The Supply Side: Online grocery sales expected to reach $204.61B in 2024

According to market research firm eMarketer, U.S. digital grocery sales will grow 11.5% to reach $204.61 billion this year. And there’s still room for growth, as digital grocery will represent just 13% of total grocery retail sales in 2024.

The eMarketer data indicated that the share of online grocery sales peaked at 18.7% of sales in 2022 amid the pandemic. Grocery e-commerce sales totaled $183.56 billion last year and comprised 15% of total sales.

Separate reports from Mercatus/Brick Meets Click indicate that during the first quarter of 2024, online grocery sales totaled $24.4 billion, down 3.55% from $25.3 billion a year ago. The March report indicated online grocery sales were flat to a year ago, but February sales were down 8% year over year, while January sales were up 1.8%.

“While most people recognized that the pandemic was a catalyst for buying groceries online, few could fully anticipate the implications of that surge,” said David Bishop, partner at Brick Meets Click. “Now, four years after COVID-19 first impacted our everyday lives, e-grocery in the U.S. looks very different from both a contribution and growth perspective, and this will impact how grocers and others expand and drive profitability in their respective businesses moving forward.”

The report also indicates that challenges remain for local grocers competing against Walmart’s everyday low-price model and streamlined online grocery pickup and delivery services. Through March, pickup and delivery grew share at the expense of ship-to-home.

Mercatus reports that pickup accounted for about one-third of online grocery sales in 2019, but it quickly moved to the top spot when the pandemic began and has stayed there. As of March, online grocery pickup accounted for 43.5% of sales. Delivery, which represented one-quarter of all online sales in 2019, experienced an even more significant jump in market share by March with 39.1%.

The past four years of sales results show that total e-grocery sales for March peaked in 2021 and have declined or been flat year-over-year since then. Regarding the specific methods customers use to receive online orders, ship-to-home crested in March 2020, pickup crested in 2021, and delivery did so in 2022.

Ship-to-home sales increased 5.9% in March 2024 compared to last year, pickup sales remained unchanged and delivery’s monthly sales dipped 2.6%. The research shows that the online grocery customer pool size has become more well-defined, and future growth will likely happen more gradually.

As of March, 78.6% of consumers were deemed e-commerce grocery shoppers at least some of the time, up from 78.47% a year ago and 70.8% of households during the 2020 pandemic. Mercatus said half of households are active users of online grocery, down from 57.5% in 2020.

Something that hasn’t changed much in the past four years is that most U.S. households continue to have strong preferences for how they receive online grocery orders. The share of monthly active users who chose one method during the past 30 days climbed to 71.7% from March 2020 to 2024. However, the methods that households use have also shifted. Over the past four years, the share of households that used pickup expanded by more than 10%, finishing March 2024 at 54.8%. The share that used delivery rose over 12% to 38.4%, and ship-to-home’s share fell nearly 20%.

Mass retailers like Walmart continue to gain strength in the online grocery business. Before COVID, only 15% of customers who bought online from grocery also completed an online grocery order from a mass retailer during the same month. However, in the first quarter of 2024, the cross-shopping rate stands at almost 27% as inflation continues to motivate some households to change where they buy groceries.

Mercatus said Walmart is the giant. The latest research found that 76% of households that primarily buy groceries from Walmart and who also buy groceries online completed one or more online grocery orders with Walmart in March 2024. For the households that mainly shop at a local supermarket and buy groceries online, only 60% of those households bought groceries online from a supermarket.

“Helping customers build their basket of goods by using personalized offers or targeted deals is not just key to growing sales but also to improving the chances that they’ll return,” said Mark Fairhurst, global chief growth officer at Mercatus. “For today’s grocers, keeping your online customers engaged is more important than ever as growth is now more likely derived from increased order frequency and/or spend per order.”

According to eMarketer, the future of e-commerce is grocery. Historically, three categories led the U.S. e-commerce market: apparel and accessories, computer and consumer electronics and furniture and home furnishings. However, eMarketer notes that in recent years, growth has been fueled by essential goods, including food and beverage items, personal care products, and household supplies. This shift will take grocery to the top of the four major e-commerce categories by 2026.

The marketing and analytic firm projects digital grocery sales will account for 19% of U.S. e-commerce sales in 2026, surpassing apparel and accessories as the largest e-commerce category.

Since 2022, inflation has primarily contributed to digital grocery sales growth. eMarketer said inflation will continue to cool in 2024, but digital grocery sales will increase by at least 11.5%. Compared with recent years, analysts expect more of this growth from increased purchase volume instead of the higher prices in the past two years.

eMarketer said its forecast includes online sales of items that consumers regularly buy from a grocery store, including food and beverages, pet foods, household cleaning products, personal care and other household consumables.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Firebend.