USA: online grocery’s $60bn opportunity

Date : 03 December 2018

We look at the growth prospects for the online grocery channel in the US.

Channel sales forecast to hit $59.5bn in 2023

The US online grocery ecommerce channel is estimated at $23.9bn, representing 1.6% of the food and grocery market. Over the next five years, we expect it to grow to $59.5bn, an increase of $35.6bn. This represents a compound annual growth rate (CAGR) of 20.0%, and a 3.5% channel share. Three key factors will shape the channel’s growth.

Source: Takeoff Technologies

Optimising store assets for pickup: strategic partners

Store pickup has been the primary model for grocery ecommerce in the US. This has been driven over the last three years by the aggressive expansion of the service by Walmart and Kroger. As retailers increasingly focus on channel profitability, we expect to see other retailers expand their pickup points, including exploiting opportunities away from their stores. Kroger recently launched a partnership with Walgreens which enables Kroger’s customers to collect their online orders from the drugstore operator’s stores.

Delivery meeting shoppers’ convenience needs: new verticals

Alongside the expansion of store pickup, over the last year, there has been a much stronger focus on home delivery. In part, this has been driven by Amazon’s acquisition of Whole Foods Market and the subsequent launch of the Prime Now delivery service. The move by several retailers into offering same-day delivery has been enabled by the presence of on-demand, crowd-sourced, fulfilment companies such as Instacart and Shipt. There are also other verticals, such as restaurant delivery, that several retailers are starting to tap into.

Improving channel efficiencies: robotic solutions

As part of the focus on developing a compelling and cost-optimal solution at scale, retailers have focused on picking efficiencies and last mile logistics. Recently, the emphasis has switched to finding an efficient picking operation, with robotics becoming part of the solution for several retailers. Walmart has recently partnered with Alert Innovation while Ahold Delhaize and Albertsons are partnering with Takeoff Technologies for hyperlocal fulfillment. Kroger and Ocado recently announced the location of their first Customer Fulfillment Centre which will utilise Ocado’s robotic solutions.

Beyond these factors, we expect to see retailers expand their online offers and develop innovative ways to order. These align with our Online Store of the Future research which highlighted how it will become a more personalised, a digital personal assistant, more efficient, frictionless and invisible.

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