- The US will see an additional 20.5% increase in digital grocery sales this year, to $147.51 billion
- Walmart Inc. is No. Walmart Inc. is the No. 1 digital grocery retailer and will continue to be, followed closely by Kroger and Amazon.
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More than half of digital grocery shoppers account for the majority US populationRetailers are racing to respond to the announcement that Amazon Fresh will open many new brick-and mortar stores in the United States over the next few decades. The ultrafast grocery startup, which promises drop-offs in under 15 minutes, is attempting to overcome substantial losses in a competitive marketplace and explore new revenue streams. Uber Eats, Gopuff and other major players are expanding their service areas. grocery delivery.
Whether through click and collect or delivery, digital grocery—orders made via any online channel, from desktop and mobile to apps and voice assistants—is on track for sales to see double-digit growth in the years to come. The US is expected to double its sales between 2021-2025 with an estimated $121 billion in new market entries.
Although convenience is still a driving factor in digital grocery adoption due to omicron surges and remote work, some economic conditions could limit its market share. Inflation and supply-chain shortfalls will continue to drive up the cost of grocery products. This could make consumers less willing to pay more for services such as digital grocery that include delivery fees and other fees. Due to the continuing shortage of labor, additional costs could be passed on to the consumer.
US digital grocery industry size & stats
Digital grocery is growing faster that in-store grocery. It makes up a larger portion of overall grocery sales. This year, digital will make up 11.2% of the $1.32 trillion in US grocery sales—a share that lags behind digitally mature retail categories, but is larger with respect to absolute dollar figures due to the sheer size of the market. And, with its currently low user penetration, there’s still significant room for growth.
With a 42.6% rise in online grocery shoppers year-over-year (YoY), 2020 was a good year for first-time buyers. The pandemic propelled it into the mainstream, which is why growth wasn’t—and won’t be—as significant in the years following. The annual growth in digital grocery shoppers will slow to 4.1% in 2022 and 2.8% in 2023 respectively, while it will remain steady at 2.5% in 2024.
The vast majority of online grocery shoppers are MillennialsThese people, who are more likely to value same-day delivery over other generations, are more open to in-home delivery options as well as new retail-tech features. These people are likely to be urban dwellers, where a variety of delivery services compete for their attention with introductory deals.
Now that digital shoppers have firmly overtaken in their share of grocery consumers, adoption will slow, even as sales rise—meaning existing digital grocery buyers will prop up the market with bigger budgets. In fact, digital grocery buyers will spend $1,524.84 more annually in 2025 than they did in 2021, an increase of $856.47.
Third-party delivery companies and retailers will both feel the effects. This will result in a greater shift of grocery sales online, despite stricter pandemic restrictions. Click and collect will be a key driver. This service will allow retailers to start investing in delivery services. Delivery can be costly and difficult to scale. However, click and collect is more lucrative and easier for legacy grocers who have large brick and mortar locations and are looking to expand into digital.
Brands will be racing to maximize higher spends so customer loyalty will be a key focus. Amazon and Walmart will invest more in their membership programs, offering discounts incentives and subscription benefits.
Top digital grocery shopping sites
Walmart Inc. (including Sam’s Club) overtook Amazon in 2019 as the leader of US digital grocery sales, claiming 28.9% of the market last year. To keep up with the rapid shift from traditional to digital, Walmart Inc. has opened micro-fulfillment centres to expand its retail presence of over 5,000 stores.
Amazon holds 23.8% market share in second place. It is the only digitally native retailer of the top five leaders. With just over 500 Whole Foods locations and 18 Amazon Fresh locations, it’s not as well positioned to meet the rising demand for click and collect, which may be why grocery sales growth will remain relatively flat through 2023.
Kroger comes in third. Groceries ecommerceKroger’s sales are just half as big as Amazon’s. This won’t change much through 2023, when Kroger’s digital grocery sales will only be 53.13% of Amazon’s sales. Kroger was an early investor into the digital space, giving them a significant competitive advantage over legacy grocers. They are also continuing to innovate with AI-powered fulfillment facilities.
Albertsons and Target are almost tied for fourth place, both having seen significant growth since the pandemic. Both retailers, which are strong in their physical presence and will see higher YoY growth than Amazon, Walmart, and Kroger for 2022, though from a smaller base.
Instacart, a third-party delivery service that makes a profit from the likes and comparisons cannot be made. However, they still hold a large share of the market accounting for 28.8% of all digital grocery sales by 2021. Instacart’s stronghold in the space is expected to fall in the coming years (from 73.8% of grocery intermediary sales to 68.2% in 2023) as competition heats up among restaurant delivery companies and as retailers invest in their own delivery infrastructure.
