Online grocery sales could account for close to 20% of all grocery sales in the best performing U.S. markets by 2023, according to estimates in a new study.
In a report called “What’s Ahead for Online Grocery,” Steve Bishop, co-founder and managing director of Barrington, Ill.-based Brick Meets Click consulting, said greater access to services and the lure of convenience will drive rapid sales gains for the online grocery sector. Brick Meets Click predicts that online grocery sales will rise from $27 billion in 2014 — about 4% of total grocery sales — to between $80 billion in and $123 billion in 2023, representing between 11% and 17% of grocery sales in most markets.
The study didn’t break down online sales forecasts by grocery department.
Bishop said the momentum is unmistakable for online grocery sales.
“We’re all waiting for the big players like Amazon and Wal-Mart to scale up, but meanwhile, highly focused online grocers like Relay Foods, Fresh Direct, Door-toâDoor Organics and other services are already moving in to serve well-defined markets and establish important customer relationships,” Bishop said in a news release.
Even the middle of the two projections for 2023 online grocery sales would exceed current sales of Kroger Co., the nation’s largest supermarket chain, according to the release.
Bishop said in the report that the more people use online services to buy groceries, the more likely they are to spend a greater portion of their food budget online. He said in the report that “onceâaâmonth shoppers” did 17% of their grocery spending online, with “twiceâa-month shoppers” spending 21% of their grocery spending online and “threeâtimesâaâmonth shoppers” spending 42% of their grocery dollars online.
Bishop said that online groceries will represent only a fraction of U.S. grocery spending for the foreseeable future, but online customers are higher-end consumers important to traditional grocers.
“Online shopping appeals disproportionately to higher income and more profitable customers, so the loss of sales will have a disproportionately negative impact on profits,” Bishop said in the release.
Growth of online food shopping will shrink the size of the market served by stores, put pressure on competition and increase the importance of finding new areas of growth, according to the report.
Traditional retailers should enhance the “store experience” via an online channel or by finding new growth opportunities, Bishop said in the release and knowing the habits of high-value shoppers is essential to know how to respond.
Bishop said that traditional grocers should maximize their appeal with improved service, cleanliness, unique prepared food and tech options such as texting and other digital communications.
Bishop said smaller suppliers should use digital marketing to increase the effectiveness of their marketing and trade spending.
Suppliers need to more efficiently deliver coupons and other consumer promotions to retailers, and provide them with tools to sell products online, according to the release.