption reaching a tipping point soon? What effects do you think online sales will have on physical grocery stores between now and 2025?